I went back through DMX Asset Management’s monthlies (small-cap manager I like) hunting for ideas and VBC kept popping up as a high-conviction mispricing with improving cash generation, hidden franking/tax assets, and with a software opportunity.

What VBC does

• Verbrec helps big resource and energy companies plan, build and look after their gear (pipelines, plants, power systems).
• They also run and maintain this stuff so it keeps working safely.
• And they sell StacksOn, software that shows a 3D “digital twin” of giant ore stockpiles so miners can load trains/ships faster and hit grade targets.

Why DMX likes VBC

• They fixed a messy first half. The second half ran much better, pointing to about $8m EBITDA and ~$5m NPAT if that pace continues.
• It still looks cheap. With a market value under ~$30m, those earnings imply a very low PE (under ~5-6×) if they can keep that run-rate in FY26.
• It’s making real cash. The company has moved to net cash and brought back a dividend, which means the profits are converting into money in the bank.
• There’s “hidden value.” VBC has roughly $6m of franking credits and about $10m of tax benefits, which can help boost future shareholder returns (e.g., fully-franked dividends) without extra cost.
• A small software kicker. VBC’s StacksOn product is already used by BHP, and a global reseller deal with Datamine should help sell it wider. DMX believes this upside isn’t fully baked into the share price.
• Cleaner, simpler business. They’re selling the training arm for cash, which strengthens the balance sheet and lets management focus on the core engineering work and the software opportunity.
• DMX owns a meaningful stake, which signals confidence and adds a shareholder pushing for sensible capital allocation.

DMX thinks the numbers are improving, the stock is cheap, cash is building, and there’s extra upside from software meaning the share price could re-rate meaningfully if execution continues.

Going to keep it short again

Revenue took a hit because of a more strict selection process. However margins did improve

Unweighted pipe of 121m

PE of about 22x if you included discontinued operations

Looks like the turnaround could be a long drawn baseline tennis slugging match.

Can see why people are selling.

[held]

Have been spending quite a bit of time studying the technology side of the business, particularly stockpile and asset management and whether there is the right leadership to drive organic growth here.

From my previous straw, Verbrec is similar to Cosol in enabling and supporting systems that deal with Asset Management What makes Verbrec different is they deliver a solution to the customer with the help of an external vendor and do not have an in-house team like Cosol. Furthermore, Verbrec just changed from NRX Assethub to MDO Prospecta which is a bit strange.

The more interesting side is the stockpile software that has been under development for the last few years and only now has started generating revenue (approx 1m pa). BHP is the only customer which presents huge concentration risk if they decide to leave.

The previous CEO, Linton Burns, did not appear to make much progress with the Asset and Stockpile software. Maybe his background from OSD (the company that merged forming Verbrec) in Oil and Gas wasn't really the right fit to drive technology growth,

At the same time, I'm not sure if the incoming CEO has the talent to sell their tech solutions with their engineering projects as Mark Read doesn't really fit that profile.

So this strategy of Verbrec from engineering services to using technology to drive growth in the business might be still too early to call.

On the other hand, at a recent investor conference that I listened to, Mark did articulate quite well his strategy in turning Verbrec around and giving some conservative targets such as picking the right projects and earnings stability without being arrogant or vague like other CEOs of small cap companies. I thought he answered the questions quite well. Would add that fluent communication is what you expect for someone that has worked in a really large company or corporation. I think he even talked better than Bill Beament!

Probably that conference must have drove the share price back up.

Better value under 11c when there was some aggressive accumulation going on. Unless there is some mega deal on the horizon.

Turnarounds are soo speculative but huge rewards on offer when done to precision. Just look at Capricorn Metals, Northern Star and Elders as examples.

[held]

Not sure if others noticed that Mark Read has quite a deep corporate history spanning 30 years and is one of the reason why I got interested in Verbrec.

Spent some time at BHP, Sedgman (2008-2011 when the share price was on the up after the GFC) and GHD in Advisory. Not just one company and seems to have achieved over the years.

More details in Linkedin if you search for Mark Read.

Looks like his experience has given him the ability to execute a radical restructure of the company and raise capital easily with the instos taking the shortfall instead of the underwriter.

[held]

Appears someone couldn't wait for the analysis today and I saw the volume this morning. I acted accordingly

So I'll release it now to see if whoever bought will have second thoughts?

Will start with a history thread and lay out the ugly side of Verbec.

Verbec is a solutions provider for the infrastructure, mining and utility sectors.

Mark Read is the current CEO who started in March 2023 and really took the sword to the business being a bit like someone from the "A-Team" and got carried away.

Anyway I digress...

Going to be very brief on revealing the skeletons in the history. I will probably miss a few things or be a bit biased.

March 2023 - Mark Read appointed as CEO

July 2023 - Michael Casey CFO resigns for another position.

Aug 2023 - Announce Net Loss After Tax of $9.5m. Verbec throws the "kitchen sink" and does big restructure including terminating a "legacy project" as well as strategic review of assets, feasible projects and resources to improve financial position.

Oct 2023 - Business review completed and legacy project terminated

Nov 2023 - Verbrec Capital Raise consisting of 2m placement to instos and 2m pro rata to shareholders. I believe the 2m retail raise was undersubscribed with the shortfall taken up by sophs.

I only have a small holding as of today. Don't know too much about corporate restructures but sometimes these can be lucrative. Oracle is a good example of this.

[held]

Found a bit of time going through the cess pool of anything under 300m again. Apart from all the myriad of mining companies including MAU, I found this one underlined in red.

Apparently appointed a new CEO recently in November

Business seems similar to Cosol???

[not held]