Underwood Capital Reports $0.193m Profit with NTA Per Share at 9.46 Cents

Profitability Maintained Amid Market Volatility

Underwood Capital Limited (ASX:UWC) closed the financial year ended 30 June 2026 with a modest profit after tax of $0.193 million, down 21% from the prior year’s $0.243 million. The company’s net tangible asset (NTA) backing per share edged up to 9.46 cents, reflecting a slight improvement in underlying portfolio value despite a challenging market environment.

The investment portfolio, managed by HD Capital Partners since July 2023, remains anchored by $14 million in cash and listed equities, alongside a $7 million stake in Canadian cannabis company Weed Me Inc. The latter continues to be the most volatile component, contributing an unrealised loss of $1.8 million during the year, though the business itself reported record sales and dividend payments, according to Weed Me’s CEO Terry Kulaga.

Portfolio Strategy and Market Positioning

HD Capital Partners has focused on reducing illiquid holdings from 87% to less than 35% of NTA, boosting portfolio quality and liquidity. The listed investments exclusively comprise ASX-listed B2B service companies with strong cash flows and defensible competitive positions, acquired at attractive valuations. This repositioning has delivered a gross return of approximately 22.9% on listed investments in FY26, amounting to gains of around $2.5 million before costs.

Despite these improvements, Underwood’s shares continue to trade at a significant discount to NTA, even below the value of its liquid assets alone. The company has responded by actively repurchasing shares on-market, acquiring approximately 2.2 million shares during FY26 for around $0.11 million, as part of a buyback program initiated in 2024 and extended into 2026. The board views the buyback as a prudent use of capital given the persistent discount and strong balance sheet.

Operating Costs and Governance

Operating expenses declined slightly to $0.84 million from $0.89 million the previous year, reflecting ongoing cost management efforts. The company operates with a streamlined governance structure, led by Non-Executive Chair Warwick Sauer and two other non-executive directors, supported by CFO and Company Secretary James Hallam. No dividends were declared during the year, consistent with Underwood’s focus on capital growth.

The auditor, Stannards Audit Pty Ltd, issued an unqualified opinion on the financial statements, confirming compliance with accounting standards and the Corporations Act. The company continues to maintain a robust risk management framework, monitoring market, liquidity, and foreign exchange risks, particularly exposure to Canadian dollars through Weed Me.

Looking Ahead: Monetisation and Market Uncertainties

Underwood remains committed to unlocking value from its Weed Me investment, actively seeking potential buyers for its stake. Meanwhile, HD Capital Partners maintains a cautious investment stance amid uncertainties around AI’s impact on technology companies, favouring mission-critical, cash-generative businesses purchased at conservative multiples.

With the share price discount persisting despite portfolio enhancements and capital returns via buybacks, the key question is whether Underwood can translate its improved asset quality into shareholder value recognition. The company’s next moves on Weed Me monetisation and ongoing buyback activity will be critical to watch.