Bell Potter upgrades Rural Funds Group following better than expected interim result

By Trevor Hoey. Published at Feb 22, 2017, in Features

Bell Potter has made minor upgrades to Rural Funds Group’s (RFF) adjusted funds from operations (AFFO) over the next three years, but the broker has substantially increased its share price target from $1.72 to $1.91.

This comes after the group’s interim AFFO came in at $12.6 million, exceeding Bell Potter’s AFFO expectations by 16%.

Rural Funds Group owns a diversified portfolio of Australian agricultural assets. As highlighted by Rural Funds Management’s (the Responsible Entity and Manager for the Rural Funds Group) Managing Director, David Bryant, it was two particular commodities that shone in the first half.

Bryant said, “The results were primarily a result of acquisitions, ongoing almond orchard developments and lease indexation”.

A significant factor was the acquisitions of cattle and cotton properties in Queensland, and with Rural Funds Management having expertise in relation to these commodities the group intends to use its funds and farm management knowledge to drive returns for investors.

RFF declared a distribution of 4.82 cents per unit, representing an 8% increase on the previous corresponding period. Management reaffirmed full-year distribution guidance of 9.64 cents per unit.

RFF is also forecasting AFFO of 12.42 cents per unit, which would represent a 34% increase on the previous corresponding period.

It should be noted that broker projections and price targets are only estimates and may not be met. Also, historical data in terms of earnings performance and/or share trading patterns should not be used as the basis for an investment as they may or may not be replicated. Those considering this stock should seek independent financial advice.

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