Good interest today

But don't overlook IMH as Shaw today recommends it as a "buy" and says it's worth more than twice the currrent price.


Monday 11th Nov 2002

IMT HOLDINGS (IMH) RECOMMENDATION @ $0.16 ST: SPECULATIVE BUY DJC
KEY POINTS:
o ASX query. Royalties of $9M expected from Lake
Dianchi treatment.
The ASX has queried IMH regarding its latest quarterly cash flow statement and the company's ability to fund ongoing operations. The company has responded which is summarised below:
The latest Appendix 4C should not be used to determine the ongoing financial viability of the company due to a number of non-recurring items - non-recurring R&D of $205k and payments for prior period creditors of $243k. The quarter therefore included $426k of non-recurring costs. The company expects to achieve positive cash flow in future quarters. Sales revenue was below expectations in Q1 due to slower than anticipated run-down of generic Coles / Bi Lo cat litter products. This shortfall should be easily recovered in the next quarter with the commencement of industrial grade bentonite sales. Orders have been received from new customers following the installation of new plant and equipment to supply the foundry and drilling markets. Phoslock commercialisation is on-track. Tests at Lake Dianchi are expected to commence in the near future. Upon their completion and commencement of full treatment, IMH will receive royalties. The operating results at this stage should show a substantial profit. The company will be in a position where it could pay dividends to shareholders in the current or subsequent years should directors choose. IMH remains debt free.

Recommendation: We believe IMH is on track to achieve its stated targets regarding commercialisation of Phoslock. As stated in the company's 2002 annual report, treatment of Lake Dianchi alone is estimated to require 100,000 tonnes for which IMH will receive A$90 per tonne (plus its share of the JV profits). This should result in revenue of $9M for this contract, with minimal expenses incurred. We expect further contracts in China at a later stage resulting in additional royalties. The current market cap. of IMH is approx $7.5M (below the level of its expected royalty payments for only one contract). We have valued the company on a DCF basis at $0.36 (based on minimum contractual agreements). Refer SHAW report dated 23/8/02 for further details. Retain Speculative Buy on IMH.