BTI: Tech Private Equity LIC - The Credibility Premium
BTI: Tech Private Equity LIC - The Credibility Premium
In a Nutshell
Executive Summary
In a Nutshell
Bailador Technology Investments is Australia's only listed vehicle offering retail investors exposure to expansion-stage private technology companies, holding stakes in 12 businesses including SiteMinder and DASH. At A$1.145 versus fair value A$1.30, the stock offers 13.5% upside plus a 9.5% grossed-up dividend yield. The key catalyst is whether private exits validate the portfolio's conservative carrying values—SiteMinder sales at 63% above book value suggest they will, but a single exit below carrying value would destroy this credibility premium and widen the discount further.
Investor Profiles
| Profile | Rating | Rationale |
|---|---|---|
| Income | ★★★★★ | Delivers a 9.5% grossed-up yield anchored by a policy to distribute 4% of pre-tax NTA annually. Dividends are fully franked and funded by cash realisations ($28m in H1FY26 versus $3.9m paid out), not accounting gains. Dividend cover is strong at 3.5x, and the policy provides predictability rare in the LIC sector. |
| Value | ★★★☆☆ | Trading at a 35% discount to post-tax NTA of $1.759, the margin of safety appears substantial. However, 39% of portfolio holdings are Level 3 (self-valued by management), creating genuine uncertainty about asset quality. The catalyst for discount narrowing requires private exits above carrying values—SiteMinder sales 63% above book value provide validation, but one miss would widen the discount materially. |
| Growth | ★☆☆☆☆ | NTA per share growth averages just 1-2% annually after fees (4.3% of NAV), tax (28%), DRP dilution (2%), and dividends (4%) consume most of the 15% gross portfolio returns. This is a structural limitation of the LIC model, not a cyclical issue. Portfolio companies themselves are growing strongly (SiteMinder ARR +27%, Updoc +86%), but shareholders capture little of this compounding. |
| Quality | ★★☆☆☆ | Business quality scores 4.9/10 due to structural LIC constraints. The competitive moat is narrow (4.0/10)—unique ASX niche positioning unreplicated for 10+ years, but this doesn't generate superior economics. Management demonstrates capable investing with validated conservative valuations, but external structure creates misalignment (manager earns fees on NAV, not share price), blocking accretive buybacks at 35% discount. |
| Thematic | ★★★☆☆ | Provides concentrated exposure to Australian digital economy themes—SaaS, digital health, proptech, fintech. Portfolio momentum is strong, with H1FY26 gains across SiteMinder (+37%), Updoc (+21%), PropHero (+46%). However, the tech thematic is diluted by the 35% discount and 4% fee drag, meaning investors effectively pay 65 cents to access $1 of tech assets but give up 4 cents annually in fees. |
Best fit: Income investors. The 9.5% grossed-up yield is exceptional, particularly for retirees seeking franking credits. The dividend policy (4% of NTA) is transparent and sustainable, backed by cash realisations rather than accounting gains. While capital appreciation is structurally limited, the high, predictable income stream with a 3.5x cover ratio makes BTI ideal for investors prioritising yield over growth. The 35% discount provides a margin of safety, but income seekers should recognise they're effectively subsidising the discount in exchange for steady distributions.
Executive Summary
Bailador Technology Investments operates as a listed private equity fund specialising in expansion-stage Australian technology companies. The portfolio holds 12 businesses including SiteMinder (hospitality SaaS), DASH (wealth management platform), Updoc (digital health), and Mosh (telehealth). Revenue comes from portfolio revaluations and exits, with management earning a 1.75% base fee plus 17.5% of gains above an 8% hurdle.
H1FY26 delivered $41.7m in portfolio gains, lifting NTA per share from $1.644 to $1.759. SiteMinder contributed $26.5m (partially realised through ASX sales), while private holdings Updoc, PropHero, and DASH marked up 21%, 46%, and 17% respectively. Cash realisations of $28m funded a $3.9m dividend (cover of 3.5x), with $27.7m remaining on balance sheet for new deployments.
The investment case rests on three pillars: a 9.5% grossed-up dividend yield anchored by policy, validated conservative valuations (SiteMinder exits 63% above carrying values), and asymmetric upside if private exits narrow the 35% discount. The primary risk is that 39% of holdings are self-valued by management without independent interim review, creating opacity. A single exit below carrying value would destroy the credibility premium and widen the discount materially.
At A$1.145 versus fair value A$1.30, the stock is 13.5% undervalued.
Results & Outlook
What happened?
H1FY26 delivered $41.7m in portfolio gains, lifting NTA per share 7% to $1.759. SiteMinder drove 64% of gains through a 37% share price rally, with BTI selling $11.3m to realise gains at 29.4x original cost. Private holdings performed broadly: Updoc (digital health) rose 21% as profitability strengthened, PropHero (property AI) jumped 46% on revenue acceleration, and DASH (wealth tech) gained 17% as funds under advice reached $20bn. The only material decline was Nosto (marketing software), down 63% as AI substitution threatened its business model. Management deployed $3.3m into existing holdings while maintaining $27.7m cash for new opportunities.
| Metric | FY24 | FY25 | FY26E |
|---|---|---|---|
| NTA per share | $1.59 | $1.64 | $1.82 |
| Discount to NTA | -29% | -26% | -29% |
| DPS (fully franked) | $0.067 | $0.071 | $0.078 |
| Net portfolio return | 15% | 15% | 7.7% |
| Fee drag (% NAV) | 4.2% | 4.5% | 4.3% |
| Cash position | $22m | $20m | $25m |
What's next?
The key catalyst is private exits—DASH and Updoc are both approaching exit readiness (DASH's $20bn FUA and Updoc's profitability make them attractive sale candidates). An exit above carrying values would validate management's conservative approach and narrow the discount by 3-5%. Conversely, an exit below carrying value would widen the discount to 38-40%. Near-term portfolio momentum remains strong: SiteMinder ARR continues growing 27% annually, Updoc is expanding into new verticals, and PropHero is leveraging AI to automate property investment analysis. The external manager structure blocks the most accretive action (buybacks at 35% discount), but dividend sustainability is secure with 3.5x cover. Over the next 12-24 months, the discount should gradually compress toward the 27% fair level as realisations validate portfolio values, delivering total returns of 13.5% price appreciation plus 9.5% grossed-up yield.
Valuation & Risks
| Metric | Value |
|---|---|
| Fair Value | A$1.30 |
| Current Price | A$1.145 |
| Upside | +13.5% |
| 12-Month Total Return | +16.3% (incl. divs) |
What could go wrong?
The single biggest risk is private valuation opacity. 39% of portfolio holdings are Level 3 assets—self-valued by management at interim periods without independent review. This creates an inherent conflict: management earns performance fees (17.5% of gains above 8%) tied to portfolio valuations they control. A 20% overstatement in Level 3 values would reduce NTA by $0.14 per share. More critically, if the next private exit (likely DASH or Updoc) occurs below carrying value, it would destroy the credibility premium we assign for conservative valuations. SiteMinder exits at 63% above book value provide historical validation, but one miss would widen the discount from 35% to 40%, erasing $0.09-0.14 in fair value. This isn't a remote tail risk—it's the core uncertainty in the investment case. The trigger would be a portfolio company's growth decelerating (revenue miss, churn acceleration, competitive pressure) between now and exit, forcing a sale below the current mark. SiteMinder's 23% portfolio concentration amplifies this—a 30% decline in its ASX-listed price would wipe 7% off BTI's NTA instantly.