Rural Funds Group · ASX:RFF
Rural Funds — Investor Presentation (June 2017)
49 slides from Rural Funds's investor presentation, Jun 7, 2017
Slide 1: 2 for 9 accelerated pro rata non-renounceable entitlement offer to raise $78.6m
Managed by: For personal use only 2 for 9 accelerated pro rata non-renounceable entitlement offer to raise $78.6m Managed by: 7 June 2017 Not for release or distribution in the United States 1
Slide 2: Disclaimer
Managed by: Disclaimer This presentation has been prepared by Rural Funds Management Limited (ACN 077 492 838, AFSL 226 701) (“RFM”) as the responsible entity of Rural Funds For personal use only Group (“RFF”). RFF is a stapled security, incorporating Rural Funds Trust (ARSN 112 951 578) and RF Acti
Slide 3: Contents
Managed by: Contents For personal use only Section 1: Transaction summary and thesis Section 2: Portfolio and strategy Section 3: Key details and conclusion Appendices: A. Asset and sector details B. Pro forma financials C. Portfolio and manager overview D. Key risks and international offer restrict
Slide 4: Transaction summary and thesis
1 For personal use only Managed by: Transaction summary and thesis Mooral almond orchard, Hillston, NSW, December 2016
Slide 5: Equity Raising summary
Managed by: Equity Raising summary The Equity Raising reduces gearing and provides financial capacity to pursue future acquisitions For personal use only • Rural Funds Management (“RFM”) as responsible entity of Rural Funds Group (“RFF”) is undertaking a fully underwritten $78.6 million, 2 for 9 acc
Slide 6: Target investments
Managed by: Target investments RFM is undertaking due diligence on a substantial cattle transaction expected to complete FY18 For personal use only • RFM has continued to assess investment opportunities to support or enhance the DPU growth rate, and has identified: – Investment opportunities in the
Slide 7: Replicating successful acquisitions
Managed by: Replicating successful acquisitions RFF has acquired and improved three cattle properties with productivity capex For personal use only Productivity capex: completed FY17 • RFF acquired three properties in 2016 that were leased to Cattle JV (wholly owned subsidiary of RFM) Rewan • The op
Slide 8: Water points
Managed by: Water points Additional water points unlock previously under utilised pasture and improve carrying capacity For personal use only Case study: Water points and pasture Case study: Water points and pasture utilisation1 utilisation1 • Water point: pasture in the immediate vicinity of where
Slide 9: Pasture improvement
Managed by: Pasture improvement Pasture improvement can significantly increase productivity For personal use only Pasture improvement – legumes Pasture improvement • Legumes such as leucaena and stylo have higher nitrogen levels that drive protein production in cattle • Higher legume content in past
Slide 10: Portfolio and strategy
For personal use only Managed by: 2 Portfolio and strategy Baled raw cotton on Lynora Downs, ready for delivery to Queensland Cotton for ginning, Rolleston, Qld, March 2017
Slide 11: Portfolio snapshot
Managed by: Portfolio snapshot1 A growing and diversified portfolio with acquisitions in the cotton and water sectors having settled in December 2016 For personal use only Notes: 1. Shaded areas denote different climatic zones. Source: Bureau of Meteorology (BOM). Valuations as at 31 December 2016 i
Slide 12: Portfolio snapshot
Managed by: Portfolio snapshot The portfolio’s stable rental income is underpinned by a WALE of 13.3 years For personal use only Key portfolio metrics as at 31 December 2016 Indexation mechanisms2 Adjusted total assets $552m Adjusted net assets $311m Other Fixed indexation (2.5%) Number of propertie
Slide 13: Strategy
Managed by: Strategy Diligent management of existing assets and examination of acquisition opportunities For personal use only Key principles underpinning assessment of acquisition opportunities Acquire properties with income secured by long-term leases to • Maintain agricultural REIT 1 structure ✓
Slide 14: Acquisition track record and performance
Managed by: Acquisition track record and performance RFF has demonstrated a track record of growth and performance For personal use only RFF trading price vs. S&P/ASX 300 A-REIT Index & 10 yr Govt Bond rates1 November 2016 Queensland cotton property contracted for $26.5m July 2016 Cattle properties
Slide 15: Sector diversification strategy
Managed by: Sector diversification strategy Acquiring natural resource predominant assets complements existing infrastructure predominant assets and can drive NAV, AFFO and DPU growth over the medium to long term For personal use only Spectrum of investment opportunities1 Note: 1. The income and gro
Slide 16: Portfolio diversification
Managed by: Portfolio diversification RFM will continue to improve diversification and scale in line with strategy For personal use only Portfolio at listing Current portfolio FY15 revenue by lessee FY18f revenue by lessee 8% 4% 6% 22% RFM Poultry6% (NSX: RFP) 14% 8% 4% 22% Olam Orchards Australia 8
Slide 17: Portfolio delivering NAV per Unit growth
Managed by: Portfolio delivering NAV per Unit growth RFM aims to grow NAV through active management and productivity capex opportunities For personal use only • Portfolio delivering strong growth in Adjusted NAV Adjusted NAV per Unit vs RFF Unit price per Unit primarily through investment in capex a
Slide 18: Recent acquisitions
Managed by: Recent acquisitions Lynora Downs and Murrumbidgee HS water entitlement were settled in December 2016 For personal use only Cotton Lynora Downs: irrigation area and water storage development • Lynora Downs is a 4,880 ha cotton property located at the northern end of the Arcadia Valley in
Slide 19: Distribution growth
Managed by: Distribution growth RFF’s conservative payout ratio supports investment into natural resource predominant assets whilst maintaining the DPU growth target of 4% per annum For personal use only 15.0 DPU and AFFO retention 40% 22% • Forecast distribution growth of 4% per 20% annum is suppor
Slide 20: Key details and conclusion
3 For personal use only Managed by: Key details and conclusion Mooral almond orchard, Hillston, NSW, December 2016
Slide 21: Sources and uses of funds
Managed by: Sources and uses of funds The Equity Raising will initially be used to reduce gearing, following debt-funded acquisitions which settled in December 2016, and pursue future acquisitions For personal use only Sources and uses of funds • Proceeds from the Equity Raising will be Sources of f
Slide 22: Financial metrics
Managed by: Financial metrics Pro forma gearing is at the lower end of RFF’s target range and provides financial flexibility to fund future acquisitions in line with strategy For personal use only Key financial forecasts FY17f FY18f1 • AFFO per Unit and DPU forecast for FY17 remains consistent with
Slide 23: Equity Raising details
Managed by: Equity Raising details Key details For personal use only Structure • Fully underwritten 2 for 9 accelerated non-renounceable entitlement offer to raise $78.6 million • Fixed offer price of $1.70 per Unit, representing: − 4.0% discount to the last close $1.77 on 6 June 2017 Offer price −
Slide 24: Indicative timetable
Managed by: Indicative timetable For personal use only Equity Raising key dates Trading halt and Institutional Entitlement Offer bookbuild opens Wednesday, 7 June 2017 Institutional Entitlement Offer bookbuild closes Wednesday, 7 June 2017 Trading of Units recommences on an ex-entitlement basis Thur
Slide 25: Conclusion
Managed by: Conclusion This Equity Raising supports the continued growth of RFF’s portfolio of quality Australian agricultural assets For personal use only • RFF provides investors with exposure to stable rental income and capital growth from a portfolio of quality Australian agricultural assets ✓ P
Slide 26: Appendix A: Asset and sector overview
For personal use only Managed by: Appendix A Asset and sector overview Cattle on Rewan with the Carnarvon Gorge in background, Rolleston, Qld, September 2016
Slide 27: Australian cattle opportunity
Managed by: Australian cattle opportunity RFM is attracted to the cattle industry because of Australia’s comparative advantage, sector size and the opportunity for productivity gains For personal use only • The cattle sector is Australia’s largest agricultural Key terminology industry and Australia
Slide 28: Australian cotton industry
Managed by: Australian cotton industry Australia is a world leader in cotton production For personal use only Top four largest cotton exporters by volume (2016)1 • RFM is attracted to the cotton industry due to: – Australia’s comparative/competitive advantage 2,500 – Industry scale – Opportunity for
Slide 29: Productivity gains
Managed by: Productivity gains Advances in cotton biotechnology may provide development opportunities For personal use only Early plant cotton • Recent advances in cotton biotechnology have improved insect and weed control, providing numerous benefits including: – Increased yields – Reduced operatin
Slide 30: Lynora Downs
Managed by: Lynora Downs An opportunity to increase planted area through productivity capex For personal use only Existing cropping areas and water storage • In December 2016, RFF acquired Lynora Downs, a 4,880 ha cotton property located at the northern end of the Arcadia Valley in central Queenslan
Slide 31: Cotton JV
Managed by: Cotton JV Cotton JV is a joint venture between Queensland Cotton and RFM For personal use only • Lynora Downs is leased to Cotton JV, an entity 50% owned Queensland Cotton gins relative to Lynora Downs by RFM and 50% owned by Queensland Cotton Corporation Pty Ltd RFM • RFM is the manager
Slide 32: Water entitlements
Managed by: Water entitlements Water is a tradeable resource that can be applied to the highest value use For personal use only • Water entitlements are tradable assets Reliability of Murrumbidgee River water entitlements - Legally separated from land titles 100% - Trading activity disclosed on publ
Slide 33: Murrumbidgee River HS water entitlement
Managed by: Murrumbidgee River HS water entitlement A cornerstone resource for future horticultural development For personal use only Murray-Darling Basin and Murrumbidgee Catchment system1 • In December 2016, RFF acquired a 9,549 ML Murrumbidgee River HS water entitlement for $34.4 million • The Mu
Slide 34: Case study: Productivity shift – water
Managed by: Case study: Productivity shift – water Water entitlements increase the value of farm land by allowing the production of higher value commodities For personal use only • The 9,549 ML Murrumbidgee River HS water entitlement Water: Profitability per ML1 could cornerstone a 1,000 ha almond o
Slide 35: Appendix B: Pro forma financials
For personal use only Managed by: Appendix B Pro forma financials Geier Vineyard, Barossa Valley, SA, December 2016
Slide 36: Pro forma summarised adjusted balance sheet Dec 2016
Managed by: For personal use only Pro forma summarised adjusted balance sheet 31 Dec 2016 (ex. Lynora & Lynora Downs & Murrumbidgee Murrumbidgee Post 31 Dec 2016 Pre-transaction Equity Post-transaction ($m) acquisitions)1,2 acquisitions transactions3 pro forma Raising4 pro forma Cash 4.7 - 1.2 5.9 -
Slide 37: Debt
Managed by: Debt Debt metrics For personal use only • Syndicated debt facility comprising ANZ and Rabobank Pre-transaction Post-transaction 31 Dec 2016 pro forma implemented December 2016 incorporating a limit increase, tenor increase, and interest cost reduction Term debt facility limit1,2 $250.0m
Slide 38: Appendix C: Portfolio and manager overview
For personal use only Appendix C Managed by: Portfolio and manager overview 800 ML dam storing water for 600 ha of almond orchards on Tocabil, Hillston, NSW, December 2016
Slide 39: Existing key assets and counterparties
Managed by: Existing key assets and counterparties Counterparties include ASX listed agricultural companies and major food processors For personal use only Almond orchards Poultry farms Vineyards Cattle Assets Brief description: 1,814 ha mature almond orchards 154 sheds on 17 farms 666 ha mature vin
Slide 40: Existing key assets and leases further details
Managed by: Existing key assets and leases further details Property leases are largely triple net in nature For personal use only Almond orchards Poultry farms Vineyards Cattle Assets Description: 1,814 ha across two mature 154 sheds on 17 farms consisting Seven vineyards with 666 ha Three cattle pr
Slide 41: Development and other capex
Managed by: Development and other capex Development and other capex attracts additional lease income1 For personal use only Development and capex timetable Total 1H17 2H17 FY18 FY19 FY20 ($m) Almonds: Kerarbury Development 2,500 ha orchard2 $23.7 $28.1 $24.7 $13.7 $26.9 $117.1 Almonds: Tocabil Devel
Slide 42: Fund and farm manager
Managed by: Fund and farm manager RFM is a fund and farm manager with 20 years experience in Australian agriculture For personal use only Key information Board and management team contacts Established 1997 Total $608m Rural Funds Group: $552m Assets under management RFM Poultry: $8m Almond Funds 06-
Slide 43: Appendix D: Key risks and international offer restrictions
For personal use only Appendix D Managed by: Key risks and international offer restrictions Rewan, Rolleston, Qld, with the Carnarvon Gorge in background, August 2015
Slide 44: Key risks
Managed by: Key risks An investment in RFF, like any investment, involves risk. These risks can be broadly divided between specific risks, property market risks, and general risks relevant to RFF. For personal use only Whilst the assumptions used in generating the forward looking statements within t
Slide 45: Key risks – specific risks (continued)
Managed by: Key risks Specific risks (continued) For personal use only Risk Summary RFM’s business strategy for RFF is focused on building RFF’s portfolio and cash yield through the management, acquisition and development of agricultural assets. RFF’s future Business strategy growth is dependent on
Slide 46: Key risks – property market risks
Managed by: Key risks Property Market risks For personal use only Risk Summary RFF owns property including land, water and infrastructure for agricultural production Decline in asset value The value of these assets may rise or fall because of general economic conditions, local and global agricultura
Slide 47: Key risks – general risks
Managed by: Key risks General risks For personal use only Risk Summary The following economic conditions may impact the performance of RFF assets: ▪ national economic growth; ▪ industry change; Change in economic conditions ▪ interest rates; ▪ inflation; ▪ exchange rates; and ▪ changes to government
Slide 48: International Offer restrictions
Managed by: International Offer restrictions This presentation does not constitute an offer of new units ("New Units") of RFF in any jurisdiction in which it would be unlawful. In particular, this presentation may not be distributed to any person, and the New Units may not be offered or sold, in any
Slide 49: Corporate information
Managed by: Corporate information For personal use only Rural Funds Management Ltd ACN 077 492 838 AFSL 226701 Canberra Office Level 2, 2 King Street Deakin ACT 2600 Telephone: +61 2 6203 9700 Facsimile: +61 2 6281 5077 Website: ruralfunds.com.au For further information: For media enquiries: Investo
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