Headquartered in Wan Chai, Hong Kong, Integrated Media Technology Limited (IMTE) is a lesser-known company that develops, sells, and distributes 3D autostereoscopic display (ASD) technology products and services across Hong Kong, China, Korea, Singapore, and Australia. The company launched its newly formed Internet of Things (IoT) business unit in February 2021 by agreeing to acquire a 70% equity interest in Shenzhen Koala Wisdom Fire Engineering Co., Ltd.

However, IMTE’s stock price has declined 6.6% over the past three months and 6.8% over the past month to close yesterday’s trading session at $3.95. The company’s shares soared to hit their 52-week high of $10.67 on March 23 based solely on social media discussion about its potential connection to the non-fungible token (NFT) craze.

In addition, the company’s operating loss in its fiscal year 2020 declined to $6.15 million from an $11 million loss in 2019. Its net loss came in at $10.03 million in its fiscal year 2020 versus $15.65 million in the prior year. IMTE is also raising funds by selling its shares to support its growth. So, its near-term prospects look bleak.

Here’s what we think could influence IMTE’s performance in the near term:

Increasing Uncertainty Surrounding Operating Business in Hong Kong

On July 16, the Biden administration warned that U.S. firms are encountering several risks posed by China’s national security law in Hong Kong. The advisory advised businesses to consider the potential reputational, economic, and legal risks of maintaining a presence or staff in Hong Kong and that they should administer  due diligence.

Furthermore, Hong Kong is in talks to pass a set of strict amendments to the Personal Data (Privacy) Ordinance (PDPO) against doxing, which is a common term referring to the act of publishing or disclosing a person’s personal information. However, several concerns have been raised over the vague definition of doxing and the rise in content-blocking in recent weeks, and it somewhat anticipated that this move might curb freedom of information. Consequently,  several technology companies, including Hong Kong-based IMTE, are expected to be negatively impacted.

Selling Shares to Fund Growth Activities

IMTE announced on July 6 that it has entered three securities purchase agreements with three accredited investors for the sale of its ordinary shares for a total of $2.80 million. The company is expected to use the net proceeds to purchase equipment for its electronic glass business and working capital. It also announced the closing of a direct offering of shares on March 25 for roughly $4.58 million in cash proceeds. IMTE is expected to use the net proceeds to strengthen its balance sheet and further develop its switchable glass, nano-coated filter, and financial research businesses. However, this share issuance is expected to lead to share dilution.

Stretched Valuation

In terms of trailing-12-month EV/S, IMTE’s 28.49x is 546% higher than the 4.41x industry average. The stock’s 12.28x trailing-12-month P/S is nearly 196% higher than the 4.15x industry average. Its trailing-12-month 20.53x  Price-to-Book  is also significantly higher than the 4.82x industry average.

POWR Ratings Reflect Bleak Prospects

IMTE has an overall D rating, which equates to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight different categories. IMTE has an F grade for Value, consistent with its higher-than-industry valuation ratios. In addition, it has an F grade for Stability, which is in sync with its 2.27 beta, which indicates extreme volatility.

The stock has an F grade for Quality also. This is justified given IMTE’s negative values for trailing-12-month gross profit margin and ROTC versus  the 48.60% and 4.51% respective industry averages.

IMTE is ranked #40 of 47 stocks in the B-rated Technology – Electronics industry. Click here to see IMTE’s ratings for Growth, Sentiment, and Momentum as well.

Better than IMTE: Click here to access 24 top-rated stocks in the same industry.

Bottom Line

Even though IMTE is a low-priced stock trading below $4, its valuation is stretched considering its near-term growth prospects. In addition, the company has reported losses over the last three years. Moreover, IMTE is currently trading lower than its 50-day and 200-day moving averages of $4.36 and $4.69, respectively, indicating that the stock is in a downtrend and could keep retreating further. So, we think it’s wise to avoid the stock now.

IMTE shares fell $3.95 (-100.00%) in premarket trading Wednesday. Year-to-date, IMTE has gained 1.28%, versus a 16.05% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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