PTB Group: Strong first half lifts our expectations

About the author:

Author name:

By Max Vickerson

Job title:

Analyst

Date posted:

24 January 2022, 8:00 AM

Sectors Covered:

Industrials, New Energy

• PTB Group (ASX:PTB) announced that its preliminary 1H22 exceeded its guidance by 12%.
• The company has not increased its FY22 guidance but we are increasingly confident that it can maintain stronger growth from its US operations.
• We therefore increase our target price to (login to view) and maintain our ADD rating.

US and Asia Pac driving solid performance

PTB has released some preliminary and un-audited financial data ahead of its expected release of its 1H22 results on 23 February that showed its Net Profit Before Tax and Foreign Exchange (NPBTFX) exceeded guidance by 12%.

The company pointed to strong trading conditions in the US and Asia-Pacific but has not yet lifted its full year guidance despite the strong 1H result.

Analysis

PTB’s preliminary 1H22 results showed revenue growth in-line with our expectations but a 2% beat on our forecast EBITDA and NPBTFX.

We will need to see the release of results to understand the divisional breakdown but we anticipate that the 18 additional contracted engines (~8% increase) in the Maldives and streamlining of the US operations will have been important drivers of the result.

Forecast and valuation update

We expect the second half to build on 1H and therefore lift our FY22 underlying net profit forecast to $9.5m (+3%) and FY23 to $9.4m (+5%).

We think PTB can continue to achieve steady organic growth in the US and from the Maldives in the next two years but it also has the potential for incremental M&A. There was over $20m in cash on the balance sheet as at 30 June 2021 and strong cash flows which we think means an acquisition of $5m - $10m would be achievable.

Investment view

Even without considering acquisition opportunities for the company we see upside to the current share price with potential 12-m TSR of 11% (+8% capital growth, 3% dividend yield) and a P/E multiple less than 14x.

If PTB could find an incremental investment opportunity with a similar rate of return (forecast ROE ~9.4%) to its business then, assuming a $10m bolt-on acquisition, we think it could easily add an additional 14cps of value.

We maintain our ADD rating given the upside we see and the potential for additional growth.

Price catalyst

More detail on the divisional performance at the half year result could identify potential outperformance in 2H and/or in FY23.

Tourism statistics from the Maldives peak season over Dec – Feb will give an indication of how strong the second half will be for the Australian-based business.

Risks

Customer traffic, particularly with PTB’s largest customer in the Maldives.

Roll out of the engine management program in the US. 

Impacts on COVID-19 on general aviation.

Interest rates.

Tax regimes.

Availability of third party financing to grow leasing fleet.

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