Upside for Imdex not in sight

Analysts remain cautious about the outlook of the drilling services company due to weaker demand in the business's minerals segment.

The rebound in confidence towards mining engineers seems to be eluding drilling services firm Imdex (IMD).

While the stock may have bounced around 37% to around 85 cents since the market bottomed in late June, analysts still have reservations about the outlook of the company as demand for its products and services may not have bottomed.

Hartleys is the latest to cast some doubts on whether conditions are set to improve for Imdex in its latest note. The broker is only assuming an earnings recovery in 2014-15 and is forecasting volumes to be down by around 50% from the peak.

Management is trying to offset the gloom in the minerals division by aggressively expanding into servicing the oil & gas industry. This means we will see revenue from oil & gas projects start to become a material component of overall sales.

However, Hartleys wants to be conservative and is basing its estimates more on the demand outlook for minerals.

“We like the business and management, but the negative earnings momentum is vicious,” it wrote in the note.

Hartleys has a “neutral” recommendation on the stock with a 12-month price target of 81 cents.

Imdex is part of the Uncapped 100.  

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