If you're looking to invest in cheap ASX 300 stocks, then look no further than Rural Funds Group (ASX: RFF).
That's the view of analysts at Bell Potter, which believe the agribusiness company's shares are significantly undervalued right now.
What is this ASX 300 stock?
Rural Funds owns a diversified portfolio of Australian agricultural assets. Its strategy is to generate capital growth and income from developing and leasing agricultural assets.
The company seeks to own a diversified portfolio of agricultural assets that are predominantly leased to corporate and institutional lessees. It notes that historically its assets have been acquired in sectors where Australia has a comparative advantage and operational experience.
After which, income growth is achieved through lease indexation, productivity improvements, and the conversion of assets to higher and better use.
What is the broker saying?
As mentioned at the top, Bell Potter believes that the ASX 300 stock is significantly undervalued. It commented:
We continue to see the discount to market NAV of RFF's share price as excessive, especially considering the ongoing growth in rural land values through 1HCY24.
The 40% discount to market NAV is the widest in RFF's listed history and compares to the historical 8% premium that RFF has averaged since listing. We suspect to a degree the discount reflects unleased properties (~15% of the portfolio) where losses were generated in FY24, however, commodity prices in general are firmer than a year ago.
In light of the above, this morning the broker reaffirmed its buy rating and $2.50 price target on Rural Funds' shares. Based on its current share price of $1.89, this implies potential upside of 32% for investors over the next 12 months.
But the returns won't stop there. This ASX 300 stock is traditionally a very generous dividend payer and this is expected to continue in the future.
Bell Potter is forecasting dividends per share of 11.7 cents in FY 2025 and then 12.2 cents in FY 2026. This will mean dividend yields of 6.2% and 6.45%, respectively. The broker concludes:
Our Buy rating and $2.50pu target price is unchanged. RFF trading at a -40% discount to market NAV and -32% discount to published FY24 NAV, representing some of the widest discounts in RFF's listed history and compared to a historical 8% premium to market NAV and 21% premium to NAV. The discount to NAV appears excessive when we consider the material improvement in counterparty profitability indicators in recent months (cattle, almond and macadamia prices) and that Australian farm assets have in general largely held values through CY24 (and up in most core RFF regions).
