PTB - PTB Group

[System]

PTB Group Limited (PTB) is a specialised aviation business, with operations in turbine engine repair, trading, financing and rental of aircrafts and turbines. The group has three business groupings under its aviation asset management: Pacific Turbine Brisbane (PTB); IAP Group; and Financing and Rentals. PTB operates from Brisbane, Sydney, and Bankstown Airport in Australia, and Blackpool Airport in the UK.

http://www.pacificturbine.com.au/investors.html

 

[galumay]

I recently took a small position in this company, I have looked at it in the past a couple of times, but never quite developed the conviction to buy. The debt was one of the main things that put me off.

I was tipped off about the details of the recently announced acquisition and also learnt about the company's plans to sell off some of its property and pay off the debt.

I think the business is trading at a discount to value under $1 and could see a meaningful rerate in the next couple of years if it can execute the acquisition well and it provides the increased EPS after dilution that is predicted. It will probably also attract some more attention now its market cap has increased significantly and there is more free float.

 

[CBerg]

Good little company! I bought a small parcel in early 2018 but sold last year to help finance a property purchase. I regret selling

 

[The Triangle]

Still staying out of it as operating cash-flows are very poor and debt is being used to pay dividend. It's certainly not cheap either and has a history of not growing the share price. The acquisition of a US business is concerning as well - Australian acquisitions in the US never - ever - ever work out. The question you have to ask is 'why didn't one of the 320 million Americans buy it first?' It's very hard to sustainably grow and pay a high yield dividend. Something has to give.

Still it looks to be a good niche business which should remain solid though downturn considering its turbo prop work they do - not commercial jets. If the 1/2 yearly shows a positive trend to reducing debt levels and better cash conversion (or they do another capital raising) I'll be interested.

 

[galumay]

Its not strictly true to say dividend was paid out of debt, you could equally say it was paid out of retained earnings, or capital raised. I think the current price is a reasonable discount to my range of valuation, but yours may well be different of course. I would tend to agree with you about US acquisitions, but "never ever ever" is an exaggeration, and this is quite likely an exception based on the results already.

I dont think its a stonk and I am not holding it in expectation of a multi bagger, but I think it will still be round for many years, and the returns on incrementally invested capital meet my hurdle rate so I am happy to hold for what I believe will be superior absolute returns over time.

 

[Clansman]

Its not strictly true to say dividend was paid out of debt, you could equally say it was paid out of retained earnings, or capital raised. I think the current price is a reasonable discount to my range of valuation, but yours may well be different of course. I would tend to agree with you about US acquisitions, but "never ever ever" is an exaggeration, and this is quite likely an exception based on the results already.

I dont think its a stonk and I am not holding it in expectation of a multi bagger, but I think it will still be round for many years, and the returns on incrementally invested capital meet my hurdle rate so I am happy to hold for what I believe will be superior absolute returns over time.

Back in Feb 12th, you say you acted on a tipoff and took a small position. Subsequent to that the price then nosedived from 80 cents to less than 30 cents???? That's not much of a tipoff....Lol.

Now you suggest the current price is a reasonable discount to your valuation?.... Lol. Objectivity and credibility appear to be once again issues here.

 

[galumay]

PTB down 10% on news out of today's AGM, SH's not happy with the cut in dividend, change to once per year, ending DRP and loss of franking. Probably shook out those just holding for the yield as it was substantial previously.

 

[The Triangle]

Not all that surprising! I think its fair to say a number of people were blindly buying shares without understanding how the dividend was being funded. This is a step in the right direction. exchnage rates won't be helping but they could look to complete another raising and more acquistions in the US

"Based on the financial instruments held at 30 June 2020, had the Australian dollar weakened/strengthened by 10% against the USD dollar, with all other variables held constant, the Group’s post tax position for the year would have been $2,380,000 higher/$1,947,000 lower"

"It is worth noting that the company undertakes the majority of its sales and purchases in US dollars. Therefore, the majority of profit is generated in US dollars, with the reported AUD profit positively impacted by any weakening of the Australian dollar."

Exchange rate was about 1.44 EOFY, its 1.36 today.

 

[galumay]

Agree @The Triangle, it seems when yields are high in the current market, there is a subset of investors who dont look any deeper than that. Its probably reflective of the general move into equities from other asset classes where there was less risk but returns were converging on zero.

 

[The Triangle]

Just got around to reading the PTB earnings 'update' from December.

11-13 $M - Originally they forecast profit before tax and FX
13-17 $M - New forecast which includes 5.8 million in asset sale gains.
7.2-11.2$M - Take out the 5.8 million from asset sales and I see a pretty hefty downgrade.

If I assume a 30% tax then the profit range after tax (not including FX) might be 5-7.8M. This equates to $0.04 - $0.06 EPS

However they quoted their #s don't include the effects of Foreign exchange... So... I think I could fairly knock off a million. which would drop the EPS to a $0.03-0.05 range.

They also mentioned the $$$ will be used to pay down debt and growth. With the interim dividend already scrapped I'm suspecting that things are not looking as rosy as they were supposed to be vs last year and lenders are not that keen to give them any more money for acquisitions. The question is was the asset sale their idea or the lenders idea?

 

[galumay]

PTB had long telegraphed the asset sale, it actually took longer than expected to eventuate. They have also consistently said it would be used to pay down debt. I don't believe they are looking for any more acquisitions. I expect the eps to drop given Covid impact, fx, dilution etc. - i dont think you are far off the mark with your numbers.

Hopefully the market over reacts and I can build my position further at a nice discount!

 

[galumay]

If I assume a 30% tax then the profit range after tax (not including FX) might be 5-7.8M. This equates to $0.04 - $0.06 EPS

H1 results out today, EPS 5.74c so you were right on the money!

Overall I think the results were more than satisfactory given the impact of Covid on the business. There was some significant Covid relief, bth in the US & JK in Aus.

I reckon they are pretty well positioned now to do quite well in the next couple of years, happy to hold for the ride. (or flight!). I don't think there is much downside from here for me given that my position is at an average cost of 62c.

 

[galumay]

PTB announced a small acquisition this morning, buying United Turbine for about $4.3m in an all cash deal. Looks like a good fit with the existing business.

 

[galumay]

Full year results out for PTB, very good numbers, better than I expected. Should earn a rerate now.

 

[galumay]

PTB with a trading update this morning, very strong numbers.

 

[galumay]

Great result for PTB H1 2022 at first glance. Reported profit dropped but once adjusted for the property sales, both Revenue & NPAT up about 40%.

 

[galumay]

A good guidance update from PTB this morning.

 

[galumay]

Bugger. About the second worst outcome possible for a long term investor, a takeover offer for PTB from US-based Precision Aviation Group, apparently offering around $200m for the business. Hopefully the offer is rejected.

 

[galumay]

More bad news today, board fully support sell out. Surprised honestly to see PTB board recommend the deal. The price is a discount to my range of valuation for the business and a poor outcome for long term investors. Did the board really have so little confidence in the business and its future?? I am tempted to vote against the deal as I dont believe its in SH's interests, but if the board no longer believe they can run the business profitably then I really have no choice but to accept the offer.

I guess I should be pleased with a nearly triple bagger in 2 years.

 

[System]

On December 12th, 2022, PTB Group Limited (PTB) was removed from the ASX's Official List in accordance with Listing Rule 17.11, following implementation of the scheme of arrangement between PTB and its shareholders in connection with the acquisition of all the issued capital in PTB by AG/PTB BidCo Pty Ltd (a wholly owned subsidiary of PAG Holding Corp.).