Having begun life four decades ago, a small supplier of drilling mud, Imdex has undertaken numerous acquisitions, numerous divestments and a period of extensive technology investment.

It now describes itself as a provider of sub-surface intelligence solutions and, assisted by a recovering resources market, it is delivering impressive financial results.

The company’s (ASX:IMD) core solutions are downhole navigation, drilling optimisation, in-field geo-analysis, structural geology and driller geophysics.

The uniting theme is to simplify the identification and extraction of what lies below the earth’s surface for drilling contractors and resource companies.

Imdex has achieved something of a double whammy in operating performance by simultaneously deploying technology into its solutions and into its own business infrastructure.

The ImdexHub-IQ provides secure access to validated data which is seamlessly transmitted from a range of sub-surface instrumentation, from analytical instruments and from mobile data inputs.

It therefore provides a comprehensive and reliable live analysis of exploration or development activity delivered in dashboard formats to allow drilling contractors to make faster more effective decisions and hence boost their own productivity.

The company is also undertaking a complete digital transformation of its internal business infrastructure which encompasses better data capture and analysis for sales activities, more efficient billing, better business information, better business processes, a mobile workforce platform, faster networks and systems and real time reporting.

As business levels improve the company inevitably has to fund a higher inventory of rental equipment and in that regard it has shifted its order book to newer technologies with higher charge-out rates due to the higher value-add for customers.

Imdex (ASX:IMD) shares over the past year.
Imdex (ASX:IMD) shares over the past year.

It has also much improved its balance sheet by moving into a significant net cash position and transitioning to a much lower cost debt facility.

Operating risk has also been reduced by broadening the mix of exposure across commodities and across territories and by shifting the customer base more toward mid-tier and major resources operators.

Last financial year, the company more than doubled its EBITDA to $31.5M, which is a dramatic improvement from as recently as fiscal 2015 when it was suffering EBITDA losses.

With discoveries, exploration and mining activity continuing to escalate in the company’s core markets of Australia, the Americas and Africa, equipment rentals are up about 40% on just a year ago.

The company believes it’s still in the early stages of a cyclical upswing and the outlook is for further strong growth in earnings this year.

The share price has performed well in anticipation of all that but the forward multiples still look very modest.

Tim Knapton is the founder and CEO of online tech research and finance marketplace TechVoyage which enables investors to appraise listed and unlisted tech companies and for entrepreneurs to finance, acquire and exit them. Previously Tim was Head of Corporate Broking at Deutsche Australia and before that ran a research department for a leading broking house.  Tim has also been a freelance tech/finance journalist for more than 20 years and a columnist with The Australian Financial Review, The Bulletin, BRW, Shares and Australian Business.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.