Total upfront consideration of $24.0m cash + 10.0m shares. 

VYSARN LIMITED (ASX:VYS) - Ann: CMP Presentation and Capital Raising, page-1 - HotCopper | ASX Share Prices, Stock Market & Share Trading Forum

Vysarn to raise approx. $38.2m via a single tranche placement under its existing placement capacity under ASX Listing Rule 7.1 and 7.1A for funding of the upfront cash consideration of $24.0m for CMP, plus any working capital / debt adjustment payable by Vysarn. • Remaining funds to be allocated to future growth initiatives and the ongoing development of the Kariyarra water resource.

Trading Friday: Share price reaction up 2%

VYS; compounding growth .. chart is up left to right..

Return (inc div)   1yr: 137.50%   3yr: 78.16% pa   5yr: 50.26% pa

Vysam has today gone into a trading halt "pending an announcement in relation to a potential material acquisition and capital raising"

"the Company anticipates that the trading halt will end on the earlier of a release of an announcement to the market in relation to the material acquisition and capital raising, and the commencement of normal trading on Friday, 13 September 2024, and requests that the trading halt remain in place until that time"

Disc~ I hold in RL

 Acquisition of Waste Water Services Pty Ltd seems a good fit to broadening the scope of the company.

 Cash consideration of $7.5 million

Company will pay an Enterprise Value/EBITDA acquisition multiple of 3.27x

 Projected earnings per share accretion of greater than 20%

Company has identified immediate organic growth initiatives for WWS.

WWS has been operating for over 25 years, has 18 staff, a manufacturing facility in Western Australia, and has long standing blue chip Tier 1 clients across the mining, oil and gas and industrial sectors.

WWS Manufactured Products include:

• Specialised sewage transfer stations

• Industrial waste systems • Sewage treatment plants

• Potable water systems • Industrial and agricultural dosing systems

• Temporary sewage treatment plants and potable water plants for short-and long-term hire WWS Products and Services include:

• Department of Health monitoring of wastewater treatment plants • Software engineering incl. SCADA and remote monitoring

• Supply, repair and overhaul of pumps

• Sourcing and supply of spare parts

• Supply of chemicals for water and sewage treatment

• Servicing, training and audit of wastewater treatment plants 

Disc Held in RL - largest position.

Doing a quick summary here....

Vysarn is at 154m market cap with NPAT of 7.96. This is now at PER of 19.4x

Revenue grew only 17% versus 40% in the previous year. Although this was from a higher base than FY23

Also corporate expenses ticked up 720k more than last year.

Can understand why it was sold on the news.

Much of the upside now hinges on the implementation of the water supply business in WA

[held]

Company has appointed Mr Steve Dropulich as Chief Operating Officer (COO).

Vysarn | VYS | Industry leading vertically integrated water service provider

The Board

Maybe not a buy. chart would need to retest 30cps:

Circa 52 week high: Friday 32cps

Small cap: $131Mill

illiquid trades only average Daily Traded: (3-month): $52,450

Appointment of COO who seems a good pick. Previous company had contracts with WA's Water Corp. Also first licenses to allow KAC to conduct a drilling and test pumping program on Indee and Kangan Stations in the Pilbara region of Western Australia. VYS hit an ATH of 34c yesterday.

As previously stated by the Company, in preparation for Vysarn’s next leg of growth an appropriate level of investment will be made in key senior human resources to provide greater depth and capability within the Company’s executive leadership team. The appointment of Mr Dropulich as COO underpins this strategic growth initiative. 

Mr Steve Dropulich as Chief Operating Officer (COO). Mr Dropulich is a 30 year veteran of the Australian energy and infrastructure services sector having established and led market leading contracting companies in senior executive management roles across both public and private business. During his career Mr Dropulich has developed extensive experience in financial and commercial management, establishment of high performing teams, strategy formation and execution, as well as driving operational excellence.

Prior to joining Vysarn, Mr Dropulich was a founder of ASX listed energy and infrastructure services group Valmec Limited, where he was the Managing Director for over 10 years until its acquisition in 2021 by French company, Altrad Group. Following the acquisition, Mr Dropulich held the role of Altrad’s Executive Director of Operations for the Australian region. Mr Dropulich holds a Bachelor of Commerce in accounting and business law, is a Chartered Accountant, and is a member of the Australian Institute of Company Directors.

Data gathered during the drilling and test pumping program will form part of a hydrogeological assessment for the commercial development and approval process for an associated 5C groundwater license that will determine the viability of the aquifer on Indee and Kangan Stations for the offtake of up to 10GL of water per annum. Vysarn anticipates that the drilling and test pumping program will begin in the second half of calendar year 2024.

First stage of the water asset management with a JV announced with native title holders.

Vysarn Asset Management (VAM) has entered into a Joint Resource Agreement (JRA) with the Kariyarra Aboriginal Corporation RNTBC (KAC). KAC holds the traditional cultural interests in all water resources on Kariyarra country. Under the terms of the JRA, KAC and VAM will be equal partners in establishing and operating an exclusive and legally binding joint venture (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. Under the terms of the JRA, VAM will also be appointed the JV manager andmarketer of all sustainable quantities of water that the JV secures and develops on Kariyarra country.

The Kariyarra people live in and around town of Port Hedland in the Pilbara region, in the north-west of Western Australia, encompassing country from Port Hedland west to the Sherlock River and south to the Yule River.

Presentation by CEO James Clement at the ASX small & mid-cap conference. Good overview/intro to the business and some thoughts on the direction they're hoping to take it.

The market was disappointed with the results despite record revenues. I think there was expectation of info on a possible dividend which was mentioned earlier. Also the note about 2nd half likely to decrease due to "requirement to invest in further resources to support growth initiatives, the strategic rotation of drill rigs through compliance upgrades, project delays and potential other risks identified herein". I like the open discussion of risks which gives confidence in the long term prospects for the company. VAM has the potential for a major expansion with significant capital costs in the coming years. We could see the SP pull back a bit after a very strong run up from 9c and I am looking for an opportunity to reenter in SM. Still my largest holding in RL

The Company’s carry forward tax loss balance was fully utilised during the period.

Company was in a net cash position for the first time since the relisting of Vysarn in September 2019 with net cash of $1.69 million 

PW Management is aggressively targeting a 50% increase in staff numbers year on year to not only service growing client demand but to expand PW’s service offering in wider fields of adviser expertise across water and environment. 

PH the recent significant decline of the battery metal sector has created the potential for short term utilisation risk. Management is monitoring early signs of contagion in client confidence which is manifesting in scope of work and project investment decision delays. 

PH has a small exposure to the nickel sector which is currently experiencing systemic issues on a global scale. This presents immediate utilisation risks with management prudently preparing for reallocation of assets should the need arise. 

The dual rotary rig purchased internationally to replace a conventional rig in the PH fleet has had significant arrival and release delays due to the recent protracted industrial action on Australian ports. Management still intends to attempt to receive and upgrade the rig for deployment inside FY24 but anticipates there will be up to a 4 month delay 

PH rig suite was involved in a major flood event on a client’s mine site. The Company is currently negotiating an equitable settlement with the client and PH’s insurer.

VAM’s focus in coming financial periods will be to position the Company to be able to execute agreements securing long term water supply partnerships and securing long term off take. Should the Company be successful in securing such agreements, then VAM will turn its attention to securing funds for the construction of a major pipeline to convey water.

In preparation for the Company’s next leg of growth an appropriate level of investment will be made in the 2HFY24 to acquire further senior human resources in asset management, equipment maintenance, information technology and business optimisation. The Company continues to forecast meaningful year on year earnings growth for FY24. Nevertheless, with the requirement to invest in further resources to support growth initiatives, the strategic rotation of drill rigs through compliance upgrades, project delays and potential other risks identified herein, it is the Board’s current view that 2HFY24 EBT will not exceed 2HFY23 EBT.

Apologies if link didnt work previously

https://www.canva.com/design/DAFyssB7jN8/HA2XvYi5yGKG5twGn8IyDA/edit?utm_content=DAFyssB7jN8&utm_campaign=designshare&utm_medium=link2&utm_source=sharebutton

Assets fully allocated to FMG, BHP and Roy Hill Iron Ore under multi-year master service agreements.

▪ Delivered record results in 2HFY23 driven by full deployment, operational efficiencies, rate increases and double shifting of one asset.

o Strategic Decision to pull multiple assets in 1HFY23 for compliance upgrades to meet Tier-1 standards

o Impact on 1HFY23 earnings but facilitated deployment on new, improved multi-year contract

VYSARN LIMITED (ASX:VYS) - Ann: AGM Presentation 2023, 71077591, page-1 - HotCopper | ASX Share Prices, Stock Market & Share Trading Forum

Return (inc div)   1yr: 182.35%   3yr: 31.73% pa   5yr: N/A

Interesting announcement this morning about water asset management. Expands on the consultancy side of water management and a comment about traditional owner partners suggests a go between role with the T1 miners?

Target investment opportunities in water, infrastructure assets and associated opportunities to control, own and toll water. Vysarn has a suite of opportunities that it is currently evaluating.

Mr Richard Lourey has been appointed as Managing Director of VAM.

Mr Lourey is an experienced water and infrastructure executive and investors etablished Australia’s first dedicated water fund, was Head of Tyndall Australia Real Assets and was the Founder and Director of AWARE Water, a significant Australian water investment company.

Richard Lourey, Managing Director of VAM said: “It is a privilege to be given the opportunity to realise these opportunities for the benefit of our shareholders, traditional owner partners and future investors in the Vysarn funds.”

A good result and the SP already at Euroz Hartley's 20c valuation. Some increased capital spend coming in buying a new rig and expanding the Project engineering manufacturing with a new facility. Reduction in conversion of earnings to Operational Cash Flow due to less favourable terms with Tier 1 clients but potential for double shifting and stability of contracts. Should be resilient to a drop in iron ore demand due to Tier 1 contracts and diversifying to provide a wider revenue base.

Now my biggest holding in RL and 2nd in SM.

Summary of group results for FY2023: -

Revenue from Operations $64.96 million -  exceeded previous corresponding period revenue from operations by $18.66 million. 

Operational Cashflow was $9.66 million. The reduction in the conversion of earnings to Operational Cash Flow compared to the previous corresponding period is primarily a reflection of increased working capital requirements created by the redeployment of drill rigs to Tier 1 iron ore miners with less favourable trading terms.

EBITDA $12.45 million -

NPBT $7.08 million -

Net Tangible Assets $30.50 million -

Cash and Cash Equivalents $8.31 million

The board and management continue to maintain the view that one of the largest and growing impediments to ongoing iron ore production is the removal and disposal of surplus water.

Pentium water

The business experienced material expansion in staff head count growing to more than 20 advisors, developing its model to derive more revenue from lump sum project work. Advisory model evolved to include Company backed internal projects and has developed a portfolio of internal early stage projects focussing on opportunities across water pipeline infrastructure and associated mechanisms to control, own or toll water. These early stage projects in turn are creating partnerships and new opportunities associated with the supply of large volumes of water for irrigated agriculture and carbon sequestering. 

Pentium Hydro

The outlook for Pentium Hydro remains robust with demand for dual rotary rigs particularly strong. Due to limited supply of dual rotary rigs in the Australian market, in hand with the long lead times and prohibitive expense to import new dual rotary rigs, Pentium Hydro anticipates opportunities to increase the number of rigs double shifting for clients to meet this demand. 

As such, Pentium Hydro has recently identified an opportunity to acquire an additional used dual rotary rig. Subject to proceeding with the rig’s acquisition, it is anticipated that this rig would be acquired and rebuilt to Tier 1 standards within FY2024.

Operational improvements will continue to be rolled out in FY2024 such as the establishment of a Pilbara based critical spares facility which will help reduce any downtime associated with programmed maintenance and breakdowns, as well as a continued recruitment drive to bring more experienced water well drillers, supervisors and managers into the business. 

Pentium test pumping

The next generation test pumping unit did not meet its initial anticipated deployment timeline of 30 June 2023, with the extension of the delivery date due to delays in the construction and delivery of the reel unit out of Queensland.

The second unit is on track to be commissioned, deployed and operational inside the September quarter of FY2024 with multiple avenues of client enquiry providing opportunities for high utilisation rates from the outset. Incorporated within the new unit is the ability to injection test in addition to test pumping. This has been made possible via the inclusion of injection technology acquired from Project Engineering. To the Company’s knowledge, there is no other provider in Australia that can provide a single unit that can both test pump and injection test. Management anticipates that injection testing has the potential to be a high growth and material offering in Pentium Test Pumping’s suite of services in future periods. 

Project engineering

Opportunities to start moving the business to a production line model rather than manufacturing on a ‘just in time’ basis. In response to this anticipated growth, ProEng is currently sourcing new premises that will enable the establishment of an expanded MAR unit production line as well as bolstering staff numbers and expertise. These strategic initiatives will require a commensurate level of increased investment. 

Group

The diversification across the vertical service offerings will help create long term shareholder value by driving expanded valuation multiples traditionally afforded to multi-faceted business.The Company is well funded, anticipates material earnings growth and has identified a range of organic and acquisitive growth prospects. As always, the Company’s board and management will continue to focus on driving long term and sustainable value for its shareholders. 

Update from Euroz Hartleys giving a target of 20c.

"We have increased our Price Target to $0.20/sh; which reflects our view of FY'24 free cash flow potential.

Multiples based valuations are useful shortcut to a price target; though can be troublesome when companies are grouped with a bucket of peers that are trading at generally deflated valuations.

As a broad idea mining services valuations (in terms of EV/EBITDA multiples) continue to trade at 50% discount to 6x average and overtime we expect re-rate across the sector.

We also believe VYS's long term business model as it transitions towards water consultant ⁄ management business should warrant a premium..."

Disc: Held in RL and SM

Earnings update from VYS is positive and director exercising options. SP responded positively but still under the radar.

The Company forecasts to deliver Net Profit Before Tax (NPBT) of $6.0 million to $6.5 million in FY2023. Previous guidance was $5.1 million NPBT.

Wholly owned subsidiary Pentium Hydro Pty Ltd is forecast to deliver second half FY2023 Earnings Before Interest Depreciation Amortisation (EBITDA) of $7.5 million. Previous guidance was $6.1 million EBITDA.

VYS coming out of a period of lower revenue after upgrading rigs for Tier 1 customers and building vertical integration. $1.6M profit but a $1.65M tax expense. Wage bill increased by $1.6M

Hydro drilling main revenue stream but diversified approach progressing nicely. Project engineering expansion going to need Capex.

Summary of group results for 1HFY23: - Revenue from operations $29.08 million - EBITDA $4.24 million - NPBT $1.60 million - Net Tangible Assets $25.81 million - Cash and Cash Equivalents $7.13 million - Operational Cashflow $5.35 million The Company maintains FY2023 NPBT guidance of $5.1 million

Drilling services $15.4M, consumables$5.4M, Income engineering $4M, test pumping $1.4M, Consultancy $1.7M, Hire $1M

The non-cash income tax expense of $1.65 million in the period primarily reflects the Company’s increase in existing deferred tax liability due to a change in Company’s corporate tax rate and utilisation of the ATO’s instant asset write-off. As a result, the Company continues to carry tax losses of $11.63 million that can be used to offset future income tax liabilities.

Pentium Water (PW), Pentium Test Pumping (PTP) and Project Engineering (ProEng) all achieved earnings in line or in excess of expectations. Vysarn corporate overheads also increased in the period, but not disproportionately to earnings when considering the major organisational and corporate restructuring during the period. The Company is maintaining earnings guidance of $5.1 million NPBT in FY2023 (a 25% increase on FY2022 and a 119% increase on 1HFY2023 to 2HFY2023

Pentium Hydro

Asset utilisation improvements will initially come via early double shifting opportunities within the March quarter of FY2023.

Pentium test pumping

The first stage of the division’s expansion strategy is anticipated to be executed within FY2023 with the second test pumping unit’s construction on track for completion within the period. Current demand for test pumping services should see the second unit deployed immediately post commissioning. 

Pentium Water

A growing number of PW clients that initially engaged the business to consult on ground and surface water are actively seeking additional assistance in areas such as the environment, traditional owner engagement and carbon sequestration and offset. Consequently, PW sees its next stage of growth coming from these horizontal opportunities. PW is also actively pursuing organic and acquisitive growth from areas such as water resource engineering, mine closure, water infrastructure and asset management. 

Project Engineering

Management is in the early stages of planning expanded capability in ProEng to be able to execute project delivery for a material increase in the MAR production line over the next 2 years and beyond. This is in line with the Company’s growth aspirations disclosed in the ProEng acquisition presentation released to the ASX on 5 October 2022. This expanded capability will initially include upgraded production facilities, warehousing and hard stand, as well as internalising a number of manufacturing services currently provided by third party contractors. 

Held in SM and RL

Article from Tim Boreham on Stockhead that was syndicated in The Australian. Bump in the SP on Friday.

”20 ASX stocks that are primed to run in 2023”

Vy-not?

The Perth based Vysarn (ASX:VYS) is the only pure-play hydro-geological driller and it provides other end to end services such as pumping and aquifer management.

Vysarn’s resources-focused rota of clients includes BHP, Fortescue Metals and Gina Rinehart’s Roy Hill.

Vysarn recovered from a shaky pandemic period to record a $4.1 million pre-tax profit in 2021-’22, 270 per cent higher, on a 79 per cent revenue surge to $46.3m.

Management guides to a $5.1 million profit this year, with the lure of a maiden div in the 2023-’24 year.

The $32 million market cap has net debt of around $4.2 million but boasts strong cash flow, so we say ‘Vy-not?’ as an investment proposition.

Held in RL

AGM presentation gives a lot of good detail about the future direction of the company and even holds out a carrot of a possible dividend in 2024. Moving rigs to BHP to give increased margin negatively affecting 1H but positive for full year. New joint venture with Concept expanding the vertical integration of water services into water containment. Share price has been in the doldrums for a while but has been on a general uptrend.

Capital management

Given the fundamental nature of the business and operations and subject to ongoing capital requirements, the Board is considering a maiden dividend in FY24.

Pentium Hydro (Hydrogeological Drilling)

Within the 1HFY23 period Pentium Hydro has been positioned to now solely service tier-1 mining clients under multi-year, multi-rig contracts.

Rigs will be deployed across BHP, FMG and Roy Hill Iron Ore.

To achieve this, multiple rigs have had to be pulled from the field for compliance upgrades in 1HFY23 to meet stringent BHP standards but will in turn provide long-term deployment with increased margins.

The strategic decision to upgrade rigs for BHP will:

Negatively impact 1HFY23, resulting in softer earnings.

Positively impact 2HFY23, resulting in budgeted record half and full year earnings.*

Budgeted record 2HFY23 EBITDA of ~$6.1m (from Pentium Hydro) anticipated to be indicative of baseline earnings performance going forward

Concept Environmental Services (“Concept”) is one of Australia’s leading providers of largescale fluid containment systems.

Concept designs, installs and services its patented array of modular, relocatable tanks.

Services clients in the energy, resource, utilities, industrial sectors across remote, regional and urban locations. Purpose of Joint Venture Joint Venture provides Vysarn an immediate and capital efficient entry into Stage 4 (‘Control’) of the water vertical strategy while providing Concept an established local partner to help drive large scale adoption of their fluid containment solutions in Western Australia.

Vysarn’s current and prospective clients in Western Australia require containment solutions as part of the vertically integrated water service offering.

Demand for containment is set to increase as water abstraction and containment needs increase.

Concept is the premier provider of containment solutions in Australia.

Concept has a strong presence in the Eastern States of Australia and is positioned to capture growing market share in Western Australia.

Vysarn’s consulting division, Pentium Water can provide immediate line of sight and access to large scale, tier-1 opportunities in Western Australia across the resources and utility sectors. Broad Terms of the Unincorporated Joint Venture Agreement

Joint Venture pays Concept a license fee per unit/tank installed.

Vysarn and Concept share costs/returns equally (50/50)

Disc: Held in RL

Investor presentation following the completion of acquisition of Project Engineering (forecast to give appx 20% earnings accretion) . Gives detail on the potential for Managed Aquifer Recharge, water banking and aquaculture (shift to onshore tank based production due to environmental concerns) and how it ties in to the vertical integration strategy.

Talk about getting it done. Just look at what Vsyarn has achieved in 3 years.

Even progress in the past 12 months is highly impressive.

Impressive capital management, using the operational cash flow to fund vertically aligned acquisitions, and reduce their debt by 23%. The management team have impressed me time and time again. I really think this business is building towards something special.

Operational Outlook

Really positive outlook on the future. The multi-year contracts with tier one miners will continue to bear fruit, and will keep utilisation and gross margins at high levels. They are in a challenging labour market, they had job ads open for drillers and consultants pretty consistently on SEEK throughout the year, but they still managed to grow their headcount and prevent any operational slow downs (excluding the effects of COVID).

Promising commentary on Yield Test Pumping, which was acquired during the year. YTP exceeded initial expectations and according to Vysarn had an immediate cultural fit within the Vysarn group. Clear avenues for YTP to continue growing in the coming years.

Pentium Water - the consulting division launched by the company during the year and is another move by management that increases my confidence. Management openly state that the consulting division is not going to materially contribute to the earnings of the company, rather the goal is to source new clients and projects at their early stages who will need drilling and pumping services further down the line. They even identified opportunities that fuelled the movement behind the recent acquisition of ProEng a few weeks back. The consulting division identified increasing demand in the need for aquifer recharge services, and within 6 months of launching Pentium Water, they announce the pending acquisition of ProEng.

Closing Thoughts

With a continued focus of vertical integration, Vysarn & its management have all the tools to continue executing the current strategy. I fully expect them to maintain high earnings, make smart acquisitons and drive shareholder value over the next 3-5 years. At a diluted P/E of 11, operationally cash flow positive, and a competent management team, you can do a lot worse than investing in Vysarn.

Disc: held in RL and strawman

Vysarn have provided an ops & earnings update to the market today.

COVID has finally caught up with WA and is causing some issues.

Due to high case loads and hard border lockdowns, Vysarn has experienced difficulty with both workforce and access to client site access, harming revenue on the hydrogeological drilling (their biggest earner).

The way the announcement is worded, suggests they waited until things had turned the corner before letting the market know, and it sounds like they are on track to be at full operational capacity by the end of June.

Due to these issues, they have revised expected EBITDA from $10-11m, down to $9m.

It is a shame to see, but my thesis is largely unbroken, it just pushes the timeframe out a little bit. The good news is that the test pumping & consultancy divisions are trading in line with expectations, so the long term goals of vertical integration seem less affected. They make note they are still exploring acquisition opportunities for further vertical integration.

I expect the price to take a hit, so there may be some good buying opportunities on a company that is unknown and still undervalued in my opinion.

Disc: held in both Strawman and my personal portfolio

No surprises in todays release of financials (Link 1, Link 2)for the 6 months ending December 2021.

Revenue, EBITDA & Operating Cashflow all seeing continued growth. On track to meet their $10m EBITDA target for 2022, I think they likely be up in the $11m range.

Currently 11/12 of their rigs are secured under multi-year, multi-rig contracts, with the 12th currently being used for short-term contracts. Management is seeking to have the 12th rig under a long term contract.

Great signs around the move towards being a fully vertically integrated water service provider. The acquisition of Yield has seen to have gone smoothly and has already secured a two year contract with Fortescue for test pumping. The consulting division is expected to be at a steady state towards the end of FY22, management sees the consulting division as a fantastic opportunity to source new clients/projects in the early stages.

Some final points to consider

• Current Market Cap is $35m.
• Expected EBITDA is $10m - that is a 3.5 multiple on a profitable company with most of its revenue secured on multi-year deals.
• If we make the assumption that earnings will stay consistent for the FY22 (which seems likely), we get to a diluted EPS of 1.16 cents per share. This gives us a P/E ratio of 7.75 at todays price of $0.09. So it's not trading at a high premium either.

VYS expanding in to water consultancy in urban and mining sectors. Moving to bigger premises.

Continuing the plan to become vertically integrated water company.

Likely to be increased costs in the short term but hopefully makes for an attractive value proposition for new contracts going forward.

Vysarn Limited (ASX:VYS) (Vysarn or Company) is pleased to advise the incorporation and subsequent launch of a new wholly owned subsidiary Pentium Water Pty Ltd (Pentium Water) to provide water management consulting services in hydrogeology, hydrology and environmental planning.

The establishment of Pentium Water is the continuation of the Company’s clearly defined strategy to build a vertically integrated whole of life, end to end water service business. Pentium Water will service the resource, urban development, utility, government and agricultural sectors.

Pentium Water has made two key appointments with Mr Shane McSweeney appointed as General Manager and Technical Director Urban Water Management effective from 15 February 2022, and Mr Ron Colman appointed as Technical Director Mine Water Management effective from 1 February 2022.

Mr McSweeney is an environmental scientist and engineer with over 16 years of experience as a water management practitioner providing consultancy services to industry on all aspects of water management including hydrology, hydrogeology, drainage design, water supply, alternate water supply, wastewater disposal and reuse, contaminated land and groundwater, urban water management and environmental impact assessments.

Mr Colman is a hydrogeologist with over 35 years of experience with a specific focus on providing water management solutions across projects involving small to large scale water supply developments from groundwater resources, mine dewatering and excess water disposal, regional hydrogeological investigations and overall mine groundwater management, licensing, and compliance reporting.

Several additional high calibre principal and senior appointments have also been made across hydrogeology and hydrology to form the foundation consulting team at Pentium Water.

Pentium Water has begun implementing an extensive business development program and anticipates the award of consulting work from current and prospective clients of the Company. In early business development, Pentium Water has entered into a 6 month fixed term sub consultancy agreement with RPS AAP Consulting Pty Ltd for the provision of water consultancy services from 1 February 2022.

In light of the ongoing growth of the Company and its wholly owned subsidiaries providing services across hydrogeological drilling, test pumping and water management consultancy, the Company is pleased to advise that is has established new corporate headquarters at 640 Murray Street, West Perth. The new offices will house the Vysarn and Pentium Water operations as well as providing space for future growth initiatives

A stock that is still very much overlooked on the ASX (which you can't blame due to their current size). It's not a sexy SAAS business, nor will it hit a 1bn valuation in a short timeframe but I think there is good potential for Vysarn to turn into a cash cow over the next few years.

Currently trading at roughly 3x its estimated EBITDA for 2022 (which the last update has shown they are on track to meet).

Management have skin in the game, as well as multiple performance incentives for management including EPS targets.

Defined plan to vertically integrate services to become a front-to-back dewatering service, which they have begun to deliver already with the recent acquisition of Yield Test Pumping.

On a 3-5 year outlook, the current price is an absolute bargain for me, I have full intention to increase my expenditure here in the comings months in both my Strawman and RL portfolios.

VYS yield test pumping presentation

Provides detail on how the acquisition fits the VYS vertical integration strategy and fills in some detail about VYS current position.

 Purchase price 4* EBITDA of 700-800k (target)

Currently fully utilised under MSA with FMG 2+1 years where VYS already operates

Aiming for Tier 1 miners to avoid fallout from Iron ore price drop

Expansion through design /construction of additional truck mounted test pump units to meet requirements of VYS existing drilling clients looking for further acquisitions to develop the vertical integration 

Should produce some steady growth in FY23 and beyond.

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02431001-6A1054179?access_token=83ff96335c2d45a094df02a206a39ff4

Vys has fallen to a 52 week low after announcing the deferral of a rig deployment (even though they already had excess demand and the rig will be redeployed)

A bit of good news today with the acquisition of Yield test pumping

“Yield is a test pumping business that services the resource sector in Western Australia. Yield currently provides services to Fortescue Metals Group Limited having executed a Master Service Agreement in June 2021 for a term of two years with a twelve month option to provide test pumping services.
Yield commenced operations in 2015 as a specialist test pumping business.
In line with the Company’s clearly defined strategy, the acquisition of Yield provides Vysarn with its first entry away from being a pure hydrogeological drilling specialist to a more vertically integrated water service provider. The board and management continue to identify a range of services that could continue to provide the Company with further opportunities to become a multi-faceted water service provider.”

Further to my earlier straw

VYS 100 employees ave 7/12 rigs deployed in FY21 (fully deployed for FY22)

Summary of group results for FY2021: -

Revenue $26.37 million ($25.82 million from operations) - EBITDA $5.00 million - NPBT $1.14 million -

Net Tangible Assets $24.76 million -

Net Current Assets $3.93 million -

Cash and Cash Equivalents $6.56m

As such, subject to maintaining 100% rig utilisation the Company is budgeting FY2022 EBITDA (earnings before interest, tax, depreciation and amortisation) to be between $10.0 million and $11.0 million

Tax losses of $9.2 million that can be used to offset future taxable income.

The Company is in a position to consider two further upgrades of Pentium owned T130XD rigs should there be a continued level of interest from current and prospective clients for Dual Tube Flooded Reverse drilling services.

The domestic labour market for hydrogeological drilling professionals continues to be challenging. Despite this backdrop the Company has been able to grow employee headcount during FY2021 from 55 staff members to in excess of 100 staff members across hydrogeological operations management and drilling contractors.

DDH 1000 employees 98 rigs 77% deployed

revenue of $294.6 million, the highest in DDH1’s history. This reflects a 17.9% increase on FY21

Statutory EBITDA of $65.6 million and Statutory EBIT of $41.9 million, inclusive of IPO costs. 

Pro-Forma NPAT2 of $35.2 million

Robust balance sheet with Net Cash3 of $9.6 million and $54.4 million in undrawn facilities. 

Fully franked dividend of 2.18¢ per share declared, which is 40% of Pro-Forma NPATA2 since listing. 

DDH1 has begun FY22 with positive momentum and a sense of optimism. Notwithstanding the continued threat posed by COVID-19 and cost pressures associated with the emerging labour shortage particularly in Western Australia, DDH1 is buoyed by strong demand for its services from existing and new customers and its ability to retain and attract the best professionals in the sector. DDH1 is set to deliver strong growth in FY22 on the back of further expansion in its drill fleet to 105 by December 2021, subject to the continued threat posed by COVID-19.

VYS / DDH

Both released results today.

Different area but both are drilling companies.

DDH about 10x scale of VYS and 1.16 vs 0.09 share price

VYS have doubled their revenue but also costs to produce a 300K profit.

Last year’s result was heavily skewed by a one off. Full rig use in FY22, big expansion in staff to enable that and acknowledges that June quarter was below expectations due to COVID restrictions affecting deployment.

All looks like it is progressing well with a statement about expanding in to vertical integration and benefiting from less capital intensive revenue streams but no detail on how this will be achieved.

Disc Held in RL

This one has been on my radar for a few months.  After a deep dive, I am now highly intrigued.  These guys provide a highly specialised service to the mining industry, where demand exceeds supply.  So much so that their current contracts exceed their available rigs.

They have had a pretty seemless set up and liftoff phase, they got most of their rigs for an absolute bargain, and were able to start turning revenues in the first year (first year of the current operation - the company has been through changes in the past I have not looked to deeply into - dyor).

Based on current guidances and demand for service, I think they will easily be close to 100% utilization of rigs for the next 2-3 years (quite possibly longer as they build the fleet and gain more favour with your tier 1 miners) which will generate great shareholder value.  Healthy asset position, good amount of cash, rather low debt levels.

On top of all of this, they have intention to vertically integrate the business, to be a one stop shop comprehensive de-watering service business to generate more value.

At current share prices, I think it is a bargain and will be looking to add this to my RL portfolio shortly.

Disc - I am by no means an expert on the mining industry - do your own research

28/6/21 announcement puts more rigs to work than they own. Lots of rigs around in Perth. Exploration on the upcycle. Dewatering needs exceed supply.

New guidance of $10-11m for FY 22 makes this company very well priced under 10c. Management want to keep growing.

Great announcement today for a new contract (to be proceeded) consisting of a one year contract valued at $13m. Current market cap is 44m. 

At 6x EBITDA multiple (industry average), full deployment of rigs (12/12) would equate to a market cap of 60m, which roughly translates to a SP of 15.5c. This is without factoring in new verticals via acquisitions (potentially higher multiples). 

New announcement. $13mil for 2 rigs for 1 year.

There was $11mil rev past 6mo, average of 7 rigs out. 9 mil for previous corresponding period. They have 12 rigs in total. 

I encourage the reader to have a serious look at this one.

CERTIFICATION TO ISO STANDARDS UPDATE

As announced on 21 December 2020 Vysarn Limited’s (ASX:VYS) (Company) wholly owned subsidiary Pentium Hydro Pty Ltd (Pentium) received a recommendation for its Management Systems to be certified to ISO standards by the accreditation body SAI Global (SAIG) with formal receipt of the certification expected to be in February.

The formal certification to ISO standards was received on 9 February 2021. ISO certification is valid for a period of three years and is subject to annual audits, with a recertification audit required after three years. This announcement has been authorised by the Board of Vysarn Limited.

Certified Management Systems conforming to ISO standards will now enable Pentium to position itself as a preferred contractor for all tiers of current and prospective clients across multiple industry sectors requiring hydrogeological drilling services.

Attached is a chart that maps earnings to a valuation based on three PE multiple scenarios (Current Multiple / Industry Average / ASX Average)

Based on management expectations:

• Management provided guidance of EBITDA $6m for FY21
• I equate this to $2.4m in earnings (approx. drill utilisation of 7.1 out of 12)
• PE Multiple = 11.7x (Industry average from Simply Wall Street)
• Shares on Issue = 387m
• Fair-value Estimate = 0.073

My expectations:

• I believe VYS’ average utilisation could reach 8 rigs out of 12 (67% utilisation)
• Earnings Estimate of $5.3m
• PE Multiple = 11.7x (Industry average from Simply Wall Street)
• Shares on Issue = 387m
• Fair-value Estimate = 0.160

Company Overview:

Vysarn engages in the hydrogeological and dewatering drilling business in Australia. The company has 12 drilling rigs and works with has tier-1 iron ore and gold producers that face dewatering issues as a greater proportion of their resources lie below the water table. VYS management have aspiration to be a specialised ‘end-to-end’ water service provider.

My Investment Thesis:

1. I am bullish on mining production outlook, therefore as a leading provider of a specialised and necessary service, I believe BYS will have strong demand for its services
2. Enterprise value is in line with their equipment. I think this is an asymmetric value proposition with low downside (worst case it folds, and you sell the equipment)
3. Pretty good growth since they started in Sep-19
4. Insiders have a fair amount of skin in the game and the Management look competent.

I chose to look at the relationship between Drill Utilisation and earnings (As this is the main business driver). I mapped a chart to represent this relationship.

I have used the following basic assumptions:

• Revenue = $360k per drill rig per month (inferred from management presentation)
• Gross Margin = 55.9% (FY20 Annual Report)
• Corporate and O/H = $325k per month (Management Commentary)
• Depreciation = $30k per drill rig per month
• Tax = None (VYS has some deferred tax assets)

Sharing my independent research notes on Vysarn Limited from September 2020 $VYS

As Vysarn continues its growth, it worth mentioning the moat here. Firstly, in a recent call with management, it is noted a brand new drill-rig along with necessary equipment for operational purposes can cost upwards of $5 million USD. A large amount of this is involved in the packaging, shipping and delivery process from overseas which could take a considerable time of time to arrive domestically. Secondly, Tier 1 and 2 mining operators require at least 2 or more drilling rigs to be available at any given time. This is because if one is broken, then the other one can be supplemented and operations can continue. The high cost of entry here should provide a strong insulant against competitors or any start-ups for Vysarn to operate sustainably. Any entrants will need to have a significant amount of capital, contractors and industry expertise to be able to compete.

Another interesting point noted during the management call was the WA Government’s Managed Aquifer Recharge Policy, which essentially states that water derived from the ground will need to ‘recharged’, which means be put back into the ground in the region. The recharge of aquifers provides 3  certain environmental benefits including the reduce for salt-water intrusion, maintaining wetlands in groundwater constraint areas and the storage of recharged water as supplies of drinking water. Mining companies must oblige to these regulatory guidelines. The effects of this cyclical activity of dewatering and recharging should mean that the business’s services are sustainable over the long run, as long as mining activities continues.

The Business Model Vysam currently operates in WA in the Pilbara region. The company owns 12 drill rigs and has over 55 employees mainly comprised of hydrogeologists, drilling assistants and contractors to service their tier 1 and 2 mining customers (Fortescue, Iluka Resources, AngloGold Ashanti and more). Customers generally enter into fixed term contracts with their subsidiary Pentium Hydro to access dewatering services and drill rigs machineries, signing agreements to solve their existing problems where a high level of ground water is a major impediment to their production, particularly iron ore.

The incentive here for mining operators to extract and dewater going deeper into the ground is of great value, as most of the Pilbara iron ore mines have a large amount of ore below the ground water level. In some reserves, 35% of iron ore is found above these water levels, while a further 65% can be found below. 

Vysarn Limited (VYS) is the holding company of Pentium Hydro Pty Ltd, a hydrogeological, dewatering service and equipment provider mainly targeting tier 1 and 2 mining operators based in the Pilbara region, Perth, WA.

On 29 August 2019, Vysarn completed the acquisition of the drilling assets from Ausdrill. These assets were originally part of Ausdrill’s hydrogeological drilling business known as ‘Connector Drilling’, comprising of 10 drill rigs and supporting ancillary equipment and inventory. The consideration paid was $16 million. After independent valuation, it was determined the net assets at acquisition date fair value was 23.6 million. It is interesting to note that back in 2011, Ausdrill acquired these assets for around 30 million, the reason for the sale was with it no longer fit within the new strategic direction of Ausdrill.