Thursday, March 28, 2024

Rising land values deliver first profit

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New Zealand Rural Land Company (NZL) has reported its first net profit after tax of $15.115 million as at June 30, due to revaluation of the 15 farms it had acquired for the start of the current dairy season. The 15 farms were acquired for $124.5m and the revaluation added $16.5m.
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New Zealand Rural Land Company (NZL) has reported its first net profit after tax of $15.115 million as at June 30, due to revaluation of the 15 farms it had acquired for the start of the current dairy season.

The 15 farms were acquired for $124.5m and the revaluation added $16.5m.

Fourteen of those farms were purchased from the Van Leeuwen Group (VLG) and have been leased back to tenancy companies in which Van Leeuwen family members are principals.

On June 30, NZL had total assets of $165m and liabilities of $54.7m, being loans from Rabobank.

It has a debt-to-total assets gearing ratio of 30%, below Rabobank’s loan-to-value requirement of 40%.

The net asset value of $110m was equivalent to $1.3968 a share, upon which the performance fee of $1.625m to the NZ Rural Land Management Company (NZRLM) was paid.

Rural servicing company Allied Farmers owns half of NZRLM.

The net asset value rose 11.74% in seven months from the initial public offering to the first balance date.

“The growth in net asset value highlights a combination of attractive large-scale acquisitions and industry tailwinds for high-quality rural properties,” the company said.

It believes that continued asset value growth can be delivered from agricultural land, especially in dairying with the current Fonterra milk price forecast being 30% higher than the 10-year average.

Subsequent to the balance date, NZL purchased another VLG 500ha dairy farm at Makikihi, South Canterbury, for $12m and settled on August 1.

It has been leased to one of the existing tenants for a gross rate of 5.34%, with an option to repurchase by Van Leeuwen interests.

A two-for-three rights issue in late June raised $20m, being a shortfall on the $44m sought.

NZL has more large-scale acquisitions in the South Island worth approximately $80m in late-stage due diligence.

Viticulture will be included in the assets for the first time; approximately 10% of the planned expenditure with the rest dairying in the same regions as the current NZL farms.

To fund further acquisitions, NZL will look to place the current rights issue shortfall of $24m at $1.10 a share with wholesale investors.

Applications for this issue will close on September 28.

NZL directors affirmed they were on track to deliver to investors a cash dividend yield of 4.35% in FY22, based on the August 27 share price of $1.12. The $75m IPO was done in December at $1.25.

They have forecast increased dividend yields in following years of 5.11% and 5.74% respectively.

Currently, 79m shares have been issued and the market valuation of the company is around $87m.

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