Rural Funds Group: The Case for a Potential RFF Re-Rating
Written by
Varun Ratra
RFF’s recent asset sales at premiums to book value highlight the strength of its underlying portfolio. With the stock still trading at a discount to NAV, the valuation gap offers potential upside.
Rural Funds Group (ASX: RFF)
On 1 September 2026, announced its quarterly interim distribution of 2.93 cents per share, exactly the same as its each quarter payout, leading to an attractive dividend yield of 6.03%.
Financial Position:
The company announced its June ending full year results in August reporting total earnings of $124.1 million, up by 103.8 million. Net property income also went up by 5.7% to %100.5 million, which is driven by additional rental income on capex and indexation. Adjusted funds from operation (AFFO) remained in line with the forecast of 11.7 cents per unit. Adjusted net asset value went up by 4.5% to $3.22 per unit, which is primarily due to property revaluation and mark-to-market of interest rate swap.
The company has a strong portfolio with its pro forma adjusted total assets of 1.79 billion. It has also completed a divestment of its assets worth $314.9 million during the year, which includes six properties and water entitlement, and the divestment was done around 18% premium to the book values, highlighting a smart decision. It has also increased its WALE from 13.2 years as of 31st December 2025 to 14.8 years, reflecting more predictable rental income and has also maintained its pro forma gearing at 31.8%, which is within the 30 to 35% target range set by the company. Overall it reflects a strong financial year for the company.
Why does RFF seem to be undervalued?
Rural Funds Group has a diversified portfolio with around 57 properties across five agricultural sectors and multiple climatic zones. It has a market cap of around $758.01 million and has strong operational performance with multiple project developments. The company has recently completed developments of two of its projects, with one project still in development pipeline. Its ROE revolves around 10.55%, which provides stable returns to the investor.
The company’s FY27 focus revolves around the strategic divestment of some of its assets, along with acquisition of some earning accretive properties, leading to an improved balance sheet of the company. The company has given guidance of capex of around 46.7 million during FY27, which is fully funded through a pro forma bank debt facility headroom of 300.8 million. In terms of relative valuation, the company’s trailing P/B ratio of 0.67 remains below the industry median of 0.7, which makes it an attractive investment opportunity for investors looking for stable income and long-term growth.
(Source: Company Announcements)
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