Biggest farm land REIT in Bulgaria, Advance Terrafund (6A6 BU, books a BGN 7.9m dividend provision, according to audited FY 2015 financial statements. This entails a BGN 0.092 dividend per share or a 4.4% dividend yield at a 90% payout of 2015 profits.

However, the company usually distributes almost 100% of profits. Thus, ELANA Trading analysts expect a BGN 0.1022 DPS or 4.9% DY at current market quotes.
Finally, the audited FY 2015 net income is up 4.7-fold from BGN 7m to BGN 33.75m on property upward revaluations.

Change of strategy in 2015 – smooth returns in the future

Advance Terrafund has shifted its strategy from sole direct land sales to a more balanced divestment strategy – a mix of direct lands sales and land leasing, to
smooth out returns and cash flows and better execute its long term land banking strategy. Since inception, the REIT has purchased and sold 47K+ ha and 23K+ ha of land, respectively, with consolidated land plots’ sales being main return driver.

In 2015, Advance Terrafund began land sales with deferred payment (leasing) to earlier tap on higher selling prices. While revenue recognition will extend over a longer period the price premium the company will get should yield a more balanced and predictive average return.

In 2015, average land leasing prices achieved by the company in 2015 add 8.5% premium to average direct sales prices for the year, BGN 1490/dca vs. BGN 1373/dca, respectively. The fund leased 2424 dca over the course of the year.

Who is Advance Terrafund REIT

Advance Terrafund is the largest REIT owner of agricultural land in Bulgaria. It is also one of the largest owners of land in the country after the Bulgarian state. It owns 23K ha of arable land which it rents or leases to farmers. The Fund’s holdings are mainly concentrated in the most fertile regions of the country: 40% of the land is in North-East Bulgaria.

The company was established in 2005 to take advantage of the consolidation wave in the agricultural sector as arable land was highly fragmented at time point in time. In addition, it took advantage of the lower land prices which almost tripled from the EU accession of Bulgaria (2007) until nowadays.

Read more in the latest equity research by ELANA Trading analysts