NAOS reports $6.6 million loss with 5-cent dividend and 15.7% NTA premium

Loss narrows but portfolio still lags benchmark

NAOS Small Cap Opportunities Company Limited (ASX:NSC) reported a reduced after-tax loss of $6.60 million for the year ended 30 June 2026, improving from a $9.07 million loss in FY25. The company’s investment portfolio returned -9.86%, significantly underperforming the S&P/ASX Small Ordinaries Accumulation Index benchmark, which gained 8.11% over the same period. This marks a continuation of challenging market conditions for small caps, with the portfolio weighed down by share price declines in several large holdings amid a persistently high interest rate environment and geopolitical uncertainties.

Despite the weak portfolio return, NSC’s share price rose from $0.28 to $0.325, closing the year trading at a 15.7% premium to its pre-tax net tangible asset (NTA) backing of 28.09 cents per share. This premium was a stark reversal from the 26.64% discount at the start of FY26, reflecting strong market demand for the stock and effective capital management by the Board.

Dividends maintained amid profit reserve buffer

The Board declared a final quarterly dividend of 1.25 cents per share, franked to 50%, bringing the total dividend for FY26 to 5.0 cents per share, unchanged from the prior year. Based on the closing share price, this equates to a healthy dividend yield of 15.38%, or 17.95% on a grossed-up basis including franking credits. The company’s profit reserve stood at 7.9 cents per share at year-end, providing a buffer to sustain dividend payments during periods of subdued earnings.

Since inception in December 2017, NSC has distributed 43.50 cents per share in dividends, alongside 15.90 cents per share in franking credits, amounting to a total return of 59.40 cents per share, well above the current share price. The Board’s ongoing commitment to a sustainable dividend stream underscores its focus on delivering shareholder income despite volatile market conditions.

Active capital management with share buybacks

Capital management remains a key priority, with the company executing an on-market share buyback program during FY26, purchasing 906,890 shares for $290,893 at prices below NTA. This strategy is accretive to NTA per share and signals the Board’s confidence in the intrinsic value of the portfolio. Since the buyback commenced in 2019, NSC has repurchased approximately 37.23 million shares, representing 22.03% of shares on issue.

The dividend reinvestment plan (DRP) continues to operate without dilution, with all DRP entitlements satisfied through on-market purchases. This approach balances shareholder returns with disciplined capital deployment.

Portfolio outlook hinges on key holdings

Looking ahead to FY27, the Board and investment manager NAOS Asset Management express cautious optimism. Several core investments are positioned for earnings momentum that could catalyse a re-rating of the portfolio.

MOVe Logistics Group Ltd (ASX/NZX:MOV) has achieved a headline return to profitability in FY26 after a multi-year turnaround. With a market capitalisation of just NZD 25 million and revenue around NZD 300 million, the company offers significant upside potential as the New Zealand economy shows tentative signs of recovery.

Big River Industries Ltd (ASX:BRI) expanded its footprint with the $17 million acquisition of Johns Building Supplies, strengthening its presence in Western Australia and adding higher-margin product exposure. The emergence of CTL (Aust) Pty Ltd as a 19.9% shareholder introduces strategic cross-selling opportunities and potential corporate activity.

SomnoMed Ltd (ASX:SOM) is targeting margin expansion and market share growth in the global sleep apnoea device market, which is forecast to nearly double in size over the next decade. Its next-generation Rest Assure oral appliance, featuring embedded compliance monitoring, could disrupt the treatment landscape if successfully commercialised.

The investment manager emphasises a long-term perspective, acknowledging the recent underperformance but maintaining conviction that the intrinsic value of NSC’s holdings materially exceeds current market valuations. This stance is reflected in continued on-market purchases of NSC shares by the investment team.

Market backdrop and investment philosophy

FY26 was shaped by an extraordinary global capital expenditure cycle focused on AI infrastructure, juxtaposed with a broad de-rating of software companies amid concerns over the durability of recurring revenue streams. Domestically, the Reserve Bank of Australia raised interest rates by 0.75% to 4.35%, driven by persistent inflation and geopolitical tensions including the Middle East conflict, which also pushed energy prices higher.

These macro factors have disproportionately rewarded large-cap and passive index stocks, leaving a cohort of smaller quality companies trading at discounts to their long-term value, a gap NSC aims to exploit through concentrated, active management. The portfolio remains heavily weighted towards sectors benefiting from structural tailwinds such as construction materials and industrials.

NAOS Asset Management’s philosophy centres on backing proven, aligned management teams in emerging companies with transparent business models and sustainable competitive advantages. The manager prefers a concentrated portfolio of 0–20 stocks, avoiding index hugging and excessive diversification.