Why PPK (ASX:PPK) and Li-S Energy are this fund's largest positions

This fund is holding a big chunk of PPK in its portfolio…

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The PPK Group Limited (ASX: PPK) share price rewarded investors handsomely during August. While the S&P/ASX 200 Index (ASX: XJO) pulled a paltry 1.9% in the month, PPK soared an astonishing 49.9%.

Much of this gain could be put down to the excitement surrounding the anticipated listing of Li-S Energy Ltd (ASX: LIS). Speaking of which, the lithium-sulphur battery tech company made its debut yesterday, exploding 174% in value. The rampant share price surge benefits PPK, with the company retaining a 45.4% shareholding.

Although much of the excitement took place yesterday, one Australian fund manager remains extremely bullish on PPK's prospects.

Let's take a closer look.

A big bet on ASX-listed PPK

In its August fund update, EGP Capital gave its investors a rundown on the latest for its Concentrated Value Fund. This fund is focused on Australian listed companies with the ambition of outperforming the Aussie index by 3% to 5% on an annual basis.

It was unsurprisingly a solid month for the fund, delivering a return of 6.7%. One of its biggest contributors was the PPK share price. Being the fund's largest holding, investors benefitted from the enthusiasm behind the listing of Li-S Energy.

At the end of August, PPK constituted 15% of the fund's overall holdings — this is nearly double its second-largest holding, United Overseas Australia Limited (ASX: UOS), at 8.8%.

Despite the miraculous returns thus far, EGP Capital holds a deeply positive sentiment towards ASX-listed PPK. As detailed in its monthly report, the fund believes the prospective market opportunity for the Li-Sulphur batteries is immense. In fact, founder and chief investment officer Tony Hansen stated:

I shall be surprised if the stock ever trades below $1 per share (the IPO price is 85c). Executed properly, this is a multi (multi)-billion-dollar opportunity.

One day in and Li-S Energy is sitting well above $2, let alone the $1 zone that Hansen mentions.

Massive market potential

In addition to this, the fund spoke highly of another PPK investment, White Graphene. The company released a table outlining some of its developmental projects.

From this, EGP Capital points out several large market opportunities for the application of White Graphene's boron nitride nanosheets. These include:

  • Concrete floor coating: estimated US$1.8 billion annual global market by 2027
  • Wood coating: estimated US$12.3 billion annual global market by 2027
  • Paint: estimated US$218 billion annual global market by 2028
  • Fibreglass: estimated US$25.5 billion annual global market by 2028
  • Faux leather: estimated US$57 billion annual global market by 2028
  • Ammunition: estimated US$28.4 billion annual global market by 2028
  • Wires and cables: estimated US$273.7 billion annual global market by 2028

Based on PPK's final report for FY21, the company owns 59.8% of White Graphene.

Now what?

Finally, the fund addressed the risk posed to investors with the fund holding such a large position in PPK.

In Hansen's words, "The management of each business needs to be careful about ensuring their investors are properly kept appraised of the prospects of each business. This is incredibly hard to do with prospectively world-changing technologies."

As a result, the fund accepts increased volatility but expects strong upside potential for PPK on the ASX.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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