Treasure Chest: Imdex

This story features IMDEX LIMITED.
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The company is included in ASX200, ASX300 and ALL-ORDS

FNArena's Treasure Chest reports on money making ideas from stockbrokers and other experts. Today's idea is Imdex.

By Danielle Ecuyer

FNArena’s Treasure Chest reports on money making ideas from stockbrokers and other experts.

Whose Idea Is It?

Canaccord Genuity

The subject:

Imdex has added to its strategy of growing and enhancing its cloud based software-as-a-service platform, Imdex Hub-IQ via an 80% stake in Norwegian energy platform Earth Science Analytics (ESA) which should boost the company’s ability to grow market share.

More info:

Imdex ((IMD)) is a small-cap ($1.5bn) global mining tech services company that offers tools and technologies, including via its digital platform, to improve drilling efficiency, safety, and environmental impacts for mining companies and explorers. The company is leveraged to mining exploration spending, earning around $2.10 in revenue for every $100 spent on exploration activities during 2024, as highlighted by management at the 1H25 results.

The shift to more intelligent workloads and cloud-based software solutions to support businesses is evident. Imdex’s acquisition of an initial 80.5% stake in Earth Science Analytics (ESA) for -$26m supports this transition. The Norwegian software company offers access to EarthNet, a geoscience platform designed to process and integrate large volumes of geophysical and drilling data for machine learning applications.

As highlighted by Canaccord Genuity, EarthNet’s current software focus is on the energy sector, but the platform is adaptable across broader earth science datasets. Reported benefits include a greater than -90% reduction in geophysical interpretation time and over 95% accuracy in predicting rock properties. ESA’s current customers include Aramco Ventures and Equinor.

ESA seems an ideal fit with Imdex’s digital expansion strategy. EarthNet will be integrated into the company’s existing platform, Imdex Hub-IQ, a cloud-based SaaS portal designed to securely collect, validate, and manage field data from geological surveys and assay results to detailed drill hole information.

At Imdex’s 1H25 results, management pointed out Datarock’s SaaS revenue rose 107% and Krux SaaS revenue by 46%, as examples of how the company is making strategic investments in new growth through digital enhancing businesses. Over the 1H25, the number of customers connected to Imdex Hub-IQ grew 7%, indicating increasing customer engagement in cloud-based platforms.

Canaccord believes ESA has similarities to these two former investments as it expands its digital orebody solutions to customers.

For Citi, the FY26 revenue multiple paid for ESA of 6.7 times appears rich at first glance, but the leverage comes from the otherwise necessary, costly, and time-consuming period of digital infrastructure investment to achieve the same outcome.

There is a put-and-call structure for Imdex to purchase the remaining equity from the founders after four years, at a minimum cost of around -$7m. This is subject to appreciation based on ESA’s performance over the period, which Canaccord believes will be linked to revenue growth.

ESA is flagged to be break even on an earnings (EBITDA) basis, with anticipated FY26 revenue contribution of $4m. The annualised revenue contribution represents circa 1% of Citi’s FY26 revenue forecast for Imdex, with an accompanying rise in anticipated FY26 finance costs of under -$1m.

Imdex’s recently up scaled debt facility of $350m will be drawn down close to circa $90m, states Citi.

From an operational perspective, Bell Potter detailed June rolling six-month equity raisings for mining juniors rose 65% on a year earlier and reached the highest level since November 2021. The raisings have expanded annually for nine consecutive months to June, which the analyst interprets as a robust signal of improving sentiment for mineral exploration.

In addition, there has been upbeat June quarter feedback from the industry. Swedish company Epiroc detailed its mining customers, particularly in exploration, have been more inclined to lift investment. Major customers indicated a preference for brownfield over greenfield opportunities, as well as investments in grassroots exploration.

UK mining services company Capital Drilling views the rise in demand for exploration drilling, as revealed in the June update, is a potential catalyst for securing more exploration drilling contracts.

Bell Potter sees Imdex as a “key” beneficiary of improving demand for drilling optimisation products, instruments, and analytical software. Notably, the broker’s update, including an upgrade in rating to Buy from Hold with a higher target price of $3.05 from $2.65, was issued prior to the ESA announcement.

Canaccord argues the sustainability and longevity of market share growth has improved post-acquisition. This broker has lifted medium-term earnings forecasts. Canaccord’s target price moved to $3.18 from $3.04 with an unchanged Buy rating.

While Citi believes the acquisition is sound, the analyst retains a Neutral/Hold-equivalent rating with a $2.80 target price. This broker envisages Imdex will use its strong balance sheet to pursue further inorganic growth opportunities in the technology space, which is considered “crucial” as the industry faces an inflection point in exploration levels, the analyst states.

The company’s leverage to mining exploration is highlighted by the fact the share price has yet to reach its previous all-time high from April 2012 at $3.259 per share, when, according to S&P Global (then SNL Metals and Mining), global nonferrous exploration budgets peaked at around US$21.5bn and the ASX saw strong exploration listings in 2010–2012.

Though most analysts are yet to update for the latest acquisition, consensus forecasts already assume strong growth ahead for Imdex, with EPS to grow by 46% in FY25 (to be released in August), followed by another 22.4% in FY26. The dividend is equally projected to take a few leaps higher, from 2.8c in FY24 to 3c in FY25, to 3.6c in FY26.

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