Shares in water technology company Vysarn Ltd (ASX: VYS) are up more than 25% over the past 12 months, but according to the team at Morgans there is plenty left in the tank.
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Deal failure leads to downgrade
This prediction comes despite the recent announcement that Vysarn had abandoned its proposed acquisition of NewGround, which it had announced in June.
Vysarn was to buy out NewGround for 33 million shares and $25 million in cash, with the deal expected to be 25% earnings per share accretive to Vysarn shareholders.
Morgans said the failure of the deal led them to downgrade their pre-tax profit expectations for Vysarn by 14% in FY27 and 19% in FY28, which would be the first full year of ownership.
But the broker added that Vysarn was now cashed up.
As they said:
Unwinding the cash consideration and noting the recent $65m raise – which included ~$15m for growth initiatives and working capital – the company has significant balance sheet optionality.
Morgans reduced its price target on Vysarn shares from $1.40 to $1.20, compared to 78 cents currently, but said it was still a solid business.
The broker said:
VYS is transforming into a multi-jurisdictional, vertically integrated water business. The company is continuously deploying cash into engineering, facilities management and consulting businesses, which is a sound strategy that should see the company continue to improve in quality. Moreover, the prospects of owning and selling water … continue to strengthen.
Solid growth in earnings
Vysarn's FY26 operational revenue grew by 31% to $140 million, while net profit was up 41% to $15.1 million.
The company said of the result:
In FY2026, Vysarn continued to develop and execute its strategy to be a leading vertically integrated water services and infrastructure provider across multiple geographies and sectors in Australia. The Company maintained its trend of material year on year earnings growth delivered by the performance of its diversified water services across consultancy, hydrogeological drilling, test pumping, managed aquifer recharge (MAR) and wastewater treatment. While Vysarn's growth to date has been underpinned by the iron ore sector in Western Australia (WA), the Company's targeted pursuit of various diversified growth opportunities across other sectors and geographies is starting to bear fruit. The Company anticipates that meaningful organic growth in future periods will start to be driven by sectors and regions other than resources and WA.
The company said it would remain on the lookout for more acquisitions, and was also intending to invest heavily in senior management.
Vysarn is valued at $496.5 million.
