Rural Funds Group: Water & cattle assets sold: upgrade to Buy

Research evidence excerpt

Rural Funds Group: Water & cattle assets sold: upgrade to Buy

f'cast period, contributing an additional ~2% AFFOps accretion vs. our prior forecasts. 06/27E 0.12 0.13 6 0.12

Elsewhere, UBSe farming income of ~$3m in each of FY27/28. While macadamia prices 06/28E 0.13 0.14 7 0.13

have recovered from post-COVID lows (now $4.35), further improvement will be

required to meaningfully swing income from operating assets, noting pricing of $4.45 Cody Shield, CFA

Analystwas assumed by RFF for FY26.

cody.shield@ubs.com

+61-2-9324 2903

Screening cheap for the growth on offer with a healthier balance sheet

Solomon Zhang, CFA

Investors have been cautious on RFF's elevated gearing/LVR for some time and this

Analyst

concern is now addressed, removing a key overhang for the stock. We lift our FY27-31e solomon.zhang@ubs.com

AFFOps +6%. RFF is trading at a ~17x NTM P/AFFO, broadly in line with history, and +61-2-9324 2007

offering a 3y AFFOps CAGR of ~7% with the period of heavy capex now passed.

Miriam Pritchard

Translated to a PEG ratio, RFF is ~29% below its long-run average. In our view, this offers

a compelling entry point for an alternative real estate exposure which is still -24% < NAV miriam.pritchard@ubs.com

offering robust growth and a ~6% DPU yield. Upgrade to Buy. +61-2-9324 2270

Valuation: $2.32 PT (+11%). Upgrade from Neutral to Buy.

Our PT (DCF/NAV avg.) increases +11% to $2.32 (from $2.10) reflecting a 5.9% yield on

rental income and 9c for the PV of income from the JBS guarantee. DCF $2.15/NAV

$2.50. Drivers of PT changes incl. lower Ke (reduced gearing), earnings changes and a

lower yield for cattle assets in our NAV.

Highlights (A$m) 06/23 06/24 06/25 06/26E 06/27E 06/28E 06/29E 06/30E

Net rental income 79 87 95 96 97 99 101 103

EBITDA (UBS) 59 63 73 81 86 87 88 90