Vysarn Limited (Vysarn, the Group, ASX: VYS) is focused on the integration and development of water specialised services and technologies by designing, manufacturing, installing and maintaining wastewater and potable water plants. These activities cover hydrogeological drilling, test pumping, reinjection water services and water consultancy services. The Group services blue chip clients across the mining, oil and gas and industrial sectors, as well as municipalities and the large scale domestic urban development sector.
Investment in water and associated infrastructure assets
Vysarn is planning to leverage the Group’s extensive in-house intellectual property and existing business relationships to earn management fees from managing physical water and related water infrastructure projects.
The launch of Vysarn Asset Management has the potential to enhance the valuation metrics of the Group in that long-term, annuity streams comprising asset management fee income trade on a higher multiple that service fee income. This is because of the passive, capital-light, dependable and recurrent nature of management fee income.
The asset management initiative is a key milestone of the Group’s strategy to build a vertically integrated whole of life, end-to-end water business. The ownership of water and associated infrastructure assets enables the asset owner to control, own and toll water and generate recurrent income from these essential assets. These assets will be housed in a Fund managed by Vysarn Limited, the parent entity of the Vysarn Group.
Vysarn Asset Management is currently assessing physical water resources and associated pipeline projects of varying scale to align capital with projects and key stakeholders that deliver long term sustainable returns. Key stakeholders include Traditional Owners, investors, constructors, and off-take partners.
The asset management strategy is focused on projects that secure long term water resources in the ground and convey water to sites that have high demand for water. This includes opportunities such as industrial and large-scale agricultural precincts, municipalities with poor water supply, stranded mining operations with poor access to water, and Traditional Owner social and economic projects.
For example, Vysarn Asset Management has entered into a Joint Resource Agreement with the Kariyarra Aboriginal Corporation to investigate, assess, manage, own, control and extract sustainable quantities of water from identified and secured water resources on Kariyarra country. Drilling and test-pumping is underway to define and develop the water resource, and discussions have commenced with potential funding partners for infrastructure to convey the water in commercial quantities under an off-take agreement. This is the type of seed asset that may be acquired by the asset management business.
The Future
The Group’s diversification across the vertical service offering mitigates operational and financial risk often associated with a single service model. However, Vysarn’s operations are predominantly exposed to Western Australia and the resource industry. This is changing as the Group seeks to become a significant provider of production critical water services and solutions to industry across Australia, and to become an asset manager of water and water related infrastructure.
The Board is confident that the water and environment thematic will continue to evolve and strengthen domestically, and that the Group is well positioned to service and subsequently benefit from this opportunity.
Vysarn is well funded to continue growing the core business with a shifting focus into the Eastern States. This geographic diversification and the establishment of a non-dilutionary, stand-alone asset management business should support consistent and sustainable earnings growth over the long term.
