Hartleys still positive on Imdex

Analysts at Hartleys have lowered its full year net profit forecast for Imdex but retained its Buy recommendation on the back of strong potential growth opportunities for the mining services company.

Yesterday, Imdex released its results for the six months to the end of December, reporting a 15 per cent drop in net profit to $10.1 million.

Revenue for the period was up 16 per cent to $80.3 million, while earnings before interest, tax and amortisation (EBITA) was up 1 per cent to $20 million.

Cash flow from operations jumped 109 per cent to $6.6 million, and the company declared a full franked interim dividend of one cent per share.

Today, analysts at Hartleys lowered its net profit estimate for fiscal 2009 by 26 per cent to $16 million "on the back of slightly lower revenue estimates, but predominately due to significantly lower margin assumptions, particularly in Downhole Instrumentation".

In the report, Imdex recorded that revenue for the division increased 11 per cent to $29.8 million while EBITA was 4 per cent lower at $12.5 million.

Imdex said the EBITA decline was a result of increased capital expenditure into the support structure for the oil and gas segment which is yet to realise the full benefit of revenue gains.

Meantime, Hartleys said new terms for the payment of the Flexit acquisition in 2007 are positive after it estimated that Imdex needed $8 million cash by May 1 as a top up payment for the acquisition.

Imdex has agreed to issue twice as many shares, 10 million versus the previous 5 million, but in exchange the cash top up is not due until May 2012.

However if Imdex's share price trades above 2012, then the cash top up payment requirement will lapse.

"The new terms are positive by removing a potential near term concern for investors," analysts at Hartleys said.

The brokerage has lowered Imdex's 12-month price target from 85 cents per share to 78c.

Shares in Imdex were up one cent to 31c at 13:34 AEDT.