Imdex Limited

Positioned for Continued Growth: Imdex Limited (ASX: IMD) is a small-cap ($476.85m of market capitalisation) leading global mining equipment, technology and services (METS) company with the market capitalization of $476.85 Mn. It has recently presented its business prospects at the Macquarie Conference and highlighted about FY18 activity. According to the presentation, the company recorded revenue growth of 28% amounting to $104.7 Mn in 1HFY18 as compared to the prior corresponding period (pcp). The sales spiked up due to the company’s integrated solutions, which include IMDEX leading AMC and REFLEX brands, and increased activity within the global minerals industry. EBITDA stood at $20.1 Mn in 1HFY18, marking the growth of 49% against pcp. The result reflected growing revenue and the Company’s ability to leverage its fixed costs while increasing its investment in the business. The company recorded net profit after tax of $10.6 Mn in 1HFY17 compared to a normalized loss of $9.9 Mn in 1H17. The Company has a robust balance sheet with the ability to pursue its organic and transformational growth strategy within the mining value chain. Current ratio and Quick ratio stood at 2.80x and 1.75x, respectively in 1HFY18 while the group enjoys virtual debt-free status.


1HFY18 Financial Metric (Source: Company Reports)

We expect that the operating conditions remain positive for IMDEX and expect a strong 2H18 at the back of growing demand trend. The cyclical upswing of the minerals industry continues, with a broad-based recovery evident across all geographies. Besides this, Wilson Asset Management Group ceased to be a substantial holder of the group since June 08, 2018. Moreover, one of its substantial holder, IOOF Holdings Limited, changed its holding from 7.047% to 5.980%. We maintain a “Hold” recommendation on the stock at the current market price of $1.280, and keep a watch for leveraging the rise by over 82% in last one year. There might be a need to replace depleting reserves at a faster rate than the discovery rate, while competition is intensifying, and seasonal issues may impact drilling services.

 
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