Small Caps | Dec 11 2025
This story features IMDEX LIMITED.
For more info SHARE ANALYSIS: IMD
The company is included in ASX200, ASX300 and ALL-ORDS
Imdex has continued to pay up for strategic acquisitions with the latest offerings serving up growth opportunities across products, software and geographic regions.
- 2025 brings another two strategic bolt on acquisitions as Imdex uses cash flow for growth
- A $700m total addressable market on offer with scope for margin accretion
- Analysts remain divided on valuation and management's ability to extract synergies
By Danielle Ecuyer
Leveraging an upcycle in resource exploration, Imdex furthers growth ambitions
Imdex ((IMD)) is benefiting from rising exploration spending, which is helping the global mining tech services company to generate cash flow from its core business, the traditional Drill Site Technologies division.
That cash flow is in turn being re-invested to expand the business into software, AI and data platforms that enhance drill site technologies, delivering “rock knowledge” and faster decision making for customers.
The latest binding agreements are to acquire 100% of Advanced Logic Technology S.A. (ALT) of Luxembourg and its subsidiary Mount Sopris Instruments Inc (MSI), a Denver based company. Both align with the geo-technology’s ambition to retain technological leadership for three global R&D hubs, large IP protection, and ongoing reinvestment in next generation sensors, fluids and digital products.
ALT was founded in 1993 and offers slim-hole imaging instrumentation and geoscience data processing software. Its customer base spans mining, infrastructure, civil, environmental, groundwater and energy sectors.
MSI concentrates on manufacturing borehole geophysical instrumentation that log things like gamma, resistivity, density, sonic, magnetic susceptibility, conductivity, temperature, caliper, etc., producing a continuous data record versus depth that geologists use to interpret lithology, structure, and mineralisation. MST is 61% owned by ALT.
Combined 2024 earnings (EBITDA) for ALT and MSI were $28m and $6.4m, respectively, with Imdex paying -$98.9m upfront with deferred consideration of up to -$35.4m based on performance hurdles.
Slicing and dicing what opportunities can be achieved for Imdex
For UBS, the acquisition is strategically positive and meets a product gap for the Imdex sensor product suite. The global total addressable market for ALT is estimated at $700m of which 75% of the potential markets (both product and regions) for expansion have no competing products.
ALT’s core asset is WellCAD, the industry standard borehole data software, with geoscience data processing which concurs with Imdex’s stated SaaS transitions that will integrate into its digital platform with the aim of growing recurring revenue alongside swifter data interpretation.
MSI is mainly a hardware business and sits mainly into Drill Site Technologies.
Both acquisitions offer revenue synergies, UBS explains. By applying the same strategy that was successful with the Devico acquisition, the analyst believes Imdex can roll out the ALT products across existing regions where it operates, notably South America, Canada, Africa and the Middle East where ALT is under exposed.
Devico was acquired in January 2023 for an enterprise value of -$324m. This company was a competitor of Imdex at the time, but brought forth a global operating footprint, boosting the group’s position in Europe to number one and helped Imdex consolidate its number one position globally.
At the time, Devico generated 46% of revenue from Sensor Technologies and 56% from Directional Drilling Technologies.
The Morgans’ analyst is comforted by the fact management chose to acquire two businesses with a heavier weighting to sensors, which is viewed as better than acquiring pure software businesses.
Breaking down the revenue contribution, Macquarie highlights the ALT and MSI product portfolios are complementary and do not compete with existing products.
Software revenue represents circa 20% via WellCAD from ALT with an 85% gross margin and the hardware the balance with a 45% gross margin. Combined, mining represents 55%-60% of revenue, other sectors offering diversified exposure to infrastructure, civil, environmental, groundwater and energy.
Macquarie points to the 45% gross margin for the acquisitions due in part to one-off sales revenue model. Transitioning to Imdex’s rental model is expected to achieve more robust and sustainable margins in the future.
Imdex’s sensor margins are 80%-90% which offers potential, according to Morgans, to increase rentals in geographically underweight regions, South America, Canada, Middle East and Africa.
The transaction will be financed with cash and existing debt facilities, closing in 3Q26 and be EPS accretive in the first year of ownership, before the inclusion of any cost and revenue synergies.
Both acquisitions come on the back of an initial 80.5% in Earth Science Analytics (ESA) for around -$26m in late July this year, as outlined in FNArena’s Treasure Chest article (https://fnarena.com/index.php/2025/07/31/treasure-chest-imdex/).
Consolidation of acquisitions muddies earnings forecasts
Morgans has adjusted FY26 assumptions for depreciation & amortisation (D&A), interest and tax based on management’s guidance to reflect the acquisitions (expected completion on Feb 1, 2026) as well as the final cash/debt settlements of DataRock (early Feb) and Krux (early May).
Both Datarock and Krux will be consolidated into the accounts in 2H26 from the estimated completion dates and both subsidiaries are assumed to break even for the forecast period.
By way of history, initial stakes were taken in DataRock in Nov 2021 and Krux Analytics with a cornerstone investment in April 2023.
As articulated by the Morgans’ analyst, there are a few moving parts to FY26 earnings forecasts. Acquisitions have resulted in higher interest and tax charges with net profit after tax forecasts lowered by -5% for FY26.
For FY27, lead indicators for exploration have resulted in revenue growth expectations for the base business to rise to 10% growth from 7% while earnings (EBITDA) for FY27 and FY28 are upgraded by 9%-10% offset by higher interest costs that lower the EPS forecast by -1% to -2%.
In contrast, Citi notes low capex rates for ALT and MSI will contribute minimal D&A and will be EPS accretive by 3% for FY26 with leverage moving up to 1.1x from 0.1x in FY25. Goodwill of around $60m will be recognised and IP (intellectual property) of $30m.
Macquarie upgrades its EPS estimates by 2% for FY26 and FY27 reflecting the inclusion of ALT and MSI. UBS also upgrades EPS forecasts by 3% for FY26 and 2% for FY27 while current forecasts assume around a 75% EPS increase trough to peak, which aligns with previous resource cycles.
UBS has a Neutral rating with the stock seen trading at a 25% premium to the ASX Small Industrials index (around 26x 1yr forward) versus an historical -20% discount. At these levels the market is viewed as discounting a “good portion” of the anticipated upcycle in exploration activity. Target price raised to $3.50 from $3.30.
On the back of downward revision in EPS estimates and applying a higher weighted average cost of capital, Morgans has lowered its target to $3.60 from $3.90, retaining a Hold rating, noting the value extraction from both acquisitions is reliant upon meaningful incremental revenue generation over the next three years post completion.
Bell Potter lowers its target price to $3.60 from $3.90 due to a higher weighted average cost of capital assumption of 8.7% versus 7.8% previously. The booking of higher D&A and finance costs which are expected to go into FY27-FY28 results in a lowering of the analyst’s EPS forecasts of -9% for FY26 and -1% for FY27 with an upgrade of 6% in FY28.
No change to Hold rating.
Macquarie post acquisition EPS upgrades lifts its target price by 4% to $3.80 at the upper end of the valuation range.
The stock is seen trading at the top of its range around 11x EBITDA but this analyst sees scope to re-rate if management can improve growth in the software business both organically and via M&A.
Rating is upgraded to Outperform from Neutral.
Citi retains a Buy rating and $4.20 target price.
On current consensus forecasts, Imdex is projected to report FY26 EPS of 10.9c, to rise to 12.6c in FY27. The corresponding number for FY25 is 10.8c.
In contrast, dividends are projected to increase to 3.9c and 5.7c respectively, compared with 2.5c for FY25.
Five daily monitored brokers cover the shares and their combind targets generate a consensus target of $3.76, circa 14.5% above the current share price.
Canaccord Genuity rates the stock Buy with a $3.98 target. Jarden only awards a $2.90 target, accompanied by a Sell rating.
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