Rural Funds Group

Improved AFFO per unit Y-O-Y: Rural Funds Group (ASX: RFF) is a real estate investment trust (REIT) and is managed by Rural Funds Management Limited. The company stated that it garners revenues with the help of long-term lease rentals throughout the five sectors namely: poultry infrastructure, tree nut orchards, vineyards, cotton as well as cattle assets. 

Rural Funds Management has contracted for the acquisition of ‘Cobungra’, which is a 6,486-hectare cattle property in Victoria, as mentioned in its latest announcement. It will fund the purchase price of $35.0 million from the debt facility of Rural Funds Group or RFF.

Financial Results for FY18 (Source: Company Report)

On the financial front, the property revenue and AFFO of Rural Funds Group are higher for 12 months ended 30 June 2018 on the back of additional lease income from acquisitions, development capital expenditure and indexation.The property revenue stood at $51.08 million in FY18 compared to $41.57 million in FY17, up by 22.9% approximately. However, the AFFO stood at $32.32 million in FY18 compared to the previous corresponding period of $25.59 million.
What to Expect from RFF Moving Forward: Going forward, the strategy of RFF is to generate stable income and capital growth by owning, and where appropriate, improving the productivity of farms.Additionally, RFF targets to grow the adjusted funds from operations per unit through lease indexation, reinvestment of retained AFFO, and market rent review mechanisms.

Meanwhile, the share price of RFF has risen 11.50% in the past six months and is trading at decent PE multiple of 15.78x. Driven by the short-term stock performance coupled with improving property revenue and AFFO YoY, we maintain our “Hold” recommendation on the stock at the current market price of $2.250 per share.
 

Magellan Financial Group Limited

A net inflow of funds as at 31^st Jan 2019: Magellan Financial Group Limited (ASX: MFG) is a financial company in Australia engaged in generating returns for its clients through investments in various global equities and global listed infrastructure companies.

Fund Under Management as on 31 January 2019 (Source: Company reports)

As per the latest updates of January 2019, the total FUM was reported at $72.950 billion with a net inflow of $317 million including the net retail inflow of $110 million, and net institutional inflows of $207 million.Over the past few years, the margins of the company have improved and are reported mostly above the industry median. It reported an EBITDA and Net margin of 78.0% and 47.0%, respectively in FY18 as compared to the industry median of 61.9% and 30.3% respectively. Further, the company is generating better returns for its shareholders than its peers as it reported a ROE of 39.7% above the industry median of 9.9%.

What to Expect from MFG Moving Forward: Going forward, the group remains focused on developing its retail business and executing its self-directed investor strategy and is implementing an alternative marketing strategy.The group expects a substantial reduction in marketing costs in the 2019 financial year. MFG happens to be capital light and it needs limited capital for supporting the business as well as to grow organically. The company stated that there are substantial organicgrowth opportunities and MFG happens to have sufficient capital to support the initiatives.
 
Meanwhile, the stock has generated a YTD return of 24.78% and trading at PE multiple of 23.90x with an annual dividend yield of 4.61%. Considering the aforesaid facts and current trading level, we maintain our ‘hold’ rating on the stock at the current market price of $29.130 per share.
 

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