Magik on java does not support magikc files any longer. You cannot create or read them (though reading them would be great for backward compatibility). Also the concept of images are no longer valid.
So how do you start a Smallworld session in 5.x? Well there is some documentation about it, but basic idea is that you start a registered magik session. This is defined typically in a register.magik file that is inside a module inside a config product. It is referenced from the gis_aliases file that you point to.
By "default" when you start the session, the magik code will be loaded based on what products/modules you have defined in the registered magik session. This is good for development, but is slow. And if you are a 3rd Party vendor, you would need to release the source code.
To speed things up, you can compile magik files into JARs. These typically are created when doing compile_all_modules() on the selected product. Also you can save the serialization information using save_serialised_module_definitions(0 on the product. One thing to note is that if JAR or SER files they take precedent over any changes to magik files. Just like an image, you would need to reload the magik files if there were any changes after the image was built. So for equivalency, the JAR/SER files can be thought of as the old image.
Creating JAR for a Specific module
Since Smallworld doesn't send the code and I couldn't get any timely info from the help desk or second line support, I poked around and developed the following code to compile one module to a JAR without needing to load all your modules in the product. This specifically helped me to compile several of the 172 modules I have as they were reviewed/fixed for Smallworld 5.
Method Finder Mapping
You can map the location of source files so that the method finder can jump to the appropriate code. This is especially good for when a JAR file is delivered but only certain source files are delivered in a separate directoey. You can use method_finder.add_mapping("NAME_OF_ENV").