I was perplexed by the market reaction to today's announcement regarding the A$2 million Loan Agreement being signed with the company's non-executive director, Dr Douglas Lingard.

The announcement was pretty much the same announcement as the previous one announced on 30 April 2019, except for who it goes to and the option exercise price. All things being equal, the one announced today has better terms - e.g. higher exercise price and locking in a key personnel.

For sure, the exercise price is lower than the share price prior to today's announcement but my thinking is that there have been ongoing discussion for some time and the share price has ran ahead of itself lately. I wouldn't be surprised that the share price was lower than the exercise price when discussion commenced.

Another aspect of today's announcement that might have been missed and was not in the previous debt facility announcement is this part:

The Company’s primary strategy is to provide SaaS solutions to healthcare organisations in a capitallight model. However, IME can also provide appropriate clients with complete managed servicessolutions via Platform as a Service (PaaS contracts) which can include the provision of medicalimaging and related computer/IT equipment.

Again, upfront installation services and etc are lower margin activities but there is still a margin to be earned. In some cases, the customers would prefer to have the whole suite rather than tender out the hardware separately. Not being able to provide the whole product suite (hardware and software) could potentially be a deal breaker. 

Hence, consistent with the previous announcement, today's announcement explicitly states that:

These two contracts signed late lastyear, with maturities of 7 and 5 years respectively, required a total of $1.7m in capital expenditure for imagingand computer related equipment. 

In other words, the raised funds has a specific one-off purpose and should not be negatively viewed as being used to finance ongoing working capital.

All in all.... I am still somewhat perplexed by the market's reaction. Only reason I can think of is that a lot of the recent spike in share price was driven by new day and/or short-term traders who might not have the full appreciation of the context and jumped to the wrong conclusions. 

Again, these are my personal thoughts and happy to be proven wrong.

The further I researched into Imexhs, the more impressed I am with the company's penetration of the latin american market. With increased distribution partners and existing sales and market capabilities, I can also see potential opportunities for cross-selling of future services and products.

Developments in the healthcare industry, demographic changes, budget pressures and etc will also collectively and inevitably lead to structural changes in how healthcare is delivered. Digitisation of healthcare, including the application of artificial intelligence, is only a matter of time to not only improve productivity but also achieve better patient outcomes.

Management seems to be doing the right things so far - revenue growth, contract wins, increased recurring revenues. More importantly, the company taking a longer view by continuing to invest in research and development rather than short-termism at the expense of long term interests.

Part of me thinks that the market is currently not pricing the company correctly simply because the business is based in latin america. It is debatable whether that is right or wrong.

Based on my understanding, the near-term catalysts which may propel Imexhs share price higher in the short term include:

1. $2mill debt facility banked.
2. FDA approval
3. First Australian contract signed

On dot point one, refer to my separate straw for my thoughts.