$1.74 NAV and 1.8c Dividend Mark Rivco’s September Quarter

Softer water values pull down quarterly NAV

Rivco Australia Limited (ASX:RIV) has started spring with a more defensive portfolio but a weaker reported valuation result. Pre-tax net asset value closed September at $1.74 per share, with total return including dividends and franking down 1.2% for the quarter and 0.6% over 12 months.

The immediate pressure came from water entitlement values. The WSP Entitlement Index fell 3% during the quarter as improved water availability reduced near-term supply stress, particularly across July and August. Southern Basin storages rose from 47% to 68%, while Lower Murray allocation prices fell from about $430 per megalitre in early July to approximately $355 per megalitre by the end of September.

Dividend policy shifts towards operating earnings

Rivco declared a fully franked interim dividend of 1.8 cents per share, payable on 30 October. That is less than half the 3.72 cents per share paid in April, and takes cumulative dividends since inception to 58 cents per share.

The company says the reduction reflects a deliberate move to align distributions with underlying operational earnings. Its new framework, effective from 1 January 2027, will set the core dividend at between 60% and 100% of adjusted net profit after tax, with a discretionary component linked to after-tax realised capital gains. The framework was foreshadowed in the 2027 dividend framework, which placed greater weight on operating earnings than realised gains.

Leasing provides a buffer against allocation volatility

Rivco has now leased 80% of its portfolio by value, producing approximately $10.6 million in contracted revenue for the 2026/27 water year. The portfolio’s weighted average lease expiry is 3.2 years, while newer leases commencing on 1 July were secured at yields of about 5%, above the portfolio’s overall effective yield of 4.3%.

The strategy reduces exposure to short-term allocation prices at a time when wetter conditions have weakened spot-market pricing. It also builds on the five-year Kyndalyn Park lease, which earlier lifted Rivco’s leased portfolio to about 82% by value from July. The trade-off is that a larger leased book may provide more predictable income while leaving less of the portfolio exposed to a sharp recovery in seasonal allocation prices.

Buyback continues alongside fully drawn debt facility

Rivco bought approximately 1.1 million shares during the quarter at an average discount of 23% to post-tax NAV. The buyback was supported in part by a $2 million debt drawdown, with $1.3 million deployed during the quarter. Across the June and September quarters, net debt drawdowns totalled $19.5 million, supporting the buyback, water entitlement acquisitions and the April dividend.

At 30 September, the company had drawn the full $40 million available under its facility, but reported a modest 12% loan-to-value ratio against its water assets. Cash at quarter end was $2.37 million, while quarterly operating cash flow was positive at $1.06 million. Rivco also disclosed $238,000 in quarterly payments to related parties, including director fees, executive chairman remuneration and a $108,000 additional payment for services provided by Brendan Rinaldi before his appointment as executive chairman.

Long-term scarcity thesis faces short-term weather test

Rivco’s longer-term investment case rests on a widening gap between demand for water and the volume available for consumptive use in the southern Murray-Darling Basin. The company’s WSP-supported modelling identifies a supply deficit in four of five climate scenarios for the Lower Murray, where 61% of Rivco’s portfolio value is concentrated. The modelled shortfall ranges from 137 gigalitres in an average year to 1,054 gigalitres in an extremely dry year.

That thesis is being tested by near-term conditions that are more favourable for water users. Government water recovery has reached about 380GL of a 450GL target, with a further 70GL due by the end of 2027, while an additional 190GL to 314GL may be required to address the SDLAM shortfall. Whether those structural constraints translate into stronger entitlement values will depend on how quickly supply tightens again, and how much income Rivco can lock in before then.