Duxton Water Ltd.

Fund Raising and future projections: Duxton Water Ltd. (ASX: D2O) is primed to obtain income from water entitlements and other allocations across Australia.The group lately raised a total of $23.78 million (before transaction costs), and will issue a total of 18,295,736 new shares, with Bell Potter as lead manager, through the completion of the 1 for 2 non-renounceable rights issue. As at 20 November 2018, the Company has invested in $183.40 million of water assets, that include 59,172 ML of water entitlements. Since 31 October 2017, the company’s portfolio has grown from $84.6 million, through continued acquisition and increase in value in terms of assets managed. Moreover, the company will benefit on the back of continuing dry conditions; and due to lack of sufficient in-flows to the system, the Australian water market continues to witness high price rise, and a steady increase in the value of water entitlements. D2O sees an opportunity over the next 24 to 36 months to continue to grow the portfolio, and to develop long-term relationships with irrigators, in order to best supply the water solutions, they need for the produce. This has helped the group make EPS projections to be over mid-single digit in terms of cents per share.
 
Meanwhile, D2O stock has fallen 2.5% in three months as on November 28, 2018, and is trading at a high P/E of 39.79x. The stock is trading at the price of level $1.30, and has support at $1.28 and resistance at $1.42.The stock has started paying dividends and the payout looks high but may correct a bit. Further, it is a bit early to look through D2O as a dividend investment and risks on seasonal changes that may impact water prices do prevail. Based on the narrow window of price movement and latest volatile trends, we have a wait and watch view on the stock at the current price of $ 1.30.
 

Rural Funds Group

Update on JBS transaction: Real estate property trust,Rural Funds Group (ASX: RFF) operates in the Agricultural space and is capable of leveraging Australia’s sector and climatic diversification. Through growth in adjusted funds from operations and single digit growth in distributions per annum (4%), RFF maintains a stable income and capital growth.The group has significant top lessees that will continue to contribute to FY19 revenue. It has also maintained its earnings growth rate within the past five-year average growth range.
 
RFF has lately received FIRB approval to acquire the five feedlots from JBS. Under this, three feedlots were expected to settle by the end of the October. Rest two feedlots are still subject to getting subdivision approvals and are expected to settle by the end of December. The unit approval of 99.8% was received for the Guarantee. RFF continues to look for opportunities for potential investments across multiple sectors within the portfolio. Since the improvement in liquidity from July 2018, the company has contracted three properties in cattle and cotton sectors for the acquisition. Additionally, for FY 19, RFF expects AFFO per unit to be of 13.2 cents, which is a 4% increase on FY18 and it expects FY 19 distributions per unit to be of 10.43 cents, which is a 4% increase on FY18. Therefore, RFF stock has risen about 5% in three months as on November 28, 2018 and is trading at a reasonable P/E of 15.78x. The stock is trading at the price of level $2.24, and has support at $2.14 and resistance at $2.35. Based on the foregoing and a decent dividend yield of about 4.5%, we give a “Hold” recommendation on the stock at the current price of $ 2.24.

DPU, AFFO Growth (Source: Company Reports)
 

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