Rural Funds Group (ASX: RFF)

RFF Details

Ongoing acquisition opportunities - Rural Funds Management Limited (RFM) is one of the oldest and most experienced agricultural fund managers in Australia. RFM’s largest fund under management, the Rural Funds Group (RFF) is an ASX listed real estate investment trust. RFF owns a diversified portfolio of high quality Australian agricultural assets and its investment objective is to generate a stable income stream derived from leasing its assets to suitable counterparts and capital growth through any appreciation in the value of those assets. Its main focus is to grow adjusted funds from operations (AFFO) per unit through lease indexation, reinvestment of retained AFFO and via market rent review mechanisms.


RFF trading price, acquisitions and equity raises (Source: Company Reports)

Recently, Rural Funds Management Limited (RFM), as responsible entity and manager for the Rural Funds Group (RFF), entered into a contract to acquire Comanche, a 7,600-hectare cattle property located in central Queensland for a consideration of $15.7 million which will be debt funded. This acquisition supports RFM’s strategy to acquire assets where productivity can be improved with the help of an increase in capital value and rental income. It is expected that transaction will settle in July 2018. The property will offer opportunities for productivity enhancements similar to those proven on Rewan, a central Queensland cattle property that was acquired by RFF in July 2016. There is potential for a stage two development for further water storage to utilise surplus water entitlements that will help it to expand to irrigated cropping area. In December 2017, RFF received a valuation uplift of 17 per cent which was due to increased carrying capacity.

RFM will seek acquisition opportunities in both infrastructure and natural resource predominant assets and RFM reaffirmed FY18 Adjusted funds from operations (AFFO) and distribution forecasts of 12.7 cents per unit (cpu) and 10.03 cpu, respectively, and the Group forecasted FY19 distribution amounting to 10.43 cpu which represents a 4 per cent increase on FY18. The tenancy agreements on its assets have an average of 12.5 years to run and have rental indexation built into them. The stock is soon going to trade ex-dividend that is on 28 June 2018 with a payment date of 31 July 2018. At present, the stock is trading at an annual dividend yield of 4.56 per cent. The stock has been falling in the last six months and was down by 1.79 per cent but started recovering in last one month. The stock again slipped by 3.18 per cent on 20 June 2018. It’s better to “Hold” the stock at the current market price of $2.13.

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