Australia Markets closed

Rural Funds share price flat as it mounts defence of asset valuations & dividend cover

Tom Richardson

The Rural Funds Group (ASX: RFF) share price is flat at $1.77 today even after the agricultural REIT launched a defence of its asset (farmland) valuation methods and calculation of the funds from operations it earns to pay dividends. 

Rural Funds has recently been the target of two short seller reports from Bonitas Research and Bucephalus that both accused it of inflating asset valuations to boost fees earned by its related management company RFM.

The short sellers also alleged the remuneration structure was conflicted or dubious being on the basis of asset valuations rather than net income for example. 

However, today RFF provided a granular rebuttal of the allegations including the below chart that shows how it reached the valuations of its assets as at June 30 2019. 

Source: Rural Funds presentation, October 9, 2019.

Bucephalus also alleged its research showed that Rural Funds’ free cash flows or adjusted funds from operations (AFFO) were lower than its total dividend payouts and in effect being subsided by debt and capital raisings in a Ponzi-scheme type operation. 

Rural Funds has repeatedly dismissed these allegations and provided the below chart showing how its AFFO more than covered dividend payments for the 12 months to June 30 2019. 

Source: Rural Funds presentation, October 9, 2019.

For now Rural Funds remains in a a public relations battle with two short sellers who are not backing down.

As can be seen from the middling stock price different investors are also drawing different conclusions over the business structure.

Other businesses facing down heavy short seller interest include NextDc Ltd (ASX: NXT) and Metcash Limited (ASX: MTS).

The post Rural Funds share price flat as it mounts defence of asset valuations & dividend cover appeared first on Motley Fool Australia.

Our Top 3 Blue Chip Shares for 2019 – NOW AVAILABLE!

You’re invited! For a limited time, The Motley Fool Australia is giving away an urgent new investment report detailing our 3 TOP BLUE CHIP SHARES to own in 2019.

So if you like trustworthy, stable, high-performing companies that pay fat fully franked dividends – we’ve got you covered!

Stock #1 is a beloved old Australian company turning its attention to high-margin businesses... and rapidly returning cash to shareholders with its hefty dividend...

While Stock #2 is an online powerhouse that’s rapidly gaining market share all around the globe... poised for years (or even decades) of tremendous growth...

Even better, Stock #3 offers a whopping 6.5% grossed-up dividend! Which beats the rates on term deposits right out of the water – and offers the potential for capital gains, too.

You can discover all three shares inside our new report right now. To scoop up your FREE copy, simply click the link below right now. But you will want to hurry – this free report is available for a LIMITED TIME ONLY!

Simply CLICK HERE FOR YOUR FREE REPORT!

More reading

Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

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.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019