Last chance to capture market? - April 2010

Outstanding Southland investment comes at time of increasing confidence

Investors are being offered a golden opportunity to invest in a top performing dairy farm in the prime Woodlands district of Southland.

MyFarm, which has secured the conditional purchase of a property to be known as Mabel Bush Limited Partnership, suggests it may be the last chance investors have to buy farmland of this highest quality at current values.

Confidence and price certainty are returning to the dairy sector following recent jumps in commodity prices at auction and confirmation that Fonterra’s payout is set to be the second highest ever. MyFarm says positive market sentiment means values for prime Southland dairy land will almost certainly move upwards from current levels.

MyFarm Director Grant Rowan, himself a Southland dairy farm owner, says Mabel Bush looks like being a last chance opportunities for investors to access high quality land before the 2010/11 season.

He describes Mabel Bush as “outstanding” due to its ease of management, fertile soils and pastures, quality infrastructure and optimum scale. The farm is already producing 300,000 kg milk solids/year from 680 cows.

“Mabel Bush is a proven performer with a major feature being its low operating costs. The pasture performance on this farm is excellent and the cows are high producing. Everything is set up for this investment to generate strong, sustainable returns from the outset.”

The farm is close to Invercargill and has good road frontage on the Lorneville Dacre Rd. The scale, layout and access are ideal for its high production 700-cow herd, also being purchased with the property.  Mabel Bush has a 50 bale herringbone milking shed with cup removers, silage bunkers, a newly installed effluent system and three good houses. Two herd homes are used to winter almost half the herd on-farm, which is a significant cost-saving.

Mabel Bush has projected operating costs of $3.25/kg MS which results in forecast operating margins (EBITs) of $2.50- $3.00/kg MS. This will generate a strong cash return of 7%p.a. with the total return over five years, including capital growth, forecast at 11%p.a.

A neighbouring property to Mabel Bush is a MyFarm dairy syndicate established in April 2007. It is returning cash surpluses in excess of 7% p.a. and shareholders equity has grown by 25% more than forecast.

Grant Rowan says this illustrates the potential for quality properties in this ideal dairy farming location to perform well for investors.

“In many respects Mabel Bush is as good as it gets. It is a high quality, low risk investment  and the timing of the purchase, on a rising market is ideal.”