We successfully recommended Imdex (ASX:IMD) late last year in The Dynamic Investor. Earlier last month, the shares retraced from all-time highs after the prices for gold and copper fell. Together, these two commodities comprise ~75% of exploration spend.

The sell-off prompted us to revisit the fundamentals. Our most recent review in The Dynamic Investor also included an assessment of results for the six months to 31 December 2025 (1H26). With the share price recovering steadily, do current levels still present an attractive entry opportunity?

About Imdex

Imdex is a global mining technology company that provides commodity agnostic solutions to its customer base comprising of drilling contractors and resources companies. These solutions enable accurate, efficient and high-speed exploration and real-time analysis of orebodies, as well as extraction.

The Company has a global footprint operating in all key mining regions and operates through the AMC and REFLEX brands. The AMC brand deals with drilling fluids, equipment, technologies, and software. The REFLEX brand includes downhole instrumentation, data management and analytical software for geological modelling.

Key Fundamental Drivers

Macro Conditions Remain Supportive

Capital raising activity in the resources sector (which typically leads drilling activity) increased over the course of calendar year 2025. There was an increase reported in both the $ amount raised and number of companies raising funds (across Australia and Canada). The 4th quarter of last calendar year saw significant capital raising activity, with raisings +102%. Capital raisings by junior miners have been supported by a lift in commodity prices, particularly gold which has held well over >US$4,500/oz. In context, junior miners account for ~15% of IMD’s group revenue.

The strong momentum continued into 2H26. Further expansion is expected across the sector. Junior miners have not yet meaningfully joined the cycle, given that there is an extended 6-9-month lag between $ raised and $ spent on the ground. This is expected to start to flow through, ahead of the move into the into key North American field season between April and August. One potential risk to the bullish demand indicators is that tightness in drill rig and labour availability may present potential constraints to the degree of industry growth.

Potential For Margin Expansion

Despite expanding EBITDA margin to 31.6% in 1H26, IMD has guided to ~30% margin. This is because the Company expect the consolidation of the Datarock and Krux acquisitions may create a margin headwind of ~50-100bps. However, there is clearly upside to this guidance, given that the activity upswing will likely accelerate through this calendar year.

The Company is also increasing the Average Revenue Per User (ARPU), which is driven by increased take-up of next generation of products across IMD’s geographical footprint. There is potential for further ARPU growth, given: i) IMD’s strategy to increasingly push more of its existing and potential customer base to newly developed products and ii) The current active customer base being largely majors.

The favourable business mix shift evident in 1H26. In particular, there was a higher proportion of revenue stemming from higher-margin sensors, services and software. Further, the likely return of junior miners should see incremental EBITDA margin expansion. In particular, junior miners represent ~15-20% of overall activity levels through the cycle and their return would result in an uplift in take-up of products and services offered by IMD.

Balance Sheet Scope to Fund Further Growth

As at 31 December 2025, IMD held a minimal gearing position: 0.2x on a net debt to EBITDA basis. The increase in the gearing level relative to 30 June 2025 (0.1x) reflects recent acquisitions (Krux, Datarock and Earth Science Analytics (ESA)). Further, the strong increase in operating cashflow in 1H26 helped limit the extent of the increase in net debt levels.

Post completion of the ALT acquisition, gearing is expected to increase to ~1.1x on a pro-forma basis. There may be upside risk to this figure given that the Company is also seeking to acquire the remaining 60% stake in Krux by April 2026 and the remaining 49% stake in Datarock. These transactions are likely to be cash funded.

Nonetheless, a pro-forma gearing level of ~1.1x still provides headroom for continued investment in innovation and Merger & Acquisition opportunities. Importantly, each of the recent acquisitions performed well in FY25 and have provided IMD with the opportunity to bolster its capabilities with respect to exploration and geoscience data.

Fundamental View

IMD shares are currently trading on a 1-year forward P/E multiple of ~28x. While the shares are trading slightly above the average multiple over the last five years, we consider that there is still investment appeal. Firstly, macro conditions remain supportive. Secondly, there is upside risk to the scope of EBITDA margin expansion from the increased uptake of higher-margin products. Finally, the Company retains balance sheet capacity to strengthen market position in existing offerings as well as to expands into new areas

Charting View

IMD has been trending higher since late-2023 and it remains in an uptrend. The recent pullback has seen it form a double bottom (arrows) within this uptrend, and that is a positive sign. IMD is therefore expected to continue heading higher. There will be some light resistance near $4.40 but a push beyond that would be the next buy trigger.

 

Michael Gable is managing director of Fairmont Equities.

 

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