Here’s why this fund manager thinks PPK (ASX:PPK) is a great buying opportunity

After falling 45% from its high, this fundie thinks PPK Group still has big potential.

| More on:
A female executive smiles as she carries out business on her mobile phone.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The PPK Group Limited (ASX: PPK) share price is looking ripe for the taking to one Australian fund manager.

In September, PPK shares became the focus of the market as one of its joint ventures, Li-S Energy Ltd (ASX: LIS), got set for its market debut. The listing of the lithium-sulphur battery tech company garnered an oversubscribed initial public offering (IPO). In turn, investors began to bid up the PPK Group share price in anticipation of a blockbuster Li-S Energy listing.

However, with PPK retaining ~45% ownership of the battery tech company, the euphoria has since gradually faded.

Despite this, the team at EGP Capital is still bullish on PPK Group. Let’s take a closer look at why this fund’s sentiment isn’t waning.

Why this fund sees value in ASX-listed PPK Group

After roughly a 33% retracement in the PPK Group share price since the end of August, EGP Capital’s weighting toward the company in its Concentrated Value Fund has fallen from 15% to 7.8%. Correspondingly, the diversified business has shifted from the fund’s largest holding to its third-largest holding.

It was a positive month of returns for the fund, outpacing the S&P/ASX 200 Index (ASX: XJO) by 1.3%. Although, there were 2 companies that weighed on the fund’s monthly returns. One of these companies was ASX-listed PPK Group, falling nearly 15% throughout October.

Undeterred by PPK’s poor monthly performance, EGP Capital chief investment officer Tony Hansen outlined the fund’s stance on the billion-dollar business. In EGP’s October report, Hansen explained:

In simple terms, I think there was enormous interest in the LIS IPO and particularly large institutional money managers that wanted exposure to LIS realised that because the IPO was so oversubscribed, they would not get it by participating in the IPO.

What I suspect they then did was to buy PPK as a proxy for LIS (given it would own almost half of the business post listing). This buying then reversed after LIS listed as these institutions sold their PPK on market to purchase the LIS they really wanted to own.

The fund believes that such an approach, if true, demonstrates flawed thinking by these institutions. The reason for this is that ASX-listed PPK Group offers numerous opportunities outside of Li-S Energy. As such, EGP Capital considers PPK to be worth much more than Li-S Energy.

Another take

EGP Capital is not alone in liking what PPK Group has to offer. In an article published last month, we covered 4 ASX shares that chief investment officer and founder of Regal Investment Fund (ASX: RF1) Phil King likes in the battery and lithium space.

That list included PPK Group alongside other high-profile names in the industry. The fundie highlighted the significant research and development progress made by PPK and its subsidiary Li-S Energy.

Finally, despite the recent weakness, the PPK Group share price has returned 104.5% on the ASX since the beginning of the year.

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.

More on Technology Shares

A group of people in suits watch as a man puts his hand up to take the opportunity.
Technology Shares

What percentage of Altium shares are owned by insiders?

Tech shares have strengthened on Wednesday.

Read more »

A paper plane crashed in sand.
Technology Shares

Why did the Nearmap share price tumble 17% in June?

The aerial mapping company is facing international competition and legal proceedings in the United States.

Read more »

A man with long hair and tattoos holds out an EFTPOS payment machine from behind a shop counter.
Technology Shares

Why is the Tyro Payments share price blasting 10% higher?

Tyro Payments is outperforming alongside many of its tech peers today.

Read more »

A woman wearing a virtual reality headset jumps high in her living room.
Technology Shares

Why are ASX 200 tech shares sprinting higher today?

Investors have regained confidence in the tech trade again, for now anyway.

Read more »

A graph ablaze with fire going up, indicating a fired up and surged share price
Share Gainers

These 3 ASX 200 tech shares are on fire today

Tech shares are broadly outperforming today following a strong lead from the US NASDAQ.

Read more »

a young woman sits with her hands holding up her face as she stares unhappily at a laptop computer screen as if she is disappointed with something she is seeing there.
BNPL shares

Why did the Block share price have such a lousy time in FY22?

Last financial year was a transformative one for the now-ASX 200 tech giant.

Read more »

Rede arrow on a stock market chart going down.
Technology Shares

Why did the Appen share price sink 13% in June?

The Appen share price was sold off again in June...

Read more »

A man wearing a suit and sitting at his desk in front of his computer puts his hand to his forehead in frustration over the delayed Afrterpay takeover
Technology Shares

How did Xero shares do in the 2022 financial year?

The Kiwi software maker has been a favourite among investors over the past 5 years. But how has it done…

Read more »