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RFF, RURAL FUNDS GROUP
blacksheep
post Posted: Aug 12 2019, 01:46 PM
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In Reply To: blacksheep's post @ Aug 9 2019, 12:18 PM

Another notable short alert on Friday. Total short positions as at 6/8/19 = 2.99%. Is the Bonitas short attack over?
QUOTE
Fri 9th Aug, 2019 2,003,722 334,926,380 0.59% 9,109,104 22.00%
Thu 8th Aug, 2019 6,972,977 334,926,380 2.08% 35,300,544 19.75%
Tue 6th Aug, 2019 2,146,176 334,926,380 0.64% 5,872,590 36.55%


SP currently $1.835
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The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 
blacksheep
post Posted: Aug 9 2019, 12:18 PM
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Notable short alert yesterday - in addition to the one on 6 August 2019

QUOTE
Thu 8th Aug, 2019 6,972,977 334,926,380 2.08% 35,300,544 19.75%
Tue 6th Aug, 2019 2,146,176 334,926,380 0.64% 5,872,590 36.55%


https://www.shortman.com.au/stock?q=RFF
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--------------------
The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 
blacksheep
post Posted: Aug 9 2019, 11:01 AM
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In Reply To: blacksheep's post @ Aug 8 2019, 01:54 PM

True to their word - directors buying yesterday. Confident or giving the impression of confidence? Meanwhile SP hit the $2.00 mark in early trading - currently $1.955

Change of Director's Interest Notice - Guy Paynter - acquired 400,000 shares

Change of Director's Interest Notice - David Bryant - acquired 292,500 shares

Change of Director's Interest Notice - Mike Carroll - acquired 15,730 shares



--------------------
The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 
blacksheep
post Posted: Aug 8 2019, 01:54 PM
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In Reply To: blacksheep's post @ Aug 8 2019, 11:36 AM

Rebuttal to the rebuttal Note Bonitas have locked onto David Bryant's strange comment made during the webinator - note also their comments re "auditors"

QUOTE
Rural Funds Group (ASX: RFF) = Fraud

“Our strategy is to deliberately provide a lack of detailed explication.”
- David Bryant, RFF Webinar 8 August 2019

On 6 August 2019 we published our initial opinion (“Report” on Rural Funds Group (ASX: RFF) (“RFF”, the “Company” which highlighted independent evidence from RFF’s largest independent customers that suggested RFF fabricated A$ 28 million of its reported rental income since FY’17. Additional evidence suggested that RFF entered into multiple nefarious transactions with RFF Management’s privately-held business, Rural Funds Management (“RFM” to siphon A$ 86+ million into RFM at the ultimate expense of RFF minority shareholders.

On August 8, 2019, RFF responded (“RFF Response” to our allegations with a strategy of non-disclosure. Despite David Bryant’s claim yesterday to journalists that “What we will do from here is work to ensure maximum transparency with the objective being that we look after the unit holders of RFF,” investors did not receive transparency today from RFF Management.

Instead, “we will not disclose” was repeatedly echoed in Bryant’s drivel to investors which provided zero clarity to investors about our allegations of RFF’s fabricated rental income or its increased related party transaction activity between RFM and RFF in the last 3 years.

On a hosted webinar Q&A, David Bryant repeatedly fell back on the credibility of PwC to certify the accuracy of its reported financial statements. We have been in this business a long time, and remind readers that not once has there been a public market fraud that didn’t trick an auditor into signing off on its historical reported financial statements.

RFF chose to remain silent on details about its customer relationships and its asset valuations. Our Report highlighted specific transactions and customer relationships with credible evidence that suggested RFF’s reported profits and net assets were artificially inflated. RFF avoided all discussion about the specifics of its rental income, instead claiming that for competitive reasons it would not disclose additional details about its customer relationships to investors.

We highlighted irrefutable evidence where RFF disclosed its A$ 75 million guarantee to J&F to that RFF’s newly acquired “feedlots can be stocked with cattle, appropriately fed, and looked after."

If RFF’s A$ 75 million guarantee was meant for working capital, why was RFF’s guarantee immediately used to repay the A$ 30 million borrowed by RFM to acquire J&F? RFF’s Reponse confirmed that RFM received the equity benefit of J&F for free by using RFF’s A$ 75 million guarantee as a balance sheet backstop. How is that not a conflict of interest??

RFF Management avoided the discussion of its conflicts of interest that RFF Management operates both RFF and RFM, yet RFF Management owns 100% of RFM and owns less than 5% of RFF’s equity. RFF Management failed to disclose to investors how RFF Management’s lop-sided compensation structure between RFF and RFM is handled to ensure decisions are made by RFF Management to prioritize the best interests of RFF minority shareholders.

RFF Management avoided the discussion about Michael Carroll’s clear clonflict of interest as director at SHV, at RFF, and at RFM.

RFM’s business failed to generate cash from operations and has recently taken borrowings from RFF which coincided with RFM and RFM Related Fund lessees generating increasingly negative operating cash flows. Do these look like good underlying businesses to have as customers?

Based on RFF’s Response, we do not expect RFF to volunteer any details to investors that would be helpful in understanding the value of RFF’s underlying assets.

RFF stated that it engaged E&Y to conduct an Independent Review to confirm RFF’s reported financial statements. While this sounds like progress, if E&Y is paid by RFF to perform a voluntary review reported directly to, and paid for, by RFF, then how is RFF’s proposed Independent Review supposed to actually produce any independent findings? What the hell is the difference between E&Y’s Independent Review and RFF paying for a second certified audit opinion?





--------------------
The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 
blacksheep
post Posted: Aug 8 2019, 11:36 AM
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In Reply To: blacksheep's post @ Aug 8 2019, 10:27 AM

SP now up 27.94% @ $1.74. Days range thus far 1.60-1.88 - volume 16.1mil. Day traders paradise.

Management will be buying according to webinator



--------------------
The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 
blacksheep
post Posted: Aug 8 2019, 10:27 AM
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Posts: 6,130
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In Reply To: blacksheep's post @ Aug 7 2019, 08:31 PM

Opened this morning - another massive dump down 21.32% @ $1.65. . Not sure why they allowed it back - should have kept it in a TH until the EY audit - just IMHO

Have released today's investor webinar in response to Bonitas Document - https://drive.google.com/file/d/1u4nnpjA1Gb...V6YomAFdT4/view

Subject: Further response to Bonitas Research document
QUOTE
On 6 August 2019, Bonitas Research LLC (Bonitas) selectively released a document about the
financial position of the Rural Funds Group (ASX: RFF) (Document)
.
Rural Funds Management Limited (RFM) as responsible entity for the Rural Funds Group (ASX:
RFF), released a response to the Document on 7 August 2019. RFM will not provide further
detailed responses to any existing, or possible future, allegations made by Bonitas, a shortactivist with an acknowledged financial interest in a declining RFF security price.


RFM has engaged Ernst & Young to independently investigate the matters raised and assess
RFF's rejection of each of the claims made in the Document.

RFM relies on its audited financial statements and again confirms their accuracy. RFF’s results for
the financial year ended 30 June 2019 are scheduled for release on Tuesday, 27 August 2019
and remain in line with guidance.

In light of the above, trading in RFF securities will resume today. The Board of the responsible
entity has determined that RFM staff and Directors may trade in RFF securities from market
open in accordance with the RFM Securities Trading Policy
.


In view of the above - are directors/staff selling this morning?



--------------------
The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 


blacksheep
post Posted: Aug 7 2019, 08:31 PM
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In Reply To: blacksheep's post @ Aug 7 2019, 11:32 AM

RFF's response to Bonitas Research Report is in. Seem to be taking same approach as QIN and BLA - have engaged EY to independently audit its audited accounts (by PwC). Sloppy work re item 6 .. Rebuttal from Bonitas no doubt in the next day or so

QUOTE
On 6 August 2019, Bonitas Research LLC (Bonitas) selectively released a document about the
financial position of the Rural Funds Group (ASX: RFF) (Document).

The Document was published without any inquiry of RFF or Rural Funds Management Limited
(RFM). Notably, at the foot of page 1 of the Document, Bonitas states:

"We [Bonitas] have a short interest in RFF's stock and stand to realize significant gains in the event
that the price of such instrument declines."

RFM rejects entirely the unfounded allegations of financial impropriety and irregularity
contained in the Document and is obtaining legal advice in respect of those matters.
Notwithstanding, given the seriousness of the matters raised and the resultant adverse effect on
the price of RFF securities, RFM has engaged Ernst & Young to independently investigate the
matters raised and assess RFM's rejection of each of the claims made in the Document as set
out below.


Bonitas statement 1:
“Evidence suggests that RFF’s reported profitability had included A$ 28+ million of fabricated
rental income paid to RFF by its two largest third-party lessees.”
Page 1, paragraph 2.
Repeated and discussed: Pages 1, 2, 7, 8, 9, 10, 11, 12, 13, 14, 20.

RFM response:
This statement is incorrect. The Bonitas reading of the accounts of third-party lessees is
mistaken. All rental income recorded in RFF accounts, including that relating to third-party
lessees is accurate.

Bonitas statement 2:
“We believe that RFF had artificially inflated its reported financial performance...”
Page 1, paragraph 2.
Repeated and discussed: pages 7, 8, 9, 10, 11, 12, 13, 14, 15, 16.

RFM response:
This statement is incorrect. RFF’s accounts are audited and are an accurate record of the
financial performance and financial position of RFF.

Bonitas statement 3:
“Dividend afforded with cash from equity raises and bank borrowings.”
Page 14, heading.

RFM response:
This statement is incorrect. Distributions are paid from Adjusted Funds from Operations (AFFO),
which is the free cash flow generated from rents after payment of expenses. RFF’s audited
accounts disclose the AFFO and accurately reflect that AFFO exceeds distributions paid.

Bonitas statement 4:
“We calculate that RFF Management overstated RFF’s net assets by 100% and that RFF’s true net
assets figure was only A$ 268 million as of December 31, 2018, which would put RFF in breach of
its recently increased minimum A$ 400 million net asset loan covenant.”
Page 1, paragraph 3.
Repeated and discussed: Pages 14,15,16,17.

RFM response:
This statement is incorrect. All asset values recorded in RFF accounts are accurate, appropriate,
supported by independent valuations and reviewed by its auditor, PricewaterhouseCoopers.

Bonitas statement 5:
“RFF’s largest nefarious transaction appeared as an undisclosed dividend recapitalization of RFM’s
newly acquired cattle asset, J&F, which included a A$ 30 million special cash dividend paid to RFM
financed by borrowings backstopped by RFF’s A$ 75 million financial guarantee to J&F.”
Page 1, paragraph 5.
Repeated and discussed: Pages 4, 19, 20, 21, 22, 23, 24, 25, 30.

RFM response:
This statement is incorrect. The ending capital structure of J&F and the guarantee were exactly
as described to investors in the equity raising document and the member meeting
documentation provided in July 2018. The guarantee was considered fair and reasonable by an
independent expert and due to its related party nature, approved by RFF unitholders. RFM did
not benefit from a $30m special dividend, rather it was repaid $30m it outlaid to acquire J&F.

Bonitas statement 6:
“RFF’s 1H’19 results disclosed that it was owed A$ 14.5 million from an RFM related party
macadamia lessee which inexplicably did not appear on the lessee’s balance sheet.”
Page 1, paragraph 5.
Repeated and discussed: Pages 3, 4, 19, 20, 26, 27, 28, 29.

RFM response:
The RFF 31 December 2018 accounts contained a table formatting error in Note E2, p31. The
table incorrectly lists a loan to the 2007 Macgrove Project of $14.463m. The correct figure is
$0.008m. This error is confined to this table only and does not flow through to, or alter, the
accuracy of RFF’s 31 December 2018 Financial Statements.


Bonitas statement 7:
“RFF Management continues to tell investors that RFM’s sole form of compensation for managing
RFF’s assets under management is ~1% fee per annum.”
Page 3, paragraph 4.
Repeated: pages 5, 18, 20.

RFM response:
RFM, as responsible entity of RFF, charges a management fee of 1.05% of the adjusted gross
asset value of RFF. RFM is also entitled to be reimbursed for expenses incurred in performing its
duties as responsible entity of RFF.

Bonitas statement 8:
“RFF Management controls and operates both boards of RFF and RFM.”
Page 3, paragraph 5.
Repeated: pages 8, 18.

RFM response:
RFM is the responsible entity of RFF and holds an Australian Financial Services Licence
authorising it to operate RFF. RFF does not have a board of directors. This structure is common
amongst Australian REITs and other managed investments.


Bonitas statement 9:
“…..former Company Secretary Andrea Lemmon, who abruptly resigned in August 2018 after 21
years of working with David Bryant since RFM was founded in 1997.”
RFM response:

Andrea Lemmon advised David Bryant of her plan to retire in 2015. Andrea and other RFM staff
then planned and managed her succession over a two-year period preceding her retirement in
October 2018. Andrea continues to hold a significant unitholding in RFF.

Conclusion
To reiterate, while entirely without foundation, RFF is seriously addressing the allegations made
by Bonitas and will vigorously defend the business in the interests of all RFF unitholders.

https://www.asx.com.au/asxpdf/20190807/pdf/...96fvhk7f89x.pdf



--------------------
The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 
blacksheep
post Posted: Aug 7 2019, 11:32 AM
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In Reply To: nipper's post @ Aug 7 2019, 11:27 AM

Agree. I've had a look at a couple but simply couldn't get my head around their financials - when that happens AVOID



--------------------
The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 
nipper
post Posted: Aug 7 2019, 11:27 AM
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In Reply To: blacksheep's post @ Aug 7 2019, 11:17 AM

Must say in previous unlisted iterations (RFF came out of a bunch of unlisted funds/ REITs; only one that came across my bow was Lachlan Farming) the reported numbers and what investors received never made much sense. Fees flowed profusely, though.

Was an AVOID then, and no reason to change that view subsequently.



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

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blacksheep
post Posted: Aug 7 2019, 11:17 AM
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In Reply To: blacksheep's post @ Aug 6 2019, 01:29 PM

Came across this article written in 2015 - Revaluation fraud using sham internal transactions. The author called RFF a "fraud" back in 2015 - also BLA - BLA was the subject of short attack by Glaucus. One of the two founders of Glaucus has set up Bonitas, who are the activist shorters in RFF
https://drbenway.blogspot.com/2015/03/reval...ternal.html?m=1

From this article - "The only viable form of business in Australia now involves fraud, as only fraud schemes can promise sufficient returns. Pie cannot be sold profitably in Australia, only pie in the sky need apply."

Food for thought - "pie in the sky" being peddled by many companies on the ASX, particularly at the spec end



--------------------
The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington

Said 'Thanks' for this post: nipper  
 
 


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