is imdex good buying at this level?

Despite my deep concern that world faces a depression i bought IMD today. This is my rationale.

Just as confidence re world economy including China wanes on a daily basis, so has confidence in mining service/mining engineering stocks. Hence, despite sound long term contracts companies like ASL, BLY, FGE etc been hammered. FGE on a very low PE. IMD services the mining industry and it too has fallen. But in my opinion it should be viewed more as a retail stock. Yes, it has a research and manufacturing component and that has capital tied-up. But the sums are small compared with firms with dozens of drilling rigs, heavy trucks, bulldozers etc.

I reckon IMD has an advantage in thatit can easily leverage its sales without a commensurate increase in costs. Let's say ASLwin a new drilling contract. The drill team is 4 men and costs are fixed. Return is also fixed as machine can only drill X metres/day. IMD sells drilling lubrication fluids and downhole instrumentation to mining engineering companies. Its presentations display an impressive list of clients. Their field personnel cross-sell both items, often to same customer. IMD services all the main drilling areas including Cooper Basin. let's say 2 new firms start drilling for shale gas. IMD simpy use same field staff to sell to new clients. There is no extra capex involved. Hence, its not totally disimilar to a sales team in retail shop. One person can sell one pair or 25 pairs of trousers in a single day. It boils down to demand.

IMD has a big jump in profit and operating cashflow in 2011. They were able to increase both top and bottom line because demand combined with weak opposition allowed them to increase both volume and margin! You know how quickly this ramps-up profit. CEO's latest presentation confirms firm had record sales inJuly and August. He also mentions that margins have been increased since FY11. Compared with most mining service companies IMD's PE is high. I reckon FY12 EPS will be 18c and divs of 8c ffr. Because the macro appears good it is a reasonable purchase at $1.50-1.59 level. About 30% of sales are overseas including new JV in Middle East. Hence, drop in AUD a def benefit.

Most of all i like the simple model. It also provides a fair degree of confidence re FY12 forecast and right now many firms earnings are had to be sure about. IMO it's worth a look for SMSI portfolio. Roger Montgomery has huge IV of over $2.40 on IMD. he focuses mainly on the 30% ROE.

anyway, i thought i'd draw yr attention to Imdex. If one has faith in gold remember IMD has plenty of business with gold miners.
Disclosure: I hold IMD.