The Rural Funds Group (ASX: RFF) share price has started a recovery after another negative report.
Rural Funds Group is a real estate investment trust (REIT) that owns farms and leases them to tenants. Started in 1997, Rural Funds Management now manages $1.2 billion in agricultural assets across New South Wales, Queensland, South Australia and Victoria.
Rural Funds’ Latest Rebuttal
Rural Funds has been in the news quite a lot over the past few weeks. First it was accused by Bonitas Research as being essentially worthless due to accounting tricks.
But Rural Funds Management refuted the claims which largely reassured investors and it also engaged Ernest & Young to confirm that the claims were false. Management backed up the confidence of the defence by buying large amounts of shares. To screw the point home, Rural Funds started legal action against Bonitas Research.
Investors seemed largely reassured after the release of the full year report which showed an increase in the cash net rental profit and forecast higher earnings in FY20.
But then, last week a negative report was released by Bucephalus Research, based out of Hong Kong. Rural Funds said that these claims were largely the same as Bonitas’. Backers of Rural Funds might say that Bucephalus picked a target which already had an uneasy shareholder register.
What Happened Today?
This morning Rural Funds released a further response to Bucephalus’ report.
Rural Funds said that all of the accounting claims were false and misleading, then explained why that was the case with each point.
Rural Funds said: “Short sellers like Bonitas and those associated with them, make substantial profit from a declining RFF securities price.
“Bucephalus and Bonitas have each released documents that are false, misleading and speculative without any inquiry being made of RFM before their release. Their documents are entirely without substantiation and are made out of the jurisdiction in their false view that they are beyond regulatory security in Australia.
“RFM again encourages its investors to consider carefully the full rebuttal of these claims by RFM Management which has been corroborated by EY and the fulsome audit reports of the group by its auditors, PwC over the past six years.”
Based on the currently depressed share price, Rural Funds offers a 6.5% distribution yield. If all of these allegations are false, particularly about the net rental returns and distributions, then that’s an attractive return in this low interest environment in my opinion. I’d be willing to buy some more shares.
But if Rural Funds seems too volatile and risky to you, then the reliable shares in the free report below could be your preferred options.
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Disclosure: Jaz owns shares of Rural Funds at the time of writing, but this could change at any time.
