Ann: BAF successfully negotiates favourable transition, page-4

As shown in table from Jan 2020 report:


BAF: $90.8m in Real Assets (mostly water entitlements). The water entitlements can be sold at valuation - it's an actively traded market. As a whole, the portfolio may even get a small premium. Rest of real assets reasonable to assess as worth current monthly value (IMO).

$58m in cash

$13.7 in real estate. Let's conservatively take 90% of current monthly value to make it $12m

Anyway, so I make that $160.8m in cash or assets that can be readily cashed out.

Yet current market cap at 82cents is $162m

Jan 2020 Net Assets are: $222.68m (which includes Private Equity)

Current Discount to BAF's NTA ($1.1389/share) at 82 cents share price = 28%

So the 60m Private Equity portfolio is the missing piece re level of undervaluation.

The Interim Report says $17m of Private Equity holdings are expected to be disposed of in next 12 months. Some (like the $6m Hotels Fund) can be disposed of anytime at least at carried value. Others would be less easy to dispose of. It doesn't say what the expected overall return (positive or negative) on these near term disposals might be.




But, regardless, it suggests that the Private Equity portfolio is being sold down and with some market-tested valuation for at least $17m of it.

Let's be very conservative and for our example cacl make the Private Equity portfolio worth only 50% of carried value (which was independently valued at end of Dec 2019, so things like Shoes of Prey are already zero and some others already written down).

Then a very sceptical investor's view of BAF net assets might be $193m. At 82 cents, $162m market cap into this = 16% discount to a very conservative valuation

I think there's a fair margin of safety there for a WAM-branded and marketed alternative assets fund.

If the buyback remains active and with LIC discount arbitrager's active like GVF (Miles Staude) and Affluence, I expect BAF's discount to close.

Will it close much during current market sell-off where anything that can be sold is being sold - perhaps not.

But when that period ends the discount could close 5-10% relatively quickly. That is, go from 28% to say 18%. If NTA stays the same that would mean a share price of 93 cents.