09-Feb-2020: I haven't looked at RFF for a little while, but they are looking reasonably interesting once again. The high-profile short selling attacks of last year have faded into the background somewhat, and RFF are just getting on with business, and business seems to be reasonably good:
17-Dec-2019: Investor Newsletter
They have now sold all of their poultry assets, and have already invested some of the proceeds into further cattle properties which they view as likely to provide a superior return on investment compared to poultry farms, particularly as much of their poultry infrastructure was aging and in need of significant capital investment (now somebody else's problem). RFF have other cattle property purchases in their sights also.
Their latest newsletter (link above) has another interesting article in it by their Managing Director, David Bryant (who continues to accumulate further RFF shares himself on-market):
Productivity: The key to improving the world food supply, by David Bryant, RFM Managing Director:
Meeting the challenge of feeding more people better food.
If you are 60 years old, or claim to be 40 and a Monty Python fan, these lyrics should ring a bell:
"Just remember that you’re standing on a planet that’s evolving
And revolving at 900 miles an hour.
It’s orbiting at 19 miles a second, so it’s reckoned,
The sun that is the source of all our power."
Eric Idle and John Du Prez, The Galaxy Song, Performed by Eric Idle in The Meaning of Life, 1983.
Idle’s reckoning of 19 miles per second, is correct, which means our planet is moving at 110,000 km/h so that it can complete its journey around the sun every 365.25 days. While all of this is going on, we will experience the four seasons, the growth and senescence of the plants that sustain us…. and get one year older.
During the 52 weeks and 6.15 hours that it will take us all to complete our next circumnavigation, an additional 82 million people will join us here as permanent residents on planet earth. As an added bonus, the average wealth of all of us here on this speeding orb, will have increased by around 3.5%, driven by the fairly constant economic growth that is the product of the collective striving and inventiveness of what will soon be eight billion people.
These two forces, population and economic growth, are having profound, but differing effects on the agricultural systems required to feed us. They also have enduring effects on the value of agricultural land and the increasing productivity we must derive from it. [continues...]
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I don't have the room to copy more into this straw, but I recommend you read the rest of it by clicking on the link above. It's a good read.
My next excerpt is from further into the newsletter, in the "Rural Funds Group Update" section:
Redeployment of capital
Funds realised from the poultry asset sale [A$72m] will be partially used to acquire three cattle properties in Western Australia ($22.6m including transaction costs), and to convert a recently acquired sugar cane property ($1.6m including transaction costs) to a macadamia orchard. These acquisitions are examples of the two types of investment strategy RFM is pursuing, being the development of assets for:
- productivity gains; or
- higher and better use.
Both strategies aim to lift the value and income earning potential of an asset. The productivity strategy achieves this objective by enhancing a property’s ability to produce a given commodity. Whereas, the higher and better use strategy aims to transform the use of an asset to a different, more profitable commodity. Put simply, increased productivity or production of a more valuable commodity enhances the ability of the operator to generate higher profits, leading to a higher valuation and enabling the landlord to charge more rent.
The first of these strategies will be applied to the WA properties by: developing land for new improved pastures and forage crops, improving existing grazing areas with fertiliser and other inputs, increasing irrigable area, and improving operational functionality with new fences and cattle handling infrastructure.
The WA properties will increase the number of natural resource predominant assets to 16, comprising 14 cattle properties and two cotton properties. [continues...]
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As I have mentioned before, I sold out of RFF on valuation grounds prior to last year's short-seller attacks, but RFF are now trading back at more reasonable levels - in a trading range between $1.80-$2.00 (and they're in the lower half of that range currently), rather than the $2.20-$2.40 range they were stuck in between January and July last year, and they continue to pay a rising stream of dividends. They are unfranked, due to their structure (stapled security/trust structure) but based on their current 2.71 cps paid quarterly (10.84 cps annually), that's a 5.8% dividend yield based on their last traded SP of $1.86). Quarterly paid dividends could also be a benefit to income-orientated investors.
Interesting !