Discl: Held 1.18% IRL

VYS provided an update on the Kariyarra Water Scheme progress to the market yesterday. This pushed me to deep dive the Karriyarra Water Scheme opportunity a bit more, going back to the original 13 May 2024 announcement, and then all the updates announced, since.

VYS has positioned itself almost perfectly for this opportunity.

If this is the first of many similar water asset targets, then VYS could be well on its way to become a significantly bigger company with highly reliable recurring revenue stepping up each time it brings one of these water assets onstream across the country. It certainly has the best, and probably only, end-to-end stack of water-related capabilities to enable this. This is extremely exciting!

This was a really good reminder that not all growth opportunities need come from "AI-margeddon." ... I topped up another 0.5% yesterday and VYS was the only green holding in my battered portfolio today ....

WHY THIS IS SIGNIFICANT

The current water supply of Port Hedland in far NW WA is at effective capacity.

WA Govt planning for additional water supply is not likely to be delivered until the 2030’s - this is a massive issue as water shortages will constrain significant and planned economic development in the PHE region https://www.abc.net.au/news/2026-01-23/port-hedland-water-carting-pilbara-supply-shortage/106258122

VYS, via its Asset management arm, Vysarn Asset Management (VAM), have signed a Joint Resource Agreement (JRA) with the Karriyarra Aboriginal Corporation, to be equal partners to develop a newly identified water source to supply customers in the PHE region since 13 May 2024

Since May 2024, the VAM-KAC JRA has done a lot of water-related studies on the Karriyarra Water Scheme (KWS), using VYS end-to-end water specialised capabilities and technologies and have established (1) encouraging geology (2) well development water volumes (3) with the water quality suitable for direct industrial bulk supply and (4) likely to be suitable for bulk potable water supply subject to minor treatment

The KWS promximity to Porth Hedland, and the promising findings of the water studies allows the VAM-KAC to position the KWS to be the only viable near-term solution to meet water demand in Port Hedland

At 10GL (10,000,000kL) per year capacity and the Port Hedland class 2 bulk water price of $4.20 per kL, this translates, back-of-envelope, to:

• Potential JV revenue of $42m per anum
• VYS’ JV revenue share at 50% = $21m per annum, recurring, from 2028 for a term greater than 10 years 
• This is a material ~20% uplift to VYS’s FY25 revenue of ~$106m
• Required investment capex = $250m, assuming VYS’s share is 50% translates to $125m, implying a ~6 years ROI

The more I understand VYS’ history and the Karriyarra Joint Resource Agreement, the more impressed and convinced I am that VYS is really in a great place to capitalise on the Port Hedland water issue, and other similar water supply issues it has identified. It does feel like VYS has had this Port Hedland opportunity as the “end-in-mind” water assets that it wants to own as it strategy, then evolved VYS over the years to be in this precise position. 

SUMMARY OF EVENTS

• VAM entered into a Joint Resource Agreement with Kariyarra Aboriginal Corporation RNTBC (KAC) to be equal partners in establishing and operating an exclusive and legally binding JV for the purpose of investigating, assessing, managing, owning, controlling, extracting and selling sustainable quantities of water from identified and secured water resources on Kariyarra country
• KAC is the registered native title body corporate that hold native title on trust for the Kariyarra Traditional Owners and the traditional cultural interests in all water resources on Kariyarra country
• VAM will also be appointed the JV manager and marketer of all sustainable quantities of water that the JV secures and develops on Kariyarra country

PRESENTATION SLIDES ON THE KARRIYARRA WATER SCHEME

Investor Presentation 2 Aug 2024

Investor Presentation 7 Mar 2025

Investor Presentation 28 July 2025

FY25 AGM Investor Presentation 27 Nov 2025

Discl: Held IRL 0.58%

Continuing my deep dive on VYS. I went through most of the key preso slides since IPO around acquisitions, launching of new capabilities to understand how VYS has evolved into what it is today.

TLDR Summary: VYS articulated a clear growth strategy of "Staged Vertcal Integration" since 2019 and then executed against that strategy, to end up becoming an intergrated and multi-disciplinary 'end-to-end' water solutions provider, today. It was a very interesting, sensible and logical evolution.

Well worth the time going through the preso's, I thought. Each pack provided a lot of insights into the water problems VYS is trying to solve and how those acquisitions give VYS capability to address those problems and the cross synergies with its other capabilities.

As my conviction continued to grow this morning, I opened a starter 0.58% position today, and expect to grow it to at least 2.5% to 3% over time.

Will now work through the 2HFY25 results in more detail ahead of the 1HFY26 results.

Should have also added that AI should help VYS in its consulting, engineering activities but it sure as hell won't replace the field services that VYS provides ....

I. EVOLUTION OF THE CORPORATE STRATEGY

VYS went to Re-IPO in Sep 2019 buying 10 hydrogeological drilling machines, primarily to address the Dewatering issue in the Pilbara, where a significant portion of the ore bodies of tier-1 iron ore miners are below the water table

From 2020, VYS has stated its long-term strategy. 

Fast forward to 2026, and VYS is now an integrated and multi-disciplinary ‘end-to-end’ water solutions provider, as it set out to evolve into, from 2020 onwards. The strategy matured and became clearer as the years went by.

This transformation came about over 7 steps, involving acqusitions and the creation of subsidiaries, summarised below

Current Geographic and Service Diversification

What I Liked About VYS Approach To Growth

• Consistent and unwavering strategy from the IPO
• Each acquisition, new entity or reorganisation had a very clear link and position in the VYS strategy
• Similar mining customers in many of the acquisitions 
• Clear step up with personnel capability and expertise
• Identified synergies with the rest of the VYS capabilities
• Expansion of TAM through increasing capabilities and services, geographic expansion 
• Acquisitions post the initial IPO acquisition of Ausdrill Hydrogeological drilling machines have been capital light - explaining the decrease in borrowings over the last 4-5 years

Discl: Not Held, But Very Interested

Following on from @Chagsy, @raymon68 , @edgescape and finding non-SAAS places to put cash to use, started a bit of a deep dive with VYS.

Still some ways to go, but as of now, the things I like very much:

• Business is very interesting as VYS is vertically integrated, and has end-to-end capability across the water value chain vs very fragmented competitors - this gives it good Aust-based capability and appears unmatched
• Demand is compliance-driven for groundwater management - mining and utilities particularly
• Revenue is accelerating across the 4 segments, NPAT and EPS is increasing as a result
• Cash is clearly trending up, liabilities clearly trending down - nice

Still To Get Head Around

• How recent acquisitions (CMP, Waste Water Management) are driving revenue, expanding geographic coverage and revenue
• A deeper understanding of what each segment does, the growth drivers and how sustainable/sticky they are.
• Valuation - will post an initial valuation, but need to fine-tune once growth drivers are better understood.

A. WHAT DOES VYSARN DO

Vysarn is vertically integrated across the water value chain and operates through multiple specialist divisions: 

Industrial

These are services tied to physical water field operations:

• Pentium Hydro: Hydrogeological drilling and dewatering services to Tier-1 iron ore miner
• Pentium Test Pumping: Groundwater test pumping and reinjection water services. 

Advisory & Consulting

Professional advisory and planning services:

• Pentium Water: Water management consulting — hydrogeology, hydrology, environmental planning. 
• CMP Consulting Group: Water infrastructure engineering consultancy (national footprint). 

Technology & Engineering

Technical engineering and design services:

• Project Engineering: Managed Aquifer Recharge (MAR) in the resources sector and hydraulic engineering solutions. 
• Waste Water Services: Design, construction and operation of custom wastewater treatment plants and pumping stations to the resource and regional utility sectors

Infrastructure

Sustainably control, convey and supply material quantities of water to meet significant unmet demand in the Pilbara region

Joint Resource Agreement with Katiyya Aboroginal Corporation, VAM continued to progress the development of a groundwater resource (and associated infrastructure) with the potential to address unmet significant industrial and municipal water demand in the Pilbara region

• Vysarn Asset Management: Investment in water infrastructure assets (including joint resource agreements for water supply projects). 

B. VYSARN’S TAM

Vysarn operates at the intersection of several growing markets:

Water Management & Infrastructure

• Urban water infrastructure (pipeline renewals, wastewater upgrades, strategic water planning) driven by population growth, aging infrastructure and regulation. 
• Managed Aquifer Recharge (MAR) — emerging focus area as governments and mining companies seek sustainable groundwater balance solutions. 

Resources & Mining Water Services

• Mine water dewatering and groundwater management is a critical, non-discretionary cost in mining operations. The water services market tied to mining is sizable in WA (Pilbara) and growing with exploration. 

Water Utility Engineering and Consultancy

• National water authority capital programs (e.g., Sydney Water infrastructure spend) provide extended TAM beyond resource clients. The CMP acquisition gives access to the East Coast water infrastructure boom. 

Market Drivers include:

• Population growth and urban infrastructure upgrades.
• Environmental regulations requiring test pumping, groundwater accounting, and reinjection. 
• Climate change impacts increasing demand for specialist water treatment, recharge, groundwater storage and reuse.

(Exact dollar figures for TAM aren’t broadly public; Australia’s water infrastructure investment is in the tens of billions AUD over the coming decade via state and federal plans.) 

C. CUSTOMERS

Vysarn’s customers span commercial, government and resource sectors:

Resources Sector

• Tier-1 miners in WA (e.g., major iron ore producers — noted in commentary on drilling fleet locked into major mining contracts historically). 

Utilities & Government

• Water Corporations (e.g., Sydney Water via CMP consulting contract). 
• Other state water authorities and councils needing planning, engineering and treatment infrastructure.

Industrial Developers

Urban development and industrial clients requiring site water strategy, dewatering, environmental planning, MAR and wastewater solutions. 

D. COMPETITORS

There isn’t one single company doing the same whole-of-life water stack, but key competitors in related subsegments include:

• Specialist Hydrogeology & Water Consulting
• Ground & Water Australia (hydrogeology). 
• Rockwater (groundwater and environmental services). 
• WRM Water and Environment (water resource engineering). 
• Engeny (environmental & water engineering consultancy). 
• Tonkin + Taylor (environmental/water engineering across ANZ). 

Larger Infrastructure Services with Water Divisions

• Ventia — infrastructure services including water projects. 
• WSP — global engineering firm with mine water and environmental water segments. 
• Aurecon — water infrastructure engineering globally. 

These competitors may not cover the entire portfolio that Vysarn offers but do compete in consultancy, engineering or drilling segments individually.

E. COMPETITIVE MOAT

Vysarn’s competitive strengths come from vertical integration and breadth:

End-to-End Stack

Very few peers in Australia combine advisory → drilling/test pumping → engineering → treatment → asset management in one group, enabling cross-selling and integrated project delivery. 

Compliance-Driven Demand

Increasing environmental regulations and approvals for groundwater management mean services like test pumping, reinjection and aquifer recharge are often required components of major projects (not optional). 

Strategic Acquisitions

Acquiring CMP gives access to high-value long-term utility engineering contracts and deepens the client base beyond mining. 

Early Market Position in Water Asset Management

The Asset Management division aims to control water supply infrastructure — a potentially high-margin, annuity income opportunity if realised. 

Integrated Capital & Footprint Expansion

The blend of drilling (capital-intensive) and consulting/engineering (higher margin) provides balance and diversification. 

Weaknesses/risks: Near-term industrial utilization volatility, integration risks from acquisitions, and climate/project execution risk on large infrastructure. 

F. FINANCIALS

Revenue is accelerating, especially post recent acquisitions.

NPAT and EPS are correspondingly increasing in tandem with revenue

Cash & Cash Equivalents are increasing, Borrowings are clearly decreasing - a good place to be

G. INVESTMENT CASE

Bullish Points

• Strong growth in revenue and earnings — FY25 revenue growth ~40% YoY. 
• Diversification away from cyclical mining into utility and government mandates via CMP and wastewater capabilities. 
• Regulation-driven demand for environmentally compliant water services which are increasingly standard requirements. 
• Strategic acquisition strategy allows footprint and capability build-out. 
• National infrastructure spend (e.g., Sydney Water contract pipeline) provides secular demand tailwinds. 

Risks / Bearish Considerations

• Small-cap volatility — share price can swing materially with contract cycles or resource sector downturns. 
• Execution risk around large projects and integration of acquisitions. 
• Market breadth — many competitors in consult/engineering spaces may compress margins on commoditised work. 
• Asset management execution — monetising water assets is conceptually compelling but implementation-dependent. 

Valuation Insights (third-party)

Analysts note Vysarn’s pivot to vertical integration and exposure to two major demand drivers (resources water management + infrastructure spend) but caution that current valuation may embed strong growth expectations. 

H. CHART REVIEW

Nice gradual uptrend, aligned with revenue and NPBT expansion.