The most well regarded dividend stock in Bulgaria, Advance Terrafund REIT, outperformed guidance again, delivering better than expected results. FY2016 land sales came 25% above management guidance and 67% above our expectations with 15 168 dca sold over the last 12 months. Тhe average price was BGN 1 318 per dca, down 4% y/y, entailing BGN 20m in sales revenues.
Higher dividend than expected
Expected financial results FY 2016 translate into 50% higher than expected upcoming dividend. Depending on the land historical cost (dividends are due on actual historic profits), ELANA Trading analysts expect the dividend to be in a conservative BGN 0.14 – BGN 0.15 per share range.
Dealing with a fall in land prices
Yet, Advance Terrafund booked a 4% y/y decline in average land prices. The latter is line with management guidance as the land market is entering a more mature state after 21% CAGR over the last five years. Declining land yields and agricultural goods’ prices affect both land prices and rents. However, it can also be attributed to declining portfolio quality as the Company sold its most valuable land. Last year the company sold its most expensive land in Northeast Bulgaria while adding land in less expensive regions like the Northwest and the Southeast.
About 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.