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

Man with rocket wings which have flames coming out of them.
Technology Shares

Guess which ASX All Ords share is rocketing 16% on an asset sale

This share is catching the eye with a very big gain on Friday. But why is it rising?

Read more »

a man clasps his hand to his forehead as he looks down at his phone and grimaces with a pained expression on his face as he watches the Pilbara Minerals share price continue to fall
Technology Shares

Why are Megaport shares sinking 14% on Friday?

Why are investors hitting the sell button? Let's find out.

Read more »

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Why today is a big day for this ASX 200 AI stock

This company stands to benefit from 'one of the most profound transformations in the history of technology'.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Technology Shares

Why are WiseTech Global shares crashing almost 20% today?

Recent controversy has led to delays to an important launch and hit its revenues.

Read more »

Woman with speaker
Technology Shares

After falling 62%, this leading ASX 200 share could be gearing up for growth!

This industry-leading company looks like a turnaround opportunity to me.

Read more »

A man has computer-generated images rushing through his head indicating an AI (Artificial Intelligence) concept of a communication network.
Technology Shares

ASX investors are obsessed with Nvidia shares! Here's why

The global chipmaker reported a 94% increase in annual revenue in the third quarter.

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
Technology Shares

Own WiseTech shares? Here's what to watch at Friday's AGM

This could be one of the major events of the year.

Read more »

Woman and man calculating a dividend yield.
Technology Shares

This ASX tech stock is down 93% from its highs. Could Trump tariffs give it a boost?

The ASX tech stock could enjoy tailwinds from Trump’s threatened tariffs.

Read more »