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.
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.