As well as the contracting AUM and little in the way of new investment, before catching this knife it's worth bearing in mind some more catalysts which may end up putting downward pressure on the share price and corporate brand:
- on 16 April, the significant AUM and NPAT downgrade was accompanied by the announcement of an independent valuation review of every asset it manages and that they are committed to changes which will "improve shareholder value
over the long term". A whole bunch of valuation issues could still surface out of this process. The 14-23% discount to holding value on exit of Foundation Early Learning Centres which BAF announced on 1 May could be the first of many.
- a week later, the MD 'resigns' and two board members step down, with processes for a permanent MD and additional independent directors commenced. Even if they start after the results of the independent valuation review are released, particularly the new MD will no doubt go through their own review to clean out as many gremlins in the closet so they can start with a clean slate. For many companies, these sorts of new-CEO broom sweeps can be viewed positively, but here they could impact the value of funds which are reported to their investors, and the credibility of BLA as an ongoing fund manager.
- anyone looking to buy assets from a BLA fund, or looking to take over management of a fund, will be doing extra extra due diligence on anything BLA says which may put downward pressure on any sale price.
- I suspect the army of analysts running the day to day activities at BLA may be brushing up their CVs and eyeing the exits.
Of course the valuations may all be accurate, the new MD hits the ground running without any further bad news, every asset sale gets recorded at greater than holding value and loyal staff all stay on to take BLA back to its previous heights. In which case the current share price should represent value.
But I'm a little more skeptical, especially on the valuation review after reading the following from this article (
http://www.couriermail.com.au/busin...e/news-story/f9d9464d013a59c62583257840607e6d)
ALL these red flags didn’t go unnoticed by Brisbane’s finance sector players.
“I always found it difficult to understand their accounts and I used to lecture in accounting. So I was always a bit leery of them privately’’ one of these gents told City Beat yesterday.
“I was one of hundreds of investment professionals around Australia scratching my head at how the accounts were put together.’’
Another industry figure told us they had similar apprehensions.
“We were always concerned because their fees seemed exorbitant and they would bring forward profits and keep raising money, which is not a sustainable business model,’’ he said.
