Vysarn Ltd

Cerutty Macro Fund continues to hold Vysarn Ltd, viewing it as a uniquely positioned water management business rather than a traditional cyclical driller. The Fund believes the market continues to misprice Vysarn by benchmarking it against low-multiple drilling peers, despite the company's structurally different model and growth outlook. Vysarn’s core business, Pentium Hydro, services tier-1 iron ore producers in the Pilbara, whose operations rely on dewatering due to resource deposits sitting below the water table. Management’s plan to double-shift rigs is expected to drive near-term revenue growth, with three rigs on double shifts by FY24 and potentially six by FY26. Beyond Hydro, Cerutty highlights the diversification and scalability of Vysarn’s other verticals—including consulting, engineering, test pumping, and a new asset management arm—all aligned with the broader water management theme. These units are gaining traction, with Pentium Water and Project Engineering growing rapidly, supported by rising demand for sustainable aquifer recharge systems. Internal modelling suggests Vysarn could grow EBITDA at ~16% CAGR through FY26, far outpacing drilling peers. Cerutty believes the company’s predictable cash flows, exposure to critical infrastructure, and expanding verticals support a compelling case for further re-rating as the market begins to recognise Vysarn's differentiated model and growth runway.

Saville Capital Emerging Companies Fund continues to hold a positive outlook on Vysarn Ltd following the announcement of a Joint Resource Agreement between its subsidiary, Vysarn Asset Management, and the Kariyarra Aboriginal Corporation. This collaboration positions the parties as equal partners in a joint venture focused on the investigation, management, and commercialization of water resources on Kariyarra country, which includes the Port Hedland area. As the appointed manager and marketer of the venture, Vysarn is poised to tap into a market with substantial unmet demand for water, promising significant earnings and valuation potential. The fund views this partnership as a key catalyst for Vysarn's growth trajectory, with attractive pricing and robust unit economics further enhancing the investment thesis for the company's future development of these water assets.

Saville Capital Emerging Companies Fund continues to hold its position in Vysarn Ltd, reflecting a positive outlook following the company's strong financial performance with FY24 revenue increasing by 17%, EBITDA by 31%, and NPAT by 100% compared to the previous year. Vysarn is strategically positioning itself in the groundwater resources sector, seeking to supply water to consumers in regional Western Australia through its new Water Asset Management business. While the company has been primarily driven by the iron ore sector, it is diversifying its growth by targeting water services, commodities, and new geographic markets. The recent acquisition of Waste Water Services for $7.5 million, which shows attractive valuation metrics and expected earnings per share accretion of over 20%, further solidifies this strategy. Vysarn is also focusing on immediate organic growth opportunities within WWS, including expanding wastewater treatment infrastructure for the resource sector and developing municipal water treatment solutions, indicating a robust pathway for future growth.

Saville Capital Emerging Companies Fund provides an updated investment thesis on Vysarn Ltd following its acquisition of CMP Consulting Group. The Fund continues to hold its position due to the strategic acquisition, which not only offers a financially compelling upfront EV/EBITDA multiple of 4.6x but also promises a greater than 20% earnings per share accretion. This move further diversifies Vysarn from its capital-intensive water drilling operations, enhancing its overall business model. Additionally, the recent capital raising of approximately $38 million has increased Vysarn’s market cap and liquidity, attracting substantial institutional interest. Having initially invested at $0.15 per share, the Fund recognizes Vysarn as a stellar performer and a core holding for the foreseeable future.