Smail had six birdies and two bogeys for a three-round total of 11-under 265, putting him a stroke ahead of Australian Andre Stolz (66), who is on the comeback from a career-threatening injury. Ewan Porter (72) and second-round leader Stephen Dartnell (75), both of Australia, were two more shots back.
The second round, cut short by rain Friday, was completed early Saturday. Daly finished with an even-par 72 ' improving significantly on a first-round 78 ' but his two-round total of 150 left him five strokes outside the cut.
The two-time major winner missed the cut in all three tournaments he played over three weeks in Australia, a visit that will be most remembered for his smashing the camera of a fan during the first round Thursday.
Dalys Australian jaunt was otherwise undistinguished by the quality of his play or his off-course behavior. Local media reported he mostly remained in his hotel room working his way through 150 DVD movies and eating junk food.
As the tournament continued without its headline act, it was Smail, a regular on the Japanese tour, leading the $1.13 million tournament at the par-72 Royal Sydney Golf Club.
Well see how it goes tomorrow. Ill just keep trying to swing it well, and hopefully theres a bit less wind, Smail said. Itd be nice to bring the trophy home, thats for sure.
Last year I was second in the (Australian) PGA and theres been some other close ones. Itd certainly be nice to have the New Zealand Open, Japan Open and Aussie Open ' thatd sound pretty good.
Stolz made a dramatic leap up the leaderboard, carding four birdies in an outward 32. He picked up four more on the back nine before bogeying the 16th and 17th holes.
As recently as six months ago, Stolz thought his professional career was over because of a chronic wrist injury. He had been reduced to playing occasional social rounds of golf until a changed swing reinvigorated his career.
He qualified for the PGA Tour through the Nationwide Tour in 2004, earning $720,000 and winning the Michelin Championship in Las Vegas to gain a two-year exemption.
Injury intervened and Stolz needed an invitation from the organizers to play in this weeks tournament.
Theres a few young pros I teach at home and I just started hitting a couple of balls, he said. One day I picked up a club and thought, I wonder if I swing it really short and just try to chip it down the fairway.
I wasnt expecting to go and play, but second game back I shot 10 under around my home course at Gosford. It was just amazing.
After putting his clubs aside for almost two years because of injury, Stolz now believe he can win his national open.
I actually said to my wife last night I had thoughts of winning it, he said. The thought just popped into my head.