NAOS Ex-50 reports -5.26% portfolio return, raises FY26 dividend to 6.3 cents

Losses Amid Market Volatility and Portfolio Underperformance

NAOS Ex-50 Opportunities Company Limited (ASX:NAC) closed its 2026 financial year with a $3.09 million after-tax loss, a sharp reversal from the $7.55 million profit recorded in FY25. The company’s investment portfolio declined by 5.26%, slightly underperforming the S&P/ASX 300 Industrials Accumulation Index, which fell 4.49%. This marks a year of consolidation following a robust 28.92% return in FY25, with the portfolio’s performance reflecting a challenging market environment marked by macroeconomic uncertainty and sector-specific headwinds.

The net tangible asset (NTA) backing per share fell to $0.63 post-tax, down from $0.75 a year earlier, underscoring the portfolio’s valuation pressures. Despite this, total shareholder return remained positive at 18.7%, buoyed by dividends and a narrowing discount to NTA, which shrank from nearly 30% to just 2.77% by June 2026.

Dividend Raised for 12th Consecutive Year

In a move that may surprise some investors given the loss, the board declared a final quarterly dividend of 1.60 cents per share, 50% franked, lifting the full-year dividend to 6.30 cents per share; a 5% increase on FY25. This marks the twelfth consecutive year the company has maintained or increased its dividend, reflecting a commitment to providing shareholders with a sustainable income stream. The dividend yield stands at a compelling 10.41% based on the recent share price of $0.605, or 13% on a grossed-up basis including franking credits.

The company’s profits reserve remains robust at 52.2 cents per share, providing a buffer to support dividend payments even in periods of portfolio underperformance. The dividend reinvestment plan continues to operate on-market, ensuring shareholders can increase holdings without dilution.

Active Capital Management with Share Buyback

Capital management remains a key focus for NAOS Ex-50. The company repurchased 980,082 shares during FY26 at a total cost of $539,422, taking advantage of the share price trading at a discount to NTA. Since the buyback commenced in 2019, approximately 16.25 million shares have been bought back, representing nearly 31% of shares on issue. The board views this program as accretive to NTA and an integral part of enhancing shareholder value.

Portfolio Highlights: Strategic Progress Despite Valuation Gaps

NAOS Asset Management’s Chief Investment Officer Sebastian Evans emphasised that while FY26’s headline returns were muted, the portfolio is materially de-risked with several core holdings making operational strides. Urbanise.com Ltd (ASX:UBN), a cloud-based strata management software provider, achieved significant milestones including a strategic partnership with National Australia Bank to co-develop a payments integration service, and launched its first AI assistant aimed at improving user workflows. This positions Urbanise well to capitalise on a multi-billion-dollar market opportunity.

Meanwhile, MOVe Logistics Group Ltd (ASX/NZX:MOV) in New Zealand is navigating a turnaround, having returned to profitability in FY26 after cost restructuring and network optimisation. The company faces challenges in its warehousing division due to onerous leases but is expected to benefit from improving economic conditions and operational leverage.

Firmus Grid Ltd, an unlisted holding, stands out as a high-conviction investment with direct exposure to the booming AI infrastructure capex cycle. The company completed a significant US$505 million capital raise led by Coatue Management and secured a $10 billion asset-backed debt facility with Blackstone, de-risking its ambitious AI factory projects in Tasmania and Melbourne. Firmus is preparing for a potential IPO, which could further unlock value.

Market Dynamics and Outlook

The broader market environment featured rising interest rates, geopolitical tensions in the Middle East, and a sharp de-rating of software stocks; a phenomenon dubbed the ‘SaaSpocalypse’. While global hyperscalers are investing heavily in AI infrastructure, many software companies face questions about the durability of their revenue streams amid AI disruption. NAOS’s portfolio reflects these dynamics, with a tilt towards companies embedded in complex workflows and infrastructure rather than commoditised software.

Looking ahead to FY27, NAOS expects several catalysts to potentially unlock latent value, including the commercial rollout of Urbanise’s NAB integration and AI services, MOVe Logistics’ sustained profitability and lease resolutions, and Firmus’s operational milestones and IPO progress. The investment manager also plans to diversify the portfolio further to reduce concentration risk and balance industry exposure.

Despite the loss, the company’s disciplined capital management, ongoing strategic progress in core holdings, and shareholder-aligned board and management team underscore a long-term value creation focus.