22-Nov-2024: Update: (2024 AGM):

Fri 22-Nov-2024: The market has sold down Vysarn (VYS) by as much as -36.8% today - earlier - their low point today was 27.5 cps, -36.8% below yesterday's 43.5 cps close. They've recovered to 40.5 cps as I type this, so "only" down -6.9% from yesterday which is a LOT better than -36.8%.

The share price rollercoaster today appears to be due to whatever was said at the AGM plus their outlook statement on slide 8 of their AGM Presentation, and specifically this:

VYSARN ANTICPATES SUSTAINED EARNINGS GROWTH IN FY25

• 1HFY25: EBT anticipated to be below 2HFY24 following ongoing conservatism within the WA resources sector as a result of the broader global economic and political environment, and consequential uncertainty in commodity prices.
• 2HFY25: FY25 EBT is expected to be materially skewed to 2HFY25 subject to a combination of the realisation of latent demand in the WA resource sector and the acquisition completion of Waste Water Services (WWS) and CMP Consulting Group (CMP) (subject to completing CMP). The anticipated step change in the 2HFY25 earnings run rate has the potential to provide the foundation for further earnings growth looking forward to FY26. 

I need to do some more work on understanding management, but they're either being overly cautious and trying to underpromise, or putting lipstick on a pig, or something in-between.

For me, the most concerning part of that is: "...has the potential to provide the foundation for further earnings growth looking forward to FY26."

That's a "nothing-burger" if ever I heard one.

It's not exactly a positive outlook guidance statement when you are simply saying that there is "potential" to provide a "foundation" for further earnings growth. You would bloody well hope so. EVERY business should have that, or else why are they even in business?

I have a very small position in Vysarn in one real-money portfolio which I bought during the past week just to make me focus on the company more and do further research, and I added some here on SM as well. I reckon I'm going to sell them today, because on the face of it, it seems that serious further profit growth is dependent on too many things going right for them, and they have just made a couple of acquisitions that they need to bed down at the same time.

I like their water exposure on multiple levels, however for the next 6 to 12 months I believe there are better opportunities than Vysarn, based on that forward guidance.

When the price of an acquisition is too good to be true it sometimes is I guess?

Would be bad if the acquisition did fall through.

[held]

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.

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

https://www.canva.com/design/DAFyssB7jN8/HA2XvYi5yGKG5twGn8IyDA/edit

my analysis

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

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

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

I quite like this company for the same reasons Maaxwell has previously stated. One concern is their significant concentration in the Pilbara. However, What I can't workout is whether or not they have a sustainable competitive advantage. I know its a fairly niche service,  but what's stopping the big mining companies from setting up their own inhouse hydro drilling service, or another mob setting up?

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.