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.

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.

Things have been quiet on the VYS front for a while. This sounds like a good acquisition to expand on the company's services in aquifer reinjection systems. Purchase at appx 0.3x sales (if my calculation is right although the statement is vague)

Company will acquire 100% of the issued shares in ProEng for a consideration of $2.60 million in cash.

The cash component of the acquisition consideration will be funded via a combination of the Company’s cash reserves and debt funding.

Based on ProEng’s historical trading results and their forecast FY23 EBT the acquisition will deliver an approximate 20% earnings accretion to Vysarn (using the full year FY22 EBT guidance ($44M) announced to the ASX on 5 May 2022).

The Company has identified organic growth opportunities for ProEng as well as material integration opportunities with Pentium Test Pumping and Pentium Water.

Management intends to rapidly integrate ProEng into the Vysarn Group of companies and then pursue these growth opportunities, initially via the planned expansions of Pentium Test Pumping’s service offering into injection testing and Pentium Water’s expansion into managed aquifer recharge consulting.

ProEng is a hydraulic engineering business that primarily services the resource sector in Western Australia as well as providing ancillary engineering services to the commercial fishing and aquaculture sectors. ProEng’s current core competency is the provision of managed aquifer recharge (MAR) systems to tier one iron ore clients in the Pilbara. Over time ProEng has completed significant research and development of aquifer reinjection systems which has culminated in unique registered and patented MAR equipment and valve technology. As such, the ProEng MAR systems provide production critical infrastructure for mining operations to solve ongoing, high volume mine dewatering and environmental issues faced by tier one iron clients. In addition, there is growing interest in MAR systems and their ability to assist in processes aimed at water harvesting and water banking to future proof water supplies from both regulated and nonregulated water abstraction sources. In line with the Company’s clearly defined strategy, the acquisition of ProEng provides Vysarn with additional diversified capability within its vertically integrated suite of water service offerings. 

Good 3 year contract with BHP. Not just drilling but monitoring and potential to bring in other services such as testing and consulting.

Pentium Hydro Pty Ltd (Pentium) has received confirmation of the successful award of a Goods and Services Contract (Contract) with BHP Nickel West Pty Ltd (BHP).

• A three-year Contract term starting from 17 February 2022; and

• The Scope of Work as defined under the Contract is to provide the drilling and installation of production bores, monitoring bores and vibrating wire piezometers.

Revenue will be determined via a schedule of rates. The Company estimates that the revenue based on the utilisation of one rig and average metres drilled per month to be approximately $2.8 million for the initial 6-month Scope of Work.

To fulfill the Contract, Pentium will redeploy a Dual Rotary drill rig previously contracted out to an existing client under a dry hire agreement that expired on 31 December 2021.

Vysarn Managing Director Mr James Clement said:

“Pentium is delighted to be chosen as the successful tenderer to provide drilling service to BHP. They will be an important client for our company going forward and the award of the contract is another strong endorsement of the quality of Pentium’s service offering.”

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

VYS share price has been in the doldrums of late but the AGM presentation looks good confirming forecast for FY22 “Achieved EBITDA of $3.5m for the months of July to October in FY22 (unaudited management accounts).”

FY22 – Outlook

Pentium Hydro contracts provide visibility to maintain full utilisation of the Company’s owned rig fleet throughout the remainder FY2022.

Strong top-line revenue anticipated – Targeting ~$50m revenue from operations in FY22

Material EBITDA growth – The Company is budgeting FY22 EBITDA to be $10.0m – $11.0m*.

Budgeting ~$10.0m EBITDA from the full utilisation of 12 rigs (Pentium).

Additional contributions from dry-hired hydro rigs and the acquisition of Yield Test Pumping is anticipated to underpin budgeted EBITDA in FY22

Company snapshot

Shares on Issue 391.9m

Market Capitalisation $32.5m

Net Debt $6.5m

Enterprise Value $39.0m

Top 20 52.7%

Board and Management 20.2%

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

VYSARN INVESTOR WEBINAR
Mr Clement will discuss the acquisition of Australian Groundwater Solutions Pty Ltd (Yield Test Pumping) and its alignment to the Company’s vertical integration growth strategy.
The webinar will be held on Thursday, 7 October 2021 at 12:30 pm AEST (9:30 am AWST). For the Q&A session, investors are invited to send questions prior to the webinar to
alastair@candouradvisory.com.au.
Register for the webinar at the link below:
https://us06web.zoom.us/webinar/register/WN_k4j0xTzGTuKKPo2yFz1HZg
After registering, you will receive a confirmation email containing information about joining the webinar and dial-in details for those who would prefer to join by phone. A recording will be available at the above link shortly after the conclusion of the live session.

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