Scottish Oriental laments "disappointing" half-year performance

(Alliance News) - Scottish Oriental Smaller Cos Trust PLC on Friday reported a half-year total ...

Alliance News 1 May, 2026 | 12:09PM
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(Alliance News) - Scottish Oriental Smaller Cos Trust PLC on Friday reported a half-year total return lagging far behind wider market indices.

The Edinburgh-based firm, which aims for long-term growth from investing in smaller Asian companies, said its net asset value total return was minus 2.3% for the six months ended February 28.

This was in stark contrast to the MSCI AC Asia ex Japan Small Cap index, which generated a plus 16.0% return. Meanwhile, the MSCI AC Asia ex Japan index's return was plus 28.3%, while the FTSE All-Share's return for the period was plus 18.9%.

"This was clearly a disappointing outcome for shareholders," commented Jeremy Whitley, who noted that "extreme geopolitical circumstances" have "resulted in periods of great volatility and, for investment managers, intense periods of self questioning."

Scottish Oriental's NAV per share was 320.81 pence as at February 28, down from 331.72p at August 31.

The company's stock was down 0.8% at 266.92p per share on Friday afternoon in London.

Whitley noted that under the board's conditional tender offer mechanism, a tender offer for up to 25% of the Scottish Oriental's outstanding share capital will be triggered if its NAV total return for the five years to August 31 this year does not beat the MSCI AC Asia ex Japan Small Cap index.

"While there are still four months remaining in the measurement period and the outcome cannot yet be known with certainty, the company's outperformance over the first three years of the measurement period has been more than offset by recent relative underperformance," Whitley said.

Scottish Oriental will confirm whether the CTO has been triggered in early September.

Sreevardhan Agarwal of the company's manager FSSA Investment Managers, meanwhile, commented: "Missing out on some of the gains when markets are rising steeply can be a consequence of focusing on company fundamentals rather than index composition. Nevertheless, the magnitude of Scottish Oriental's relative performance lag over the last 12 months...warrants a detailed and contrite explanation."

That explanation included weak earnings per share growth due to "unique headwinds" affecting certain portfolio companies, like Colgate-Palmolive (India) and Philippine Seven, and that "index returns have been concentrated among cyclical industrial businesses and information technology companies, where the trust has relatively smaller exposure."

Agarwal particularly noted "difficulties" faced by "the consumer holdings that have traditionally constituted the bulk of Scottish Oriental's portfolio," due to varying headwinds like increased inflation in India, and lower consumer confidence in China. The portfolio's main detractor was Chinese Domino's Pizza franchisee DPC Dash, which saw "a sharp re-rating" after a 2025 decline in same-store sales growth.

However, Agarwal added: "While we do not underestimate the potential for further volatility, the company's holdings should remain fundamentally resilient...As market leadership broadens and investor focus returns to business fundamentals, we are confident that the portfolio is well positioned to deliver attractive outcomes for shareholders over the coming years."

By Emma Curzon, Alliance News reporter

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Scottish Oriental Smaller Cos Ord 266.90 GBX -0.78

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