RFF - Rural Funds Group

another selection for the full year competition is RFF

RFF is a REIT structure ( and therefore pays no franking credits )

RFF pay three monthly dividends , and while there is no franking you do have some hope of capital gains along the way

this one buys and leases out various types of farmland to proven operators

REITs in general are getting plenty of bad press and farming is always a tough gig ( too little rain , too much rain , rain at the wrong time , banks will lend at exorbitant rates , or banks won't lend at all , etc etc etc )

my av. SP is $1.72

a REIT without being held hostage to the construction boom/bust cycle , retail shopping demand , or office space demand

divs4ever said:

another selection for the full year competition is RFF

RFF is a REIT structure ( and therefore pays no franking credits )

RFF pay three monthly dividends , and while there is no franking you do have some hope of capital gains along the way

this one buys and leases out various types of farmland to proven operators

REITs in general are getting plenty of bad press and farming is always a tough gig ( too little rain , too much rain , rain at the wrong time , banks will lend at exorbitant rates , or banks won't lend at all , etc etc etc )

my av. SP is $1.72

a REIT without being held hostage to the construction boom/bust cycle , retail shopping demand , or office space demand

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I had great hope...but bad outcomes when I had to sell to free cash..
Not a great history yet on macro economics....

qldfrog said:

I had great hope...but bad outcomes when I had to sell to free cash..
Not a great history yet on macro economics....

Click to expand...

am doing OK on these ( not fantastic ) but then half the other REITs in other sectors are facing big challenges as well

i try to use REITs as 'bond proxies ' ( aka fairly steady income )

Rural Funds Group (RFF)

Rural Funds Group (RFF) is a listed agricultural REIT with a portfolio focused on almond orchards, vineyards, cattle, cotton and macadamias. RFF trades at its largest discount to its market NAV ($2.78pu) in its listed history at ~39%.
While we are in general seeing a large ~35% discount in ASX listed farming and water assets to market NAV, the discount that RFF is trading appears excessive.
In effect we are seeing the market imply a depression type correction in agricultural asset values and with this in mind we are seeing a value opportunity in RFF.
While the timing of that value discount closing is difficult to call, investors are likely to be rewarded with a ~7% yield to hold the position until such a time as the asset class re-rates.
Interest rates peaking and divestment of non-core assets proving up NAV and releasing capital, may well be that catalyst.

Buy, Price Target $2.40

by
Jonathan Snape
Industrials Analyst

i hold RFF ( where i partially DRP )

very hard to get good exposure to Australian agriculture

I sometimes wonder at the planning in these corporate farms. They are planting up 2500 hectares of macadamias at Rookwood Farms in an already oversupplied market when prices have nosedived. If you head north and see the numbers of young trees planted in the last few years, there is already a big increase in production in the pipeline.

rcm617 said:

I sometimes wonder at the planning in these corporate farms. They are planting up 2500 hectares of macadamias at Rookwood Farms in an already oversupplied market when prices have nosedived. If you head north and see the numbers of young trees planted in the last few years, there is already a big increase in production in the pipeline.

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yes , one of the dangers in agriculture

one is trying to predict future demand ( a l-o-n-g way out ) another is trying to predict future supply , the weather can make that a real dice game

and of course there is the cost factor as there are fewer family run farms and growing numbers of corporate ones

earlier in my investing adventure i kept a very small agriculture exposure because of those risks , but the mining cycle will have to consolidate soon enough and some other sectors of investing have their own issues ( look at the mess in the financial sector as an example )

unless the macadamia industry can trick the climate change folks into calling macadamia trees 'carbon sinks ' ( and getting subsidies to grow them ) i don't see how they will resist the boom/bust cycle , but maybe the Davos crowd see macadamias as an essential food and save them as needed

rcm617 said:

I sometimes wonder at the planning in these corporate farms. They are planting up 2500 hectares of macadamias at Rookwood Farms in an already oversupplied market when prices have nosedived. If you head north and see the numbers of young trees planted in the last few years, there is already a big increase in production in the pipeline.

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A large orchardist here in the Goulburn Valley told me years ago that a good operator will only ever have half of his oorchard in production at any one time.
You have one quarter of mature trees producing fruit, another quarter that is about to start producing, a third quarter of mature trees that are getting prepared to be ripped out, and a final quarter that is fallow awaiting planting out.
Because of the vagaries of the market where fruit varieties can in and out of fashion very quickly, you have to be prepared to just rip out plots of perfectly good producing trees.
Ag is a mugs game.
Mick

If you look at the past record of listed companies in the ag space eg PAG, BUG, AAC, CGC, etc, none have been particularly successful and then you have all the Managed Investment Scheme companies that went spectacularly broke. Probably best left in the hands of family farms.

rcm617 said:

If you look at the past record of listed companies in the ag space eg PAG, BUG, AAC, CGC, etc, none have been particularly successful and then you have all the Managed Investment Scheme companies that went spectacularly broke. Probably best left in the hands of family farms.

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while i would call neither SHV , GNC nor SGL(LV ) all that 'successful ' ( i hold all 3 ) i see them as more resilient in a general downturn

however D2O and RFF are my preferred play in the agri-sector now that my Ruralco(RHL ) was taken-over ( i hold both )

i was expecting mining to be consolidating by now , so it looks like i am ahead of the curve ( or way out of sync )

very hard when investing in agri. to get rewarded for the extra risks you take

Being a retired farmer, I probably have a bit of a jaundiced view of the sector, so don't take too much notice of me. I think agriculture nowadays is efficient enough to supply the developed world with all the food it needs and oversupply is always close by to eliminate quick profits.

rcm617 said:

Being a retired farmer, I probably have a bit of a jaundiced view of the sector, so don't take too much notice of me. I think agriculture nowadays is efficient enough to supply the developed world with all the food it needs and oversupply is always close by to eliminate quick profits.

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am retired now but have just moved to a farm that was let run down ( previous owner was over 90 and still doing a bit )

the main aim here is to be partially self-sufficient first , the new chooks are doing their part , the cattle maybe later since they are beef , but the grass needed eating down to reduce the fire risk , and some herbs in the garden and some fruit trees ( and a lot less crime than in the 'burbs where i shifted from ) , solar to help reduce power bills , bore and tank water

will worry about profits once i learn a bit more about farming

however most of society is in a big rush today , and farming ( especially if leveraged ) will be no different

i notice RFF is hovering just above $2 this morning

while not compelling value ( my av. SP is under $1.72 )

maybe sub $2 will be attractive to some novices ( although no franking credits since it is a REIT in structure )

a quirky cross of REIT but exposure to the farming sector ( have to make you less nervous than office space in the current economic climate )

i hold RFF ( partially DRPed )

@debtfree

Subject: Independent valuation update

8 February 2024
Rural Funds Management Limited (RFM), the responsible entity of Rural Funds Group (RFF), provides an update on independent valuations arranged for the six months ended 31 December 2023 (1H24).
The assets revalued total $438m, or 24% of 30 June 2023 adjusted total assets.
The unaudited impact of the valuations (net of capex) is an increase of approximately $80m, or $0.21 on a per unit basis.1,2,3

Asset Number of assets revalued Prior value ($m)1 Value ($m)2 Net valuation uplift ($m)3
Cattle properties 4 $174.4 $223.1 $48.5
Macadamia orchards 18 $194.3 $240.2 $27.9
Other4 13 $69.7 $73.7 $3.7

Total 35 $438.5 $537.0 $80.1

Further details will be provided as part of the release of the 1H24 financial results on Friday, 23 February 2024, with a corresponding webinar at 11:00AM AEDT.

To register for the webinar please use the following link: https://webcast.openbriefing.com/rff-hyr-2024/

Notes:
1. Based on June 2023 adjusted values. Adjusted values include water entitlements held at fair value.
2. Valuations received during 1H24, subject to audit. Values inclusive of $18.4m in capex incurred during the period prior to valuation. Excludes capex incurred after valuation date prior to 31 December 2023.
3. Net of capex.
4. Includes Maryborough sugar properties and Murrumbidgee water entitlements.

Rural Funds Group (ASX: RFF) Rural Funds Group is an agricultural Real Estate Investment Trust (REIT) listed on the ASX under the code RFF.
RFF owns a diversified portfolio of Australian agricultural assets which are leased predominantly to corporate agricultural operators.
RFF targets distribution growth of 4% per annum by owning and improving farms that are leased to good counterparties.
RFF is a stapled security, incorporating Rural Funds Trust (ARSN 112 951 578) and RF Active (ARSN 168 740 805).

i hold RFF

hmmm looks like the almond orchards ( leased to SHV ) weren't valued this time

but it gives folks a better idea how they spread their risk

1H24 financial results summary

23 February 2024

Rural Funds Management Limited (RFM) today released the Rural Funds Group (ASX: RFF)
Financial Statements for the half-year ended 31 December 2023 (1H24) as summarised below.
Financial results summary
• Property revenue increased 12.4%, or $4.6 million (m), to $42.0m primarily due to rental income earned on macadamia developments. • Earnings increased 19.5%, or $11.6m, to $71.0m driven by property revenue and asset revaluations.1
• Adjusted net asset value (NAV) increased 4.8%, or $0.14 per unit, to $3.07 per unit benefiting from independently revalued assets, primarily in the cattle and macadamia sectors.
o Asset revaluations contributed $72.2m to adjusted NAV.
• Adjusted funds from operations (AFFO) 4.0 cpu. AFFO forecast to be higher in the second half (2H24) due to:
o rent payable on capex deployed for second tranche of macadamia developments2
o timing of the receipt of operating income from owner occupied properties.
• FY24 forecast AFFO 11.2 cpu and distributions of 11.73 cpu.

Capital management summary
• Bank debt facility extension and limit increase completed during period demonstrating ongoing support from financiers.
• Sufficient facility headroom ($171.6m) for committed capex in FY24 and FY25 ($165.7m), primarily for the continuation of accretive macadamia development pipeline.
Portfolio and strategy update
RFM is currently in the documentation phase of a proposed transaction for two cropping properties (Mayneland and Baamba Plains) with a combined value of $73.6m.
The proposed transaction involves a 50% sale of the properties to an operator and the operator will lease 100% of the properties.
If a binding agreement is reached, the transaction is expected to settle 2H24.3
1 Based on Total Comprehensive Income.
2 Commencement of second tranche of macadamia lease (1,800 ha) subject to water allocations being issued following completion of the Rookwood Weir.
Allocations expected to be issued 2H24.
Second tranche rent earned on the value of land, water and capex as it is deployed, payable on lease commencement.
3 The parties have not entered into any binding agreements and there is a chance that the negotiations will not be successfully concluded.
Page 2 of 2
This proposed cropping property transaction is in line with RFM’s previously stated objectives to reduce operating exposure, debt, and improve earnings.
RFM are pursuing a macadamia transaction with similar characteristics to the proposed cropping transaction.
The development of 3,000 ha of macadamia orchards are forecast to be substantially complete by calendar year end.
The developments are expected to contribute significantly to property revenue growth, with the forecast rentable capital base increasing from $173m to $298m by FY25e.
Portfolio highlights
• Provides exposure to a defensive property sector (food production): with inflationary hedge characteristics.
• Quarterly distributions: March, June, September and December (record dates).
• Long WALE: 12.8 years with leases predominantly triple-net structure.
• Diversification: 67 properties across five agricultural sectors and multiple climatic zones.
• Quality lessees: c. 80% of FY24f income from corporate and listed lessees.
• Structural rental growth: Mix of lease indexation mechanisms and market rent reviews.
• Development and leasing pipeline: Productivity improvements and conversion to higher and better use development opportunities.

Results webinar A financial results webinar will be held today at 11:00AM AEDT.
Those wishing to attend the webinar will need to register via: https://webcast.openbriefing.com/rff-hyr-2024/.
A recording of the webinar will be made available on the RFM website.

i hold RFF ( partially DRPed )

hopefully this will push me into the green for the yearly comp. and have 4 green for the end of February

@debtfree

this goes ex-div. on Wednesday so my monthly tally in the yearly com. is liable to get a modest hit here

my average buying price is sub $1.72 so i am not exactly hurting here

i hold RFF ( partially DRPed )

am not sure in recent rains in South East Queensland will help the asset base ( they dabble in water rights as well )

Morningstar predicts a flat rate of divs. on a slowly rising earnings rate ( over the next two years )

but gee it is in the agriculture sector , is that a safer place to invest than other places of the REITs in Australia ?

@debtfree

not much happening here ,

but i note major customer( lessee ) SHV is having a rather tumultuous time , enough to bring the SHV down to levels i am considering topping up )

i hold RFF and SHV

not a huge asset weighting , but also holds some water-entitlements

@debtfree

Public and private markets look disconnected

The disconnect between private market values and the listed values for rural property assets continued to be material. In recent weeks we have seen the release of Elders rural market update, Rural Bank’s land values report and RFF take the Mutton Hole and Oakland Park properties to market, the latter could be a catalyst.

Key Points:

RFF Asset sales: At the 1H24 result RFF announced that was in the documentation phase of the disposal of a 50% interest in the Mayneland and Baamba Plains, which would largely confirm the carrying value of the assets (BS value $66m/mkt value $74m).

Subsequently, RFF has also put the Mutton Park and Oakland properties on the market, with press articles citing expectations of ~$50m (inclusive of cattle inventories), a level consistent with current carrying values.

If achieved the transactions would free $80-90m in capital, while confirming market asset valuations.

4Q23 Rural market values:

Elders recent review, highlighted median farmland values continued to improve through 4QCY23, up +12% YOY and +18% QOQ.

Rural Bank’s CY23 review demonstrated gains in median values up +6% YOY, following a +27% YOY gain in CY22 and implying a 10yr CAGR of +12% pa.

Macadamia price lifting: Marquese macadamia’s 2024 macadamia price is $3.20/Kg, well above the 2023 price of $1.70//Kg and above the 2022 price of $2.90/Kg.
Our monitoring of port price indicators also suggests macadamia values at a 2yr high.

Higher macadamia prices would reduce farming losses, while improving the prospects of securing either a counterparty or sale of unleased orchards.

Investment view: Buy rating unchanged Our Buy rating and $2.40ps target price is unchanged.

RFF continues to trade at a material 26% discount to 1H24 reported NAV and 35% discount to 1H24 market NAV, with the disconnect between private and public asset values at historically high levels.

In the near term disposing of assets at or around market value is a positive catalyst for NAV confirmation and debt reduction, while recovering commodity values benefits farm related earnings and counterparty profitability.

part of a much larger Bell Potter analysis

i hold RFF

now RFF is starting to slide down to where i might find it attractive to top up ( but not yet )

i am also watching SHV ( i hold ) which has major leases of RFF properties ( SHV benefits from a weaker $A )

@debtfree


Subject: Lease and partial sale of cropping properties

20 June 2024

Rural Funds Management Limited (RFM), as responsible entity of Rural Funds Group (RFF), advises it has entered into an agreement for the lease of two cropping properties, Mayneland and Baamba Plains, for10 years.

The lessee is a company managed by The Rohatyn Group (TRG) on behalf of a joint venture between TRG and a global institutional investor.

The transaction will also include the sale of a 50% interest in the properties.

The lease and partial sale provide several benefits to RFF, including a reduction in exposure to operating earnings, confirmation of asset values and capital from sale proceeds for debt reduction.

Additional details include:
 Lease rate in-line with existing cropping leases.
 Triple-net lease terms with an option to extend for an additional 10-years.
 CPI annual indexation (within 1.5% to 2.5% range) plus profit share mechanism.
 Sale proceeds of $39.0m, subject to adjustments relating to water licence certifications.
 Farm management services to be provided to the lessee by a wholly owned subsidiary of RFM.
 Lessee termination rights include RFM ceasing to be responsible entity of RFF, a change of control in the farm manager without lessee consent and performance metrics calculated over rolling four year periods.
Settlement is expected early FY25, once various conditions precedent have been satisfied, including Foreign Investment Review Board approval.

i hold RFF

@debtfree

haven't spotted much news on this recently

am currently up 19% (on my average buying price )

this sits in my bottom drawer ( only partially DRPed)

but gives me exposure to the agricultural sector with fewer worries about trade tariffs and the smaller dramas that can happen to farmers , usually quite boring but also causes less sleepless nights than some

i hold RFF

@debtfree

FY24 financial results summary

23 August 2024

Rural Funds Management Limited (RFM) today released the Rural Funds Group (ASX: RFF, the Group) Financial Statements for the year ended 30 June 2024 (FY24) as summarised below.

Financial highlights1
• Property revenue increased 8.0%, or $6.5m, to $88.4m, primarily due to additional rental income earned on macadamia developments.
• Adjusted net asset value (NAV) increased 7.2%, or $0.21, to $3.14 per unit, benefiting from independent assets valuations conducted on 69% of assets.
• Adjusted funds from operations (AFFO) increased 2.8% to 11.0 cents per unit (cpu).
• Earnings of 30.3 cents per unit, or $117.2m, largely driven by property revenue and independent property valuations.2
• Distributions per unit (DPU) of 11.73 in line with forecasts.
• FY25 forecast AFFO growth of 3.6%, to 11.4 cpu, and forecast distributions of 11.73 cpu.

Capital management
• Increased facility limit providing funding for FY25 capex primarily for the continuation of macadamia developments.
• Additional $80.0m interest rate hedges entered providing weighted average hedge duration of 4.2 years.
• Interest rate hedging and fixed debt facilities total 69.8% of drawn debt.3
Portfolio valuations
During the year independent valuations were arranged for $1.2b of assets, representing 69% of the portfolio, resulting in a net valuation uplift of $97.3m.4
Portfolio and strategy update
The 3,000 ha of macadamia developments which commenced 2021 are on track to be materially complete end of 2024, despite some delays due to above average rainfall.
The 40-year lease associated with these assets is forecast to generate 18% of FY25 total revenue and increase in future years as additional capex is deployed.1
Comparisons are to FY23, unless otherwise stated,2
Based on Total Comprehensive Income.3
Current hedges and total fixed debt facility divided by total facilities.4
Percentage based on 30 June 2023 adjusted values (excluding capex since 30 June 2023 of $0.1b).
During the period, the second tranche of the macadamia development lease commenced (representing $133.9m of assets) following issuance of Rookwood Weir water entitlements.
In June 2024, the lease and 50% sale of Mayneland and Baamba Plains cropping properties ($75.7m)was announced.5
Other assets within the Group continue to be developed.
Management will pursue leases and partial sales of additional assets, seeking to improve earnings, operating exposure and gearing.
Forecasts
FY25 forecast AFFO of 11.4 cpu, representing 3.6% increase to FY24 actual.
Forecast distributions of 11.73 cpu consistent with FY24.
Portfolio highlights
• Provides exposure to a defensive property sector (food production): with inflationary hedge characteristics.
• Quarterly distributions: March, June, September and December.
• Long WALE: 13.5 years with leases predominantly triple-net structure.
• Diversification: 67 properties across five agricultural sectors and multiple climatic zones.
• Quality lessees: approx. 80% of FY25f income from corporate and institutional lessees.
• Structural rental growth: Mix of lease indexation mechanisms and market rent reviews.
• Development and leasing pipeline: Productivity improvements and conversion to higher and better use development opportunities.
Results webinar
A financial results webinar will be held today at 11:00AM AEST. Those wishing to attend the webinarwill need to register via the link below:https://webcast.openbriefing.com/rff-fyr-2024/

A recording of the webinar will be made available on the RFM website.

i hold RFF ( and partially DRP )