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Your opportunity to access forecast returns of 7.5% p.a from a diversified selection of assets in Dairy: New Zealand’s #1 export industry.
Rimu Dairies LP aims to deliver strong investor returns from the best of New Zealand’s dairy sector.
Income will come from the partnership’s three assets:
1) A 172ha dairy farm, located in prime Southland dairy country and to be managed on a 50/50 sharemilker agreement.
2) Shares in Fonterra, one of New Zealand’s largest companies with 80% share of New Zealand’s milk production.
3) Shares in LIC (Livestock Improvement Corporation), one of New Zealand’s leading providers of animal genetics.
The 7.5% p.a forecast return is based on a combination of dairy farm earnings (60% of income) and dividends from the shareholdings (40% of income).
Why Dairy?
Dairy is a powerhouse of the New Zealand Economy and our largest export, with annual dairy exports valued at $22bn. After a difficult period, the sector has been through a reset over the past eight years, and has emerged stronger, having built a track record of positive returns. Global supply and demand growth are back in line, and this stability has led the milk price to reach new highs over the past two years. With this season’s milk price forecast of $8.50 per kgMS, returns for dairy farmers remaining firmly in positive territory. There is also now more clarity around environmental regulations, and land prices have moderated sufficiently to provide investors with the potential for a healthy cash return.
Why the Rimu Road Property?
The 172ha dairy farm is located in a prime farming area, 19 km from Invercargill. The property is well appointed, with a 40 a-side herringbone cowshed with automatic cup removers, modern effluent disposal and good homes. The farm has a strong track record of consistent performance, and its fertile soils and climatic conditions mean good pasture levels year-round, reducing the need for imported feed and other high-intensity farming methods.
The farm is operated through a 50/50 sharemilker model, which reduces operational risk for investors. The bulk of the costs most exposed to price pressures and volatility are the responsibility of the sharemilking partner. The sharemilker owns the cows, moveable plant and machinery, employs all staff and operates the farm in return for 50% of the milk income. The farm owner receives the balance 50% of the milk income. This structure often attracts the best young farmers and is an important route to farm ownership.
Why Invest in Co-op Shares?
The Partnership plans to invest 25% of its funds in Fonterra FCG and LIC (Livestock Improvement Corporation) shares, both of which are forecast to deliver dividend yields of over 10% in the coming years. As an investor, you can only access these shares if you own farmland and belong to those co-ops through supply or use of services.
Fonterra, with 80% share of the national milk supply, is back on track with a clear strategy focused around New Zealand milk and sustainability. Recent performances have matched their market guidance.
Fonterra Co-operative Group Limited (FCG) shares are forecast to deliver dividend yields of over 10% p.a based on today’s prices. As a bonus, a capital return is also forecast by 2024, meaning total dividends over 2023 and 2024 are forecast to represent 39% of the current FCG share price.
The Fonterra share structure is such that the dollar value dividend is the same for FCG as the NZX-listed FSF shares, however FCG shares are currently trading at a 15-20% discount to FSF shares, giving a higher percentage dividend yield.
LIC is listed on the NZX, and is one of New Zealand’s leading providers of dairy genetics, dairy milk testing services and herd improvement software. Their shares are currently generating a 14% dividend yield plus imputation credits.
MyFarm Upcoming Webinars
An introduction to Fonterra & LIC Webinar
Thursday 23rd March, 12 noon
We will be joined by Joshua Dale and David Harris from Craigs Investment Partners.
Investors will gain an analyst's view on global dairy nutrition co-operative Fonterra, and LIC, a world-class herd improvement technology co-operative.
Joshua and David will take us through each company's recent performance as well as their outlook for the future.
An introduction to Dairy Farming and Rimu Dairies LP
Tuesday 28th March, 12 noon
Explore the fundamentals of dairy farming. MyFarm's Grant Rowan will be discussing dairy as a business, covering the management of dairyland, the 50/50 share milking model, and exactly what products are produced as New Zealand's biggest export earner.
We’ll be joined by the wider MyFarm team with Investment analyst Brad Rose, and Head of Establishment Gareth Evans covering the due diligence and financial modelling of Rimu Dairies Limited Partnership.
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