Rural Funds Group is raising $100m to acquire water entitlements and reduce debt to provide balance sheet capacity to fund the first phase of macadamia conversion projects and $100m of cattle acquisitions with the backing of a lessee.
UBS believes the water entitlements acquisition and $100m of renewed debt capacity for cattle properties was a surprise but highlights the company’s increased appetite from corporate lessees for cattle properties.
While not reflected in guidance, the $100m of cattle property acquisition is expected to be 7% accretive.
FY22 guidance is down 14% versus FY20 reflecting the sale of high yielding low growth assets, acquisitions of low yielding macadamia conversion and de-gearing.
Adjusted for market value of water rights net tangible assets (NTA) is $2.05.
Neutral rating remains with the target price increasing to $2.65 from $2.43.
Sector: Real Estate.
Target price is $2.65.Current Price is $2.60. Difference: $0.05 – (brackets indicate current price is over target). If RFF meets the UBS target it will return approximately 2% (excluding dividends, fees and charges – negative figures indicate an expected loss).
