Blue Sky Alternative Investments Ltd (ASX: BLA)

Asset valuations to lower down the profits: Blue Sky Alternative Investments has been under more pressure with the withdrawal of its FY18 guidance. The group has also been reported of charging fees on undrawn debt facilities. Meanwhile, BLA lately announced that it had substantially completed the first phase of the previously announced independent review of asset valuations, involving 12 of 93 assets managed by Blue Sky. The first phase of Blue Sky’s independent review of asset valuations included assets within funds with a unit price greater than $1.20 in which the Blue Sky Alternatives Access Fund is invested and other assets. The asset revaluations have included the entire portfolio of Student Accommodation (SAC) assets, three private equity assets including Wild Breads, Sunfresh Salads and Foundation Early Learning (for which a sale of the asset has been announced), and a Retirement Living project in Corinda, Brisbane. Collectively, these assets represent approximately 25% of Blue Sky’s total fee-earning assets under management (‘FEAUM’) as at 31 March 2018.

These asset revaluations are expected to lower Blue Sky’s net profit after tax (NPAT) for the year to 30 June 2018 by approximately $7 million. This is a non-cash adjustment primarily driven by reductions in accrued performance fees and it will not have any impact on its FEAUM as announced on 7 May 2018. On 7 May 2018, the Group thus announced that it will withdraw earnings guidance for FY18 and FEAUM guidance for FY18 and FY19. The results of the first phase of asset revaluations, based on independent review, were not known at that time. It has grown institutional investment stability since FY15 and now manages institutional capital across all four asset classes.


Revenue and Underlying NPAT Performance (Source: Company Reports)

Michael Charles Gordon, one of its director ceased to be associated with the group as the director from 14 May 2018 due to personal reasons. The Blue Sky Board is continuing with its process to appoint new independent directors and is committed to transitioning to a majority independent Board ahead of the Blue Sky Annual General Meeting in October. BLA’s ROE as at 2017 was reported at 15.2 per cent against 12.1 per cent as at 2016; and Debt to Equity Ratio as at 2017 was 0.38 and as at 2016, the same was 0.14. The stock was down by 79.6 per cent in the last six months, and by 30 per cent in last one month. Despite of the dip, the share needs to be avoided at the current market price of $2.64, with so many issues at hand.

 
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