UBS assesses Rural Funds has missed the A-REIT rally as it is up just 10% versus the sector’s gains of 22%. The company’s revaluation of Rewan and its gulf properties has affirmed the cattle strategy and provides the broker with confidence.
UBS suspects investors may be overlooking the growth and yield of Rural Funds because management sticks to a conservative distribution policy. However, in a low bond yield environment, the stock offers a secure yield play as a small cap, without the structural challenges of smaller retail A-REITs.
Buy rating maintained. Target is raised to $2.65 from $2.42.
Sector: Real Estate.
Target price is $2.65.Current Price is $2.35. Difference: $0.30 – (brackets indicate current price is over target). If RFF meets the UBS target it will return approximately 11% (excluding dividends, fees and charges – negative figures indicate an expected loss).