Aventus Group

Higher occupancy & rental price will boost AVN earnings: Real Estate Company, Aventus Group (ASX: AVN) has recently announced the distribution details for the quarter ending 31 March 2019. As per the release, the Board of Directors declared a quarterly dividend of 4.16 cents per share with payment date on May 22, 2019 and record date on March 29, 2019. Further, the Dividend Reinvestment Plan (DRP) is available to shareholders for the quarterly dividend to reinvest all or part of receipt of their dividends/distributions in new securities rather than being paid in cash.Shareholders who opt to participate in the DRP will benefit from a 2.0% discount, and its dividend/distribution reinvestment plan (DRP) election date has been set on April 1, 2019.

On the other hand, Mr. Brett Bundy, Director of Aventus Capital Limited and Aventus Holdings Limited has offloaded total 908,328 stapled securities at $2.25 per stapled security via on-market trade. Thus, post this development, Mr. Brett Bundy has 145,462,998 stapled securities.

For the half year ended 31 December 2018, it reported an increase in its revenue from ordinary activities by 1.3% pcp to $84.2 Mn. This increase can be attributed to increases in rental and other property related income.Its net profit after tax attributable to security holders decreased by 15.1% pcp to $63.7 Mn. This is due to a decrease in net fair value gains on investment properties and a decrease in transaction costs.


H1FY19 P&L Statement (Source: Company Reports)

What to expect from the company: Aventus aims to drive sustainable earnings from the portfolio through active diversification of the tenant base with a focus on increasing Everyday-Needs uses. It expects high occupancy and annual contracted rent increases to underpin future income growth. It aims to continue to re-invest into the portfolio to enhance shopper experience and capitalize on attractive development returns.

Stock Recommendation:Aventus’ share generated positive YTD return of 5.14%. Its gross margin and EBITDA Margin for H1FY19 stood at 78.4%, and 65% better than the industry median of 73.3%, and 61.3% respectively implying decent fundamental. Moreover, its PE multiple is trading at 9.15x lower than the industry median of 12.1x, indicating an undervalued position at the current juncture. Its dividend yield stood at 7.32% better than the industry median of 5.2% generating more income for the shareholders. Hence, considering the aforesaid facts and current trading level, we recommend a “Hold” rating on the stock at the current market price of $2.250.
 

Rural Funds Group

Decent Liquidity position to drive future growth:Real Estate Investment Trust company, Rural Funds Group (ASX: RFF) has a diversified portfolio of high quality Australian agricultural assets leased to experienced agricultural operators. Its revenues are derived from long term lease rentals in sectors such as poultry infrastructure, tree nut orchards, vineyards, cotton, and cattle assets.

It recently announced an unfranked dividend/distribution of 0.026075 AUD with the payment date on April 30, 2019, and record date on March 29, 2019.Shareholders who opt to participate in the dividend/distribution reinvestment plan(DRP) will benefit from a 1.5% discount and its DRP election date has been set on April 1, 2019.

It reported an increase in its earnings per unit by 17% pcp to 7.73 cpu. Earnings were higher due to the independent valuation for Kerarbury, higher income resulting from acquisitions and the sale of unleased annual water allocations. Its term debt facility limit increased, and tenor extended to include expiries in two tranches i.e. $200 Mn three-year facility which expires in November 2021 (FY22), and $100 Mn five-year facility which expires in November 2023 (FY24). It will help the company to execute its projects at a sustainable growth rate.


H1FY19 P&L Statement (Source: Company Reports)

What to expect from the company:Rural Funds Group is determined to continue to oversee and manage existing assets and developments while considering new investments and lessees.It confirmed FY19 forecast AFFO of 13.2 cpu and distributions of 10.43 cpu which is an increase of 4% compared to FY18. The FY20 distribution forecast was also provided, which is expected at 10.85 cpu, which is in line with Rural Funds’ DPU growth target.

Stock Recommendation:RFF’s share has generated a positive YTD return of 5.02%. Its top line and bottom line, both have performed very well. Its gross margin and EBITDA margin for H1FY19 stood at 97.5% and 82.9% which is better than the industry median of 73.3% and 61.3%, respectively, implying decent financial metric as compared to its peer group. It is trading at higher PE multipole of 17.25x with dividend yield of 4.49% as compared to the concerned industry. Hence, we reiterate our “Hold” recommendation on the stock at the current market price of $2.290 (down 0.435% on 25 March 2019).
 

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