BAF shows signs of recovery post-Blue Sky uncoupling
25 February 2020, Written by David Simmons
Distance makes the heart grow fonder, or so the saying goes. But for Blue Sky Alternatives Access Fund (ASX: BAF) its breakup with parent Blue Sky Alternative Investments (ASX: BLA) has been the right move.
The investment vehicle has demonstrated it is capable of revival in its 1H20 results posted today.
BAF posted revenue growth of 233.06 per cent in the half to $13.2 million after deciding to partner up with new fund manager Wilson Asset Management (WAM) in November 2019.
Profit was similarly up by 374.9 per cent to $9 million during the half.
At the time BAF's board expressed concern about the "substantial disconnect" that existed between the share market valuation of the company and the underlying value of its assets.
In the months since the fund had a "significant breakthrough" when it was decided that Blue Sky's management rights over BAF would be transferred to WAM.
The board of BAF continues to negotiate with WAM, BLA's receivers KordaMentha and Oaktree Capital Partners to settle the final terms of the management transition.
While today's results are certainly promising, BAF says it still has a while to go until it can completely recover.
"For the half-yea rthe Company has continued to see its share price trade significantly below the NTA of the company, albeit in a more stable range," says BAF.
"In order to address this, the Company has implemented a range of initiatives throughout the year including the continuation of the share buy-back program.
"The Board has also worked with the Manager and service providers to significantly strengthen and improve the investment valuation process, including the appointment of a new lead independent valuer, streamlining processes, and increasing the transparency of the valuation process supporting individual values."
BAF receives attractive returns on exits
During the half BAF exited a total of 13 funds, with the total number of funds in the portfolio now at 28 closed end funds and one open ended fund.
"Returns on these funds have been attractive, and contribute further to the Company's realised track record which stands at a weighted average internal rate of 11 per cent per annum since inception," says BAF.
The majority of BAF's remaining investments are in the 'real assets' class (41.8 per cent), with $56.8 million in the Water Fund, $7.5 million in one operating agribusiness asset and one renewables asset, and $29.1 million in is Strategic Australian Agriculture Fund.
The remainder of its investments are in private equity (25.9 per cent), private real estate (6.2 per cent) and cash (26.1 per cent or $58.2 million).
The profit for ordinary activities after income tax amounted to $9 million, up from $1.9 million in 1H19.
Shares in BAF are down 1.16 per cent to $0.85 per share at 11.16am AEDT.
Business News Australia
Author: David Simmons