The Rural Funds Group (ASX: RFF) share price is going nuts, it’s up 39.7% this morning.
Rural Funds Group is a real estate investment trust (REIT) that owns farms and leases them to tenants. Started in 1997, Rural Funds Management (the manager) now manages $1.2 billion in agricultural assets across New South Wales, Queensland, South Australia and Victoria.
Why Is The Rural Funds Share Price Going Nuts?
The Rural Funds saga continued this morning after being accused of a number of accounting wrongdoings by Bonitas Research, a shorting business.
After issuing a response yesterday to the market, investors got the chance to react to Rural Funds’ rebuttal.
This morning Rural Funds also held an investor webinar to cover some of the issues whilst also answering some questions from investors.
Aside from asserting again that all of the allegations were incorrect, Managing Director David Bryant made a few more comments.
Rural Funds Management (RFM) won’t be providing further detailed responses to any existing or possible future allegations made by Bonitas and that Ernst & Young will investigate the matters raised and assess Rural Funds’ reject of each of the claims.
Rural Funds results are on schedule for release on 27 August 2019 and remain in line with guidance, which is why leadership were happy for the shares to return to trade today.
Interestingly, the Board of the ‘responsible entity’ has determined that RFM staff and Directors may trade in RFF securities, and Mr Bryant confirmed he will be purchasing shares.
He also confirmed the net asset value (NAV) in the December 2018 report was correct and that the FY19 result would show a small increase. He also confirmed that the distributions won’t be affected by these allegations and it continues to aim for a 4% increase in the distribution.
What To Make Of All Of This?
Rural Funds came back with a good response, which is why the share price is up so much today, however only time will tell who is ultimately right, at least until the EY report is released.
It’s hard to truly say what real estate investment trust (REIT) properties are worth unless someone else offers to pay a certain price. However, Rural Funds is confident in its accounting treatment of rental income and its adjusted funds from operations (AFFO), which the distributions are based on.
At this stage I think it’s hard to say definitively what the right action is, so each shareholder must make up their own mind whether to buy, hold or sell. If you want to invest money somewhere else, the reliable shares in the free report below could be less nerve-wracking.
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Disclosure: Jaz owns shares of Rural Funds at the time of writing, but this could change at any time.
