Rural Funds revenue up, and legal case set against US activist

Rural Funds Group sues US short seller for `malicious' report


Rural Funds Management says it may not recover its legal costs, but it intends to highlight the deceptive conduct behind its August share price crash.


Australia's largest agricultural property trust, Rural Funds Management, will launch legal action in the NSW Supreme Court this week against US group, Bonitas Research, after the Texan short seller's actions trashed RFM's share price last month.

The company said it may never recover its legal costs, even if it is successful, but it wanted to put Bonitas in the spotlight for what it alleged was malicious and deceptive conduct.

Managing director, David Bryant, understood the courts in Texas could uphold any Australian legal decision against the US player.

We want to make sure this bloke, or anybody else doesn't feel they can get away with this sort of thing - David Bryant, Rural Funds Group

He hoped to shoot home a clear message to any activist short seller, or similar operator, tempted to ridicule his organisation's financial reporting with unsubstantiated claims.

The legal action was not necessarily about seeking compensation, but could also save others from future similar unfair accusations at the hands of opportunistic traders.

Telling the truth

"We are telling the truth. We want to make sure this bloke, or anybody else doesn't feel they can get away with this sort of thing," he said.

Founded by Matthew Wiechert, the newly established Bonitas' issued a scathing investment report accusing Rural Funds of overstated its asset values as much as 100 per cent.

Mr Wiechert also co-founded Glaucus which was responsible for last year's crippling short sell attacks on agricultural investor, Blue Sky Investments, and sandalwood producer, Quintis,

Rural Fund's share price dived almost 50 per cent to about $1.36 after the Bonitas Research report was released, losing about $335 million from its Australian Securities Exchange market capitalisation.

Share values are is still to fully recover all their lost ground, despite the rural group last week posting a 30pc rise in revenue for 2018-19.

An independent investigation by financial services giant, EY (Ernst and Young) also found Bonitas' assertions were not substantiated.


RFM, listed as Rural Funds Group, owns a $923m in agricultural assets leased to various agribusinesses including big names, JBS, Olam, Treasury Wine Estates and Select Harvests.

It manages a total portfolio worth $1.2 billion.

It was ambushed by the selectively released investment report which claimed, among other things, the group's true net asset value was only about $268m at the end of last year.

The assertions contained within the Bonitas Document are not substantiated - EY report

While its share price did recover some ground after RFM released a fervent denial of the report's assumptions, Mr Bryant said the nature of the share market buying cycle meant it "just takes a bit of time to get back to where it was", particularly in the current market climate.

"Importantly, our share price has been moving fairly firmly up," he said.

Rural Funds' share price was trading around $2.10 early this week in the wake of its full-year profit announcement, which included revenue from ordinary activities at $66.39 million.

David Bryant

David Bryant

"We think our results were well received and emphasised our credibility is beyond doubt," Mr Bryant said.

Among other assertions debunked by EY were that Rural Funds fabricated rental earnings worth $28m and it did not disclose a $14.5m related party loan.

Independent assessment

"Based on our independent investigation and procedures outlined below, the assertions contained within the Bonitas Document are not substantiated," EY's review report said.

"Further, based on our inspection of the RFM response and the procedures undertaken as specified in this report, we observe that the RFM's response to the Bonitas Document is corroborated by the observations in this report."

He noted Bonitas, or Mr Wiechert, may not choose to mount a defence to RFM's legal case.

The US group had made no contact with RFM or any public comment since August 7.

Rural Funds' asset base includes the parent group's 154 poultry sheds at Griffith in NSW and Lethbridge, Victoria; about 660,000 hectares of cattle country in Queensland and NSW worth about $270m; 660ha of vineyards in South Australia and Victoria worth $18m; 260ha of macadamia plantings at Bundaberg worth $14m, and 7800ha of cotton farmland worth about $50m.

Last financial year the group's portfolio grew to 50 properties.

Almonds investments dominate its holdings, representing about 42pc of its assets, by value, while cattle holdings and feedlots now represent 27pc of its assets.

The group is reportedly looking at further possible cattle sector investments and more nut opportunities.

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