Why Did Regal Asian Investments’ Profit Plunge 92% Yet Boost Dividends?

Financial Results Amid Market Volatility

Regal Asian Investments Limited (ASX, RG8) has released its annual report for the year ended 30 June 2025, revealing a significant contraction in earnings. The company’s net profit after tax plummeted 92% to $3.4 million, down from $43.7 million the previous year, while revenue fell 67% to $28.2 million. This sharp decline reflects the challenging investment environment in Asian equity markets over the past year, marked by geopolitical tensions and sector-specific setbacks.

Despite the downturn, Regal’s portfolio delivered a modest net return of +2.7% after fees, supported by gains in Industrials (+8.9%) and Materials (+3.5%) sectors. However, the Healthcare sector suffered materially, dragged down by a complete write-down of the company’s investment in Australian biotech firm Opthea following unsuccessful phase three clinical trials.

Dividend Policy and Shareholder Returns

In a move to sustain shareholder confidence, Regal declared a fully franked final dividend of 6.0 cents per share, maintaining its revised dividend policy targeting at least 6 cents every six months. This brings total dividends for FY25 to 12 cents per share, fully franked, representing a net yield of 5.8% based on the closing share price. The dividend reinvestment plan remains active, encouraging shareholders to reinvest their dividends.

The company also continued its on-market share buy-back program, purchasing 18.7 million shares at a cost of $39.1 million during the year. This capital management strategy aims to reduce the discount between the share price and net tangible assets (NTA), which stood at 15.9% at year-end; an improvement from nearly 19% at the time of portfolio management transition in mid-2022.

Portfolio Composition and Risk Management

Regal’s portfolio remains concentrated in Asian markets, with significant exposure to companies listed in Japan, Australia, South Korea, and Hong Kong. The investment manager actively manages currency risk through hedging strategies and maintains a balanced approach to long and short positions, including the use of derivatives such as equity swaps and foreign currency forwards.

The company acknowledges several risks inherent in its investment strategy, including market volatility, geopolitical uncertainties, liquidity constraints, and the amplified effects of short selling. The write-down of Opthea underscores the challenges of sector-specific risks, particularly in healthcare innovation.

Governance and Outlook

Regal Asian Investments is overseen by an experienced board led by Independent Chairman Lawrence Myers. The company’s investment management fees remain aligned with shareholder interests, with no performance fees earned in FY25 due to portfolio performance relative to benchmarks.

Looking ahead, the company remains cautious in its outlook given ongoing market fluctuations but emphasizes its commitment to delivering stable dividends and managing capital effectively. The upcoming Annual General Meeting in November 2025 will provide further insights into strategic priorities and shareholder engagement initiatives.