Wisr Limited (Australia: WZR.AX) – last price 3.5c – ~A$62mm market cap

A quick follow-up to my July write-up, now that WZR has printed 1Q27. The thesis is developing nicely, and indeed, faster than I modeled. Originations hit a record $254mm (+73% YoY, +28% QoQ, a $1bn+ annual run-rate), against the +25% FY27 growth I deliberately assumed for conservatism. The book is up 40% to $1.21bn, and credit keeps getting better as it grows: 90+ day arrears are 0.86%, and net losses are 1.19% against the 1.5% I’d baked in. Management duly upgraded FY27 Cash NPAT guidance by 40% to at least $7mm, only two months after reaffirming $5mm. That is the third straight year of ‘upgrade-then-beat’, and I’d argue the new guidance remains quite conservative. Q1 alone produced ~$10.6mm of risk-adjusted margin on a cost base of ~$30.5mm. I re-ran the model with origination growth haircut to 35% in FY27 and 25% in FY28, losses back up to FY26’s 1.38%, opex growing 10% a year, and NIM held at Q1’s (mix-diluted) 4.90%. On that basis I still get ~$10mm of FY27E and $21–24mm of FY28E Cash NPAT, with the business exiting FY28 at a $25–30mm annualized run-rate. That is comfortably ahead of guidance, and ahead of the only broker number I can find (Shaw: $7mm/$20mm, set pre-upgrade). So at a high level, this remains very much a ‘beat-and-raise’ story and trading at something like 2.5x FY1 EPS, still seems significantly mispriced here.

A pertinent question in the face of such outsized growth is, why is the business growing so fast (and so much faster than competitors)? Management suggests that technology spend, heavily invested over the last two years, is now visibly paying for itself. 82% of loans are auto-approved by the AI-driven decision engine, up from 73% two years ago. 52% of verification steps are now automated, versus 13% in Sep-24, and AI service agents are increasingly handling customer servicing. Hence a business that grew originations 65% in FY26 on just 7% opex growth is now growing faster still, with no loosening of the credit box that I can see (certainly this is a question to be litigated through any economic downturn). Layer on the majors’ continued retreat from personal and auto lending, and you have a lender taking share in a ~$58bn origination market where it still holds under 2%. This is exactly the operating leverage dynamic I flagged in July. Nearly every incremental dollar of risk-adjusted margin now drops to the bottom line and the company is explicitly guiding to increased operating leverage into FY28.

The new disclosure I found most important, however, addresses the risk I flagged most prominently last time: dilution. Slide 13 of the deck lays out how ~$25mm of existing liquidity, deployed into warehouse and ABS seller notes, funds a further ~$0.8bn of lending and takes the book to ~$2bn. At that point it generates ~$74mm of annualized risk-adjusted margin and, in management’s words, becomes “self sustaining at scale”. That is a path from $1.2bn to $2bn+ with zero new equity, with growth thereafter funded from operating cash flow. Combine that with ~$98mm of carried-forward tax losses, and these earnings are effectively untaxed for the next three to four years. At 3.5c WZR trades on ~6x FY27E and under 3x FY28E Cash NPAT. Even at the bottom of the sector’s 6–10x range on FY28E, the stock is roughly a double from here, and more on run-rate earnings.

Finally, this is likely the last time I comment publicly on WZR in this form, for reasons that should become apparent in the near term. I remain a substantial holder (disclosed at 5%) and continue to believe the opportunity here is considerable, both on a standalone basis and in the context of the strategic options I outlined in July.

New idea – Terracom Ltd (ASX: TER) – last price 5.5c – $100mm market cap

Thesis summary: TerraCom (ASX: TER) has fallen ~30% in two weeks, after an audited annual report carrying a going-concern note and A$103.5mm of asset impairments — released whilst Newcastle thermal coal sits at ~US$155/t, a 23-month high. Meanwhile, the business carries no debt, and at current coal prices it should be roughly cashflow-breakeven even at production 30-40% below guidance — guidance the company reiterated in the same document that contained the impairment. I believe the market has misread the impairment entirely. It is, by its own terms, backwards-looking; massively conservative in its assumptions; contains a mine life that ignores the company’s own publicly documented extension project; and it arrived in most curious circumstances — after a preliminary report that contained no impairment and no going-concern note, and shortly after the resignation of the Board’s sole independent director, citing a divergence of views on the Board’s “oversight, sequencing and risk management”.

The reality, in my view, is that TER is massively levered to an imminent operational turnaround; to thermal coal prices that are ripping as LNG shortages force Asia back to coal; and to a potential special situation arising from serious, documented questions over how the new 45% shareholder assembled its stake around a deeply discounted rights issue. Transparency here is poor and the production turnaround is still unproven, so this is a small position — but the paths to a multi-bag outcome are numerous. And if my reading of the motivations for some of the behavior here is correct, the major shareholder could look to clean up minorities before a likely ongoing coal price rip takes the equity too far away from them.

Background: from coal-boom darling to annus horribilis

Long-time readers know this name: I first wrote TerraCom up for Raper Capital Pro subscribers in June 2022, in the teeth of the great thermal coal bull market, and it was a profitable chapter in what became a very good run in small-cap coal. The asset is Blair Athol in Queensland’s Bowen Basin — one of Australia’s most famous thermal coal mines, acquired from Rio Tinto for a nominal sum and restarted — plus a portfolio of South African operations. Through the FY22-23 boom the company gushed cash and paid out substantial dividends. The register, the board and the story have since turned over entirely.

Fiscal 2026 was the annus horribilis. It opened with shipment delays and working-capital pressure (November 2025, the company “exploring funding options”); proceeded through an emergency, deeply discounted rights issue (of which much more below); a change of effective control; the replacement of the entire board and senior management; a production year of just 1.47Mt sold against guidance of ~1.6Mt; realised pricing of A$123/t against FOB cash costs of A$133/t — yes, negative cash margins at the mine gate; a A$57mm operating cash outflow; and closed with an audited annual report carrying A$103.5mm of impairments, a net current asset deficiency of A$21.3mm, unrestricted cash of just A$8.4mm, and a material uncertainty over going concern. The stock, 9-10c a year ago and 6c at the rights issue, is 5.5c today and has been completely abandoned by the market.

Let’s examine the rights issue, first of all, because this is where the ‘tinfoil hat’ stuff began in earnest.

The rights issue: how 46% changed hands at the bottom

The following chronology is assembled entirely from public filings, and is presented by way of context/background.

So: a shelf company with S$10,000 of capital, incorporated weeks before the seller began accumulating, acquired 19.98% at cost from a disclosure-defective vendor, sub-underwrote a discounted emergency raise at the seasonal low in liquidity, was sold to a new owner mid-offer without disclosure, and emerged with 45.84% of an ASX-listed coal company — all without paying a single shareholder a premium. The board then turned over completely.

And who stands behind Orbit? Orbit is owned by Quantum Global Strategic; which is owned by Quantum Strategic Investments; which is owned by NATO — a listed Indonesian company that was, until months before, a Bali hotel operator! — which sits beneath a private Singapore entity whose owners are undisclosed, with a Cirebon property developer declared as ultimate beneficial owner.

To my mind the key disclosure is that NATO (the listed Indonesian stock) actually consolidates TerraCom, line by line, as a subsidiary in its own IDX-lodged accounts — “Terracom Limited, 45.84%” — whilst having told the Indonesian exchange, in the same quarter, that its mining business plan was “not yet available”, and having described its purchase of Orbit as a S$10,000 “risk diversification” without mentioning TerraCom at all. That is – NATO thus admits, in its own accounts, that it controls Terracom (the accounting standard for consolidation being, of course, control of the entity being consolidated).

There are further oddities: NATO’s accounts show roughly Rp1.4 trillion of unexplained “other equity” movements; the ~A$52.8mm Orbit deployed into TER has no visible funding source in any filing; and NATO’s own audited half-year accounts are overdue. One additional pattern for the conspiracy-minded; Bixbite — the vehicle that assembled the initial 19.98% and passed it to Orbit at cost — appears in the IDX filings of the UBO’s other listed company, NIRO, as a counterparty to a trillion-rupiah promissory-note trade in 2021-22. The “unrelated vendor” and the ultimate buyer were, on the public record, financial counterparties four years earlier.

These are all simply observations from the public record, but the Australian disclosure regime exists precisely to allow shareholders to 1) understood who stands behind beneficial ownership of substantial shareholdings; and 2) if control has passed in a manner consistent with the Corporations Act (ie, the law). Because of these concerns, I intend to report these matters to ASIC, and I intend to press for ASIC-issued beneficial-ownership tracing notices under s672A to establish, definitively, who owns and who funded this 45.84% — and whether every acquirer along the chain has met its substantial holder obligations. Readers can draw their own conclusions in the meantime.

The impairment: backwards-looking, aggressively conservative, and strangely timed

Now to the event that cratered the stock — and which I believe the market has completely misunderstood.

Start with the timing. On 31 August the company released its preliminary final report: there was no impairment, and no going-concern note. On 28-30 September the stock was halted and then suspended pending finalisation of the audited accounts. On 7 October the audited annual report emerged carrying A$103.5mm of impairments — Blair Athol written down by A$53.0mm to a carrying value of just A$10.0mm, plus write-downs across the South African assets — a material-uncertainty going-concern paragraph, and, buried in Note 1.2, the first disclosure that the company had identified “potential support from Orbit” as a liquidity source, support which “is not legally binding”. Between prelim and audit, something changed. And recall what had happened shortly before: on 27 July, Mark Chadwick — the Board’s sole independent director and Audit Committee chair, citing “a divergence of views with the Company’s board regarding the Board’s oversight, sequencing and risk management”. He had been on the Board less than three months. The audit committee that then oversaw the accounts’ finalisation consisted, until 8 September, of the Chairman and a director the company’s own governance statement concedes is not independent.

Examining the impairment disclosures themselves in this context, we note the following:

• It is backwards-looking by construction. The note states plainly that there has been “no change in the Group’s mineral resources or ore reserves, and no change in the mine plan”. AASB 136 required the cash-flow model to anchor to the costs demonstrated in FY26 — a year of flood, breakdown and single-digit-millions working capital — rather than to the improvement expected. The note even concedes that “management expects unit costs to reduce if higher production volumes are consistently achieved” and commits to reversing the impairment under AASB 136 when the evidence arrives. This is an accounting photograph of the worst year in the company’s modern history, presented to the market at the exact moment the operating and price environment is turning.
• The assumptions stack conservatism upon conservatism. The model assumes saleable production of 1.87-1.97Mt — below the 2.0-2.2Mt guidance maintained in the very same document. It assumes FOB cash costs of ~A$120/t in FY27 escalating to ~A$150/t by FY33 — costs rising forever, efficiencies never arriving. It applies a 14% post-tax nominal discount rate (20% pre-tax equivalent) to a producing asset — against the single-digit real rates disclosed by the large listed coal peers. It caps mine life at FY2033, taking zero account of the publicly documented life-extension project discussed below. And it widens the assumed quality discount to benchmark to FY26’s distressed realisation.
• The sensitivity disclosure is the tell. The note states that the entire remaining A$10mm carrying value is eliminated by a 1.2% decrease in coal prices, a 1.5% decrease in production, or a 1.3% increase in costs. Read that in reverse: movements of the same magnitude in the other direction — with Newcastle coal prices up >20% since balance date — swing the model violently positive. The really crazy part here to my mind is that TER never even disclosed the price assumption they used to test the asset value at Blair Athol (keeping in mind again that benchmark prices are currently ripping) even though they disclosed all the price deck assumptions for the similarly impaired South African assets!

In sum, this is what we are left with: a 45.84% holder whose acquisition of control raises the documented questions above. An audited impairment that is backwards-looking, extravagantly conservative, and produced after the only independent director resigned over “oversight, sequencing and risk management” — an impairment that cratered the price of the very equity a controller might, one day, wish to acquire more of. And underneath it all: coal fundamentals ripping, and a business that may be about to turn the corner operationally as well as on price. Note that I am not alleging intent. I simply note that if one wished to depress the price of a controlled company, the sequence would look remarkably like the last three months — and that if the impairment’s own sensitivities are taken at face value, the write-down reverses the moment the operating evidence improves (which could be in as little as six months from balance date).

The operational turnaround – how significant is it?

The beauty of TerraCom at 5.5c, however, is that if you remove entirely the ownership intrigue, the basic thesis is a very simple cost-recovery story. In FY26 Blair Athol sold 1.452Mt at a realised A$123/t against FOB cash costs (including royalties) of A$133/t — negative ten dollars a tonne at the gate, before A$19.3mm of corporate costs. That is what a year of weather, breakdowns and working-capital starvation looks like at a mine whose cost base the accounts themselves describe as ~80% fixed. A high fixed cost business, of course, cuts both ways: at 1.45Mt it produced A$133/t cash costs and an impairment. But at the 2.0-2.2Mt the company has guided — and, remarkably, maintained “at the time of reporting” in the same annual report that contained the impairment — the company’s own 80/20 disclosure implies unit costs collapse toward A$97-104/t. Even the impairment model’s more conservative ~A$120/t at ~1.9Mt leaves very healthy margins at current prices.

Meanwhile, prices have accelerated meaningfully since balance date, and in my view will keep rising. FY26’s A$123/t realisation reflected a Newcastle index that averaged far below today, as well as a distressed-seller discount. Newcastle 6,000kcal is now ~US$155/t — roughly A$235/t — a 23-month high; even applying FY26’s depressed realisation ratio, that translates to something like A$175/t achievable to TER. My scenarios below use A$150/t and A$170/t realised — both materially below what spot implies — and tier unit costs conservatively against both company disclosures:

Let’s first consider the downside case. The business is roughly cash breakeven at ~1.3-1.45Mt at current prices — that is, 30-40% below guidance, and at ~1.0-1.1Mt at A$170/t realised. A no-debt company (borrowings at 30 June: nil; the US$20mm trade prepayment is repaid in coal, not cash) that doesn’t burn cash even if production misses guidance by a third is not a conventional going-concern situation, whatever the note says — the going-concern language is about working-capital timing at trough prices and trough production, both of which are already behind us if guidance is remotely honest. Management literally two weeks ago had a perfect opportunity to cut FY guidance (when they delivered the impairment announcement and the Annual Report), and indeed had all of 1Q production in hand when they published that announcement – but they chose to maintain guidance (even if the tone was talked down somewhat). Of course, the upside corollary cannot be ignored and that is, at guidance volumes and anything like spot pricing, the equity trades at one to two times free cash flow with no debt.

And the price tailwind may only be beginning. The global gas market has lost roughly a fifth of seaborne LNG supply to the Hormuz disruption, and the consequences are cascading: Asian coal demand is forecast up ~70 million tonnes in 2026 as the LNG shortfall bites, Japanese power prices are at four-year highs on surging coal and LNG costs, and JKM gas trades at a massive premium to Newcastle coal on an energy-equivalent basis — the widest substitution incentive since 2022. Coal is the swing fuel when LNG is short; utilities are switching now; and one cold Northern Hemisphere winter into a market missing a fifth of its gas could feasibly send thermal coal parabolic, as 2021-22 taught anyone who was paying attention.

This is certainly not my base-case outcome, but we don’t need that to win here by any stretch. More likely is (to my mind) an acceleration of an attempted minority takeout, if or when coal prices keep rising through a (hopefully) coal Northern Hemisphere winter.

The free option: Moorlands

There is one more asset the market is pricing at zero — and the company has, oddly, stopped mentioning. Moorlands is a ~100Mt thermal coal deposit 14km northwest of Blair Athol, which featured prominently in TerraCom’s materials as recently as last year and has now all but vanished from its presentations and its annual report — even as the public record shows the project advancing. The owner, Huaxin Energy (Wintime), lodged variation requests with the federal environment regulator in December 2025 and February 2026 — public documents on the EPBC portal — which disclose: a strategic agreement with TerraCom under which TerraCom acts as “full-service development and mining services partner”; the Blair Athol precinct operating as a dual processing and logistics hub for both mines, with ~1.2Mtpa of Moorlands product washed through Blair Athol’s CHPP and exported over its train load-out; and — the line that matters most — a Moorlands project life of ~25 years against Blair Athol’s remaining ~7, such that, in the proponent’s own words to the regulator, “Blair Athol Mine’s life of mine would extend by approximately 15 years.”

Respeculator’s September piece did the best public work on what this could be worth, and I commend it in full rather than claiming I have any especial insight into the geology: ~100Mt measured, thick seams (23 cumulative metres), a 3.2:1 strip ratio, Newcastle-spec product, potentially ~A$80/t more margin than Blair Athol’s current output; on his numbers, a 2Mtpa attributable operation at ~A$100/t of margin would generate on the order of A$200mm a year against today’s A$100mm market cap, with the Blair Athol CHPP (~3Mtpa capacity) and nearby rail infrastructure removing most of the capital intensity. Even treating those numbers with appropriate scepticism, the option value is still enormous against this equity. And note what a formalised Moorlands JV does to the accounting: the impairment’s FY2033 mine-life assumption — the single most value-destructive input in the model — is completely reversed by a 15-20 year life extension processed through the very infrastructure the company just wrote down to A$10mm. Which makes the company’s new silence on the project — in the same period as everything described in this memo — either a curious omission, or another entry in the same pattern. I leave the choice to the reader.

Summary: small position, many ways to win

You pay ~A$100mm at 5.5c for: a debt-free coal producer that is roughly cash breakeven at production 30-40% below guidance at current prices; levered 1-2x P/FCF to guidance volumes that management reiterated two weeks ago; exposed to a thermal coal market being squeezed by the loss of a fifth of the world’s LNG; carrying a A$103.5mm impairment that is backwards-looking, wildly conservative on its own disclosed sensitivities, and reversible under AASB 136 the moment operations normalise; holding a zero-priced, publicly documented mine-life-extension option that would invalidate the impairment’s core assumption outright; and sitting atop a potential special situation, in which the questions about how 46% of the company changed hands at the lows may yet have consequences of their own. The new management team may be executing a turnaround in good faith; or the price may be being managed down around a controller whose intentions remain undisclosed. Either way, both branches are bullish at 5.5c: one ends in earnings, the other, history suggests, in a transaction that cannot happen at these levels once those questions are answered.

I should be quite transparent about the risks: this is a high-cost, single-asset-dominated producer in operational transition, with poor transparency, a going-concern note, a controller whose motives are unknown, and leverage to a volatile commodity. That is why this is sized small. But the setup rhymes with the regulatory and control situations I have spent plenty of time this year in: a price formed by misinformed sellers, a document trail the market has not read, and multiple independent paths — operational delivery, coal prices, impairment reversal, Moorlands, or the resolution of the ownership questions — any one of which likely multiplies the equity from here.

Disclosure: long WZR.AX and TER.AX