Author Topic: PTB  (Read 1331 times)

galumay

  • Administrator
  • dhunga
  • *****
  • Posts: 725
PTB
« on: February 07, 2020, 10:13:02 AM »
I took a small position in PTB this week at 88c. It is a business that operates in 4 segments,

Pacific Turbines Brisbane & US - both provides repair, maintenance and overall services for specific turboprop aircraft engines. They also sells engines and parts.

Pacific Turbine Leasing - leases aircraft and engines.

International Air Parts - focused on selling engines parts but also airframes.

The turbo prop engines they sell and service account for about 90% of turbo props in use.

I was initially put off by the level of debt in the business, but a small fund manager with deeper knowledge told me that PBT were selling land worth significantly more than the debt, paying down the debt and then leasing back at less than existing interest costs.

PBT also announced a significant CR and subsequent acquisition last week, Prime Turbines, a US business.

"Prime Turbines is well known to PTB and more than doubles the current workshop capacity before productivity gains

Is expected to provide positive impact to PTB’s earnings with expected EPS accretion of [8.0%] on a full year basis pre-synergies, increasing to 23.7% on a full year basis including additional margin capture from redirecting outsourced MRO services to Prime Turbines"

By my calculations the underlying business, prior to acquisition was around $1, if they can achieve the predicted EPS accretion of 8% even, then the value should be significantly higher.

The downside risk is that the acquisition is a failure, and results in significant impairment to the business, on a much larger register, they dont sell the land and the debt remains. This seems low risk given the experience of operating in this niche, the high level of founder operation and ownership and their history of sensible capital allocation. None the less, the risk is real and for this reason my initial position is fairly small. Because a lot of shares were issued to existing holders at 69c there is a chance of opportunity to accumulate if they sell off, this may creat ongoing softness in the share price in the medium term.

I will sell if execution of the acquisition is not apparent in the next 12 months, and accumulate if it is.

I had looked at this business a few times and the debt as well as the sense that there was limited growth and a pretty capital intensive business put me off. It was only the stregth of conviction by a fellow investor and the large amount of supporting material and research he sent me, as well as the inside knowledge on the takeover and debt that made me change my mind and take a position.

Why will this business be around in 10 years? - Because these engines will still be in use in aircraft and these guys will be maintaining them.








« Last Edit: May 04, 2021, 08:09:27 PM by galumay »

galumay

  • Administrator
  • dhunga
  • *****
  • Posts: 725
Re: PTB
« Reply #1 on: August 29, 2020, 10:36:28 AM »
FY2020 A good year for PTB, the acquisition already looking to be adding value, covid has had a smaller impact than maybe many expected, should have a solid year and hopefully get rid of some of the excess debt. Only red flag for me was the use of a new bullshit earnings acronym, NPBTFX

galumay

  • Administrator
  • dhunga
  • *****
  • Posts: 725
Re: PTB
« Reply #2 on: February 24, 2021, 04:43:05 PM »
H1 2021 - Not too bad considering the impact of Covid on the business, a complex set of accounts to interpret and the revaluation of US assets due the strength of the AUD confused me for a bit. I think the business should do ok from here on in. Next 6 months will be interesting.

galumay

  • Administrator
  • dhunga
  • *****
  • Posts: 725
Re: PTB
« Reply #3 on: August 27, 2021, 09:25:10 PM »
FY 2021 PTB really starting to move after the impacts of Covid start to drop off internationally, still an impressive result for anything connected to flying in these times! No quantitive outlook at this stage.


galumay

  • Administrator
  • dhunga
  • *****
  • Posts: 725
Re: PTB
« Reply #4 on: March 02, 2022, 08:57:33 AM »
H1 2022 for PTB was a strong one, once adjusting for land sales the numbers were much better, my only issue is they failed to use the proceeds to pay down the debt as much as i would have liked.

Its a bit hard to see through the financials because the property sales were recognised in the H1 2021 income statement, but didnt appear in the cash flow until this half.

« Last Edit: March 02, 2022, 09:01:07 AM by galumay »

galumay

  • Administrator
  • dhunga
  • *****
  • Posts: 725
Re: PTB
« Reply #5 on: August 19, 2022, 11:00:22 AM »
Well the 2nd worst thing that can happen to a long term investor (aside from losing capital), has happened with PTB, a takeover by a competitor, US-based Precision Aviation Group, apparently offering around $200m for the business.

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.

Our cost was an average of 62c and takeover will be $1.595 current price $1.15