Besides the FDA decision which we know is due by the end of June, what other contract announcements are you expecting?
Although I agree that the recent price falls (despite two consecutive positive announcements) may present a good opportunity for new investors to purchase or existing investors to average down (assuming they bought in at a higher price), I would suspect that most retail investors are sitting at the sidelines awaiting the FDA outcome.
Personally, I also believe that the FDA outcome, in itself, would only provide a short term boost rather than an enduring boost to the share price. I may be wrong and underestimate the impact of the FDA outcome (assuming a positive one!), but I am assessing the situation from a longer term perspective.
At the end of the day, it comes down to how the management execute their sales and marketing strategy following the FDA decision that would lead to a sustained share price growth.
Because I am still a very new investor in Imexhs without the in-depth knowledge of the company like so many of you here, I am also perhaps looking at things from a different angle. For me right now, although Imexhs represents a reasonable risk-reward proposition, and I have therefore taken an initial position. Further positions would obviously be dependent on the FDA outcome, company's execution of their strategy, contract wins, financial performance and etc.
As a current shareholder, I am not trying to down ramp Imexhs but only share my thoughts on why it is not yet a high-conviction holding for me. As always, I am happy to be corrected and for opposing views to be expressed as I genuinely we can learn a lot more through an open, respectful and robust informed debate.
My reasons are as follows:
Lack of a coherent investment narrative
At this moment, I do not feel the company is doing a fantastic job at articulating a coherent investment narrative. There are bits of relevant information provided in the corporate presentation, chairman's address and the annual report.
What I would personally like to see is for the company be consistent in articulating the big picture (mega trends such as application of artificial intelligence to heath services), addressable markets (size and value), structural drivers (e.g. increased focus on productivity, reducing healthcare costs and wastes and patient outcomes) and how Imexhs intends to capitalise on those opportunities (e.g. how it differentiates from other market solutions and the compelling proposition that it offers to customers).
For example, reputable research firms like marketsandmarkets publishes many in-depth market research reports that the company can reference to give market participants a feel of the potential size of the market. In its latest report released in May 2019, it projected the global diagnostic imaging market to reach USD 33.5 billion by 2024 from USD 25.7 billion in 2019, at a CAGR of 5.5% from 2019 to 2024.
Rationale for expansion beyond the Latin American markets
I also feel that the company has not adequately explained the rationale for expanding into US and Australia. For sure, we can argue the size of former market but is that a good enough reason?
Bearing in mind that Imexhs is not yet a positive cash flow business and with a small cash balance ($886,000), expanding beyond your traditional market presents its own set of challenges and risk. I believe a similar question was ask during the Q&A of the conference call and I felt the response was somewhat inadequate. Whether the language barrier played a part, I felt German Arango (CEO) could have better articulate the rationale, particularly given he also mentioned that he had the same reservations. I also thought that Tom Pascarella (Chairman) being the chair of the board who sets the company strategy could have contributed.
If the reason was the higher margins that are available in those markets, I would argue that margins in the existing Latin American markets could be improved given that the existing price points are up to 75% cheaper than competitors. If you can achieve higher returns from your existing markets with less risk, why would not that be your first option?
I also have some questions regarding the details of the 'soft launch' sales and marketing strategy that Imexhs has planned for the US.
My own lack of in-depth knowledge about Imexhs
For high conviction holdings, I need the assurance that I can collaborate what they are articulating in their public announcements with what they tell me face to face. This is just a personal preference. Although I have not yet had the opportunity to meet either German Arango (CEO) or Tom Pascarella (Chairman), I would endeavour to establish contact soon to see if they are willing to communicate with an ordinary retail investor like myself.
Personally, I think meeting management and/or board members beneficial as it helps me to identify if there is substance behind all the carefully crafted public announcements. If they are unable to explain in a nutshell to an ordinary investor their business and strategy, that really says everything.
IME Price at posting:
3.3¢ Sentiment: Buy Disclosure: Held
