Vysarn Limited

ASX:VYS

Vysarn Limited

ASX:VYS
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$0.795 (-0.6%)
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#13
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Forum Topics VYS VYS Vysarn - General Discussion
Maaxweell
Added 4 years ago

@laoshi - I was just about to hit post on my writeup for the same announcement! :P

Big fan of the acquisition - $2.6m cost (roughly 10% of market cap) and adding 20% to the bottom line (so about $800k) before tax, seems like a good deal on the face of it. Then factoring in how it's a crucial step in the continued vertical integration plan, and the 25 years of experience and patented tech they possess.

I continue to be impressed with management and their efforts to make these smart acquisitions, while still running a profitable & operationally cashflow positive business.

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ProEng covers the highlighted stage 4 components, and the hydrogeological consulting is covered by the consulting division they launched six months ago. Not to mention the test pumping component was only announced about 12 months ago too.

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Maaxweell
Added 4 years ago

@laoshi - Continued good news from Vysarn. Even better to see that it involves re-deploying a rig from dry hire (equipment only), to the full drilling & boring service, so the earnings per rig will be improved.

Will hopefully be a good opportunity for them to employ their new consulting division.

Very excited on the outlook for these guys.

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laoshi
Added 4 years ago

@Maaxweell good summary of the financials. A few other thoughts.

The carry forward of the $9.2M tax benefit is significant and the suggestion that going forward EBITDA being appx $1M / month gives growth even if things stay the same.

"Fielding high levels of enquiries" presents a dilemma as the rigs are obviously capital intensive. Test pumping equipment appears to be the preferred capital application allowing other services(eg camera work) to be added at lower capital outlay.

Good to see the statement about trying to diversify away from the resources sector and concentration risk through the consultancy into agriculture, government sectors.

Board looking for acquisitions now that earnings will support costs.

All in all happy with the numbers but more so the sensible approach that management have taken towards staffing, growth and diversification.

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Maaxweell
Added 5 years ago

@bjbart - I think you raise a good point on their competitive advantage, and it is one of the few concerns I have for the company.  However barriers to entry are generally quite high - I recall reading that to get a brand new rig (which to my knowledge are exclusively manufactured in and shipped from the US) cost around $5m each.

The standard seems to be you need two rigs on every job, one working and one on standby in the case of breakdown.  Meaning you would need a $10m investment to be able to run a single job, when you could pay margins of that for the service of having bring the rigs in.

Still a risk of some of the larger companies that are cashed up going a building a fleet of their own, but Vysarn seems to be in a great spot given the current capacity issues (where the current workflow is exceeding the amount of rigs available).  I think their intention to vertically integrate the de-watering service is a good sign that they realise the current lucrative situation may not last, and they need to use these earnings to build value adding systems in the long run.

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