Rural Funds share price rises on FY20 results

Rural Funds share price has increased after delivering solid FY20 results driven by its expansion and independent valuations of assets.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Rural Funds Group (ASX: RFF) share price is trading 2.27% higher following the release of its FY20 results.

The group is a real estate investment trust (REIT) that owns a diversified portfolio of Australian agricultural assets. 

What were the FY20 results?

The group has 61 properties across five agricultural sectors including almonds, cattle, cropping, vineyards and macadamias. The weighted average lease expiry (WALE) is 10.9 years. 78% of revenue comes from corporate or listed tenants.

Property revenue increased 8% to $72 million and earnings (total comprehensive income) per unit lifted 82% to 18.4 cents. This was an increase of 80% on the prior corresponding period (pcp). 

Adjusted net asset value (NAV) per unit increased 8% to $1.94 per unit.

Adjusted funds from operations (AFFO) per unit of 13.5 cents was in line with forecast.

Distributions per unit (DPU) of 10.85 cents was also in line with forecast and a 4% increase on the pcp. As a result, it's in line with the 4% growth target for distributions.

Rural Funds Group gearing is at the lower end of the 30-35% target range. 

Independent valuations for almond orchards, macadamia orchards, cattle properties and water entitlements have helped boost the group's earnings.

Outlook for Rural Funds share price

Rural Funds Group has a commitment to buy central Queensland properties that are suitable to the conversion of 5,000 macadamia orchards. As a result, its expected earnings growth will continue in future years.

To fund the acquisitions, the group is divesting poultry and almond assets. However, the divestment is conditional on completion of due diligence and Foreign Investment Review Board (FIRB) approval.

In addition, while planting of macadamia trees on new properties is expected to start late FY21, lessee discussions are ongoing. The group has advised the developments are expected to take several years.

Furthermore, forecast distributions for FY21 of 11.28 cents and within the 4% growth target has been reaffirmed as a result of the reconfiguration of the portfolio.

AFFO is expected to decrease in FY21 as funds are reinvested to macadamia orchard developments. The company advised they would produce higher income when leased.  As a result, AFFO is expected to be 11.7 cents per unit.

Pleasingly, Rural Funds confirmed no lessees had required rent relief.

Currently, the Rural Funds share price is trading at $2.25, a 2.27% increase. The group is just shy of its 52-week high of $2.27.

Motley Fool contributor Matthew Donald has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Three miners stand together at a mine site studying documents with equipment in the background
Materials Shares

BHP share price on watch after Anglo American takeover update

BHP is seeking an extension to its deadline to get a deal over the line.

Read more »

A woman's hand draws a stylised 'Top Ten' on a projected surface.
Share Gainers

Here are the top 10 ASX 200 shares today

It was carnage on the ASX this hump day.

Read more »

Two excited woman pointing out a bargain opportunity on a laptop.
Cheap Shares

How I'd try to turn an empty portfolio into $300k by buying cheap ASX shares, starting now

If I was looking for cheap ASX shares today, here's what I'd buy.

Read more »

Young couple having pizza on lunch break at workplace.
Broker Notes

Domino's share price is set to soar 22%, say top brokers

Serving up another positive view for the pizza giant.

Read more »

Investor sitting in front of multiple screens watching share prices
Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys this week.

Read more »

Middle age caucasian man smiling confident drinking coffee at home.
Share Gainers

Why Alligator Energy, Data#3, Fisher & Paykel, and IPD shares are storming higher

These shares are avoiding the market selloff on Wednesday. But why?

Read more »

A young male investor wearing a white business shirt screams in frustration with his hands grasping his hair after ASX 200 shares fell rapidly today and appear to be heading into a stock market crash
Share Fallers

Why Cettire, Neuren, Peter Warren, and Qantas shares are falling today

These shares are having a tough time on hump day. But why?

Read more »

A goldfish jumps out of a crowded fishbowl into another empty bowl, indicating an ASX market leader with a strong share price
Healthcare Shares

Up 20% in 2024, why this ASX 200 healthcare stock just hit a new 52-week high

This healthcare stock has been on fire over 2024.

Read more »