Bailador Technology Investments Ltd (ASX: BTI), a prominent ASX dividend stock, has seen its share price decline by 33% since its peak in October 2021. Despite this downturn, the company presents an intriguing investment opportunity, particularly for those seeking strong passive income through dividends.
The company’s strategy revolves around investing in small, private, and rapidly growing technology companies at attractive valuations. Its portfolio includes a diverse array of businesses such as Siteminder Ltd (ASX: SDR), DASH, Updoc, Access Telehealth, Expedition Software, Rosterfy, PropHero, Hapana, MOSH, and Nosto. These investments span various sectors including travel, digital healthcare, property investment, and more.
Strong Passive Income Potential
Bailador aims to provide investors with a 4% dividend yield based on the pre-tax net tangible assets (NTA) of the company. The company updates investors monthly on its portfolio’s worth in both pre-tax and post-tax NTA terms. When factoring in franking credits, this 4% yield translates to a grossed-up dividend yield of 5.7%.
Currently, Bailador’s stock is trading at a 37% discount to its portfolio value, which stands at $1.95 per share. This discount means the grossed-up dividend yield could potentially reach 9.1%, making it an attractive option for income-focused investors.
Compelling Portfolio Holdings
One of the key attractions of Bailador is its portfolio of technology companies, which are known for delivering strong long-term returns due to their ability to grow revenue rapidly at appealing profit margins. In FY25, Bailador’s portfolio companies demonstrated a weighted average revenue growth of 47%, with 87% of this revenue being recurring. The weighted average gross profit margin was reported at 65%.
The company strategically invests in businesses with appealing unit economics and large addressable markets, positioning its portfolio for sustained growth. This approach ensures that Bailador’s investments are not only performing well but are also poised for future success.
Discounted Valuation and Growing NAV
The significant discount at which Bailador’s stock is trading relative to its NTA makes it appear undervalued. As the company’s investments continue to increase in value, the NTA seems even more attractive. Bailador has a “well-established track record of realizing cash for its private company positions, doing so at a premium to carrying value on every occasion.”
The average premium of Bailador’s cash realizations over carrying value for private companies is 39%.
This track record underscores the company’s capability to enhance shareholder value by selling its investments at a substantial premium to their NTA, further solidifying its investment appeal.
Expert Opinions and Market Context
Financial analysts have noted that Bailador’s approach to investing in technology companies aligns well with current market trends. The technology sector has been a significant driver of growth in recent years, with digital transformation initiatives accelerating across industries.
According to market experts, the ongoing digitalization of various sectors provides a fertile ground for technology companies to thrive. Bailador’s focus on high-growth tech companies with strong recurring revenue models positions it well to capitalize on these trends.
Looking Ahead
As Bailador continues to identify and invest in promising technology companies, its potential for delivering substantial returns remains strong. The company’s disciplined investment strategy, coupled with its ability to realize value from its holdings, makes it a compelling choice for investors looking to benefit from both income and capital appreciation.
Overall, despite the current 33% drop from its peak, Bailador Technology Investments offers a unique opportunity for investors to gain exposure to the burgeoning technology sector while enjoying attractive dividend yields. With a proven track record and a well-diversified portfolio, Bailador stands out as a noteworthy option for those seeking long-term growth and income.
