Company Reports

Narrow-moat Goodman Group’s fiscal 2024 results were broadly in line with our expectations. Operating earnings per security grew 14% to AUD 107.5 cents, up from AUD 94.3 cents last year, above guidance of an 11% increase. Unfranked distributions of AUD 0.30 per security were flat year on year. The company guides to operating earnings rising 9% in fiscal 2025, and our estimate of AUD 1.17 is in line. However, guidance is for distributions per security to be unchanged at AUD 0.30, which equates to a forward yield of less than 1%. Payout ratios will likely remain low in the near term, given the large development pipeline.

Goodman Group is one of the world’s premier developers and managers of industrial property projects and investments. The group was co-founded in Australia by Gregory Goodman who remains CEO, and now has projects and customers in Asia, Europe, and the Americas.

We retain our AUD 24 fair value estimate for narrow-moat-rated Goodman Group as we transition coverage to a new analyst. Goodman securities screen as overvalued, trading at a 35% premium to fair value. This is likely driven by optimism over increasing demand for Goodman’s properties as data centers to support cloud computing and artificial intelligence training by major technology companies.

Goodman Group is one of the world’s premier developers and managers of industrial property projects and investments. The group was co-founded in Australia by Gregory Goodman who remains CEO, and now has projects and customers in Asia, Europe, and the Americas.

We raise our fair value estimate for Goodman Group by 15% to AUD 24 per security after reassessing the opportunity the group has in data centers. We still expect logistics investment to moderate, but data centers have reached 40% of work-in-progress and will likely exceed half of WIP in the next couple of years. These projects will likely be larger, take longer, require more capital expenditure, and be more profitable than we previously attributed. Despite our valuation increase, Goodman's securities screen as overvalued, with the upside seemingly priced in but not the risk.

Goodman Group is one of the world’s premier developers and managers of industrial property projects and investments. The group was co-founded in Australia by Gregory Goodman who remains CEO, and now has projects and customers in Asia, Europe, and the Americas.

Goodman Group posted a strong half-year result, with operating earnings per security of AUD 0.59, 28% higher than the first half of 2023. Management now signals fiscal 2024 OEPS growth of 11%, up from the 9% guidance provided in August 2023. We increase our OEPS estimate to AUD 1.05, up from AUD 1.03, mainly driven by increased assumptions for rental growth this year. We also increase our medium-term rent assumptions, given Goodman’s current rents are an estimated 25% below market rents. This, combined with the time value of money, pushes our fair value estimate up 7.0% to AUD 20.75 per security. Even so, Goodman Group securities look overvalued, with the market seemingly more optimistic than we are about industrial property and Goodman’s fast-growing opportunity in data centers.

Goodman Group is one of the world’s premier developers and managers of industrial property projects and investments. The group was co-founded in Australia by Gregory Goodman who remains CEO, and now has projects and customers in Asia, Europe, and the Americas.

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Goodman Group is one of the world’s premier developers and managers of industrial property projects and investments. The group was co-founded in Australia by Gregory Goodman who remains CEO today, and now has projects and customers in Asia, Europe and the Americas. A typical project involves obtaining a development site, signing tenants onto a lease, and investors to pay for the development and acquire the completed project. Goodman typically retains a minority stake and continues to manage sites after completion, collecting development fees, leasing fees, management and performance fees, and its share of rent.

We increase our fair value estimate for narrow-moat Goodman Group by 5% to AUD 14.80, after a stronger-than-expected first-half result. Goodman increased guidance for operating earnings to AUD 64.4 cents per security, and we increase our estimate 3% to AUD 64.7 cps. We make no change to our distribution estimate of AUD 0.30 per security, which is in line with management’s latest guidance.

Goodman Group is one of the world’s premier developers and managers of industrial property projects and investments. The group was co-founded in Australia by Gregory Goodman who remains CEO today, and now has projects and customers in Asia, Europe and the Americas. A typical project involves obtaining a development site, signing tenants onto a lease, and investors to pay for the development and acquire the completed project. Goodman typically retains a minority stake and continues to manage sites after completion, collecting development fees, leasing fees, management and performance fees, and its share of rent.

Narrow-moat-rated Goodman Group delivered a strong first-half result, with operating earnings per security of AUD 28.8 cents. The momentum of the business, particularly its funds management division, prompted an increase in profit guidance for the full year. Management now expects 2020 earnings to be 11% above 2019, up from the previous 9% growth expectation.

The phenomenal demand for logistics assets was on display with today’s first-quarter operational update from narrow-moat-rated Goodman Group. The release revealed remarkably strong growth in funds under management, or FUM, to AUD 48.2 billion in the first quarter of fiscal 2020. We upgrade our estimates for the group’s FUM, now expecting a 2020 year-end asset book of slightly more than AUD 50 billion.

Goodman Group delivered a strong result that was above our expectations. We slightly increase our fair value estimate to AUD 12.30 from AUD 12.00, though the security still screens as overvalued.

We confirm our AUD 12 per share fair value estimate for Goodman Group as we transition coverage to a new analyst. Our narrow moat, medium fair value uncertainty, and Standard stewardship ratings are unchanged. At current prices, the stock is trading 15% above our intrinsic valuation. Our fair value estimate implies fiscal 2019 price/earnings of 24 and enterprise value/adjusted EBITDA of 22. Our valuation is derived using a discounted cash flow methodology, using a 9% cost of equity and a weighted average cost of capital of 8.0%. Goodman’s narrow economic moat is sourced from switching costs and efficient scale benefits.

After raising fiscal 2019 earnings guidance to growth of 9.5% from 7% in February, we weren’t expecting any further upgrades as part of the third-quarter update. That said, narrow-moat-rated Goodman provided a mini-upgrade, advising assets under management, or AUM, will exceed AUD 45 billion by June 2019, up by at least AUD 2.1 billion or 4.9% since December 2018 when AUM was AUD 42.9 billion. Part of the uplift will be due to movement of development assets to completed assets, with the balance attributable to further asset value appreciation driven by rent growth and potentially a further reduction in market yields.

In what has now become a recurring theme of underpromising and overdelivering, Goodman Group has upgraded fiscal 2019 earnings guidance to growth of 9.5% from 7% previously. The raised guidance is mostly due to a step up in performance fees as the returns for wholesale investors in Goodman managed funds were materially above benchmark, a major catalyst being ultra-loose monetary policies and falling bond yields. After years of tight reins on its development business, Goodman has said the high demand supports a more aggressive stance and development work in progress will exceed AUD 4.0 billion after hovering around AUD 3.5 billion in recent years. The faster rate of development will have a multiplier effect on earnings, increasing development fees, but also accelerating the growth rate in external funds under management, the firm’s highest return on equity activity.

The first-quarter fiscal 2019 operational update from Goodman Group contained no material new financial information, with guided growth in fiscal 2019 earnings and distributions reaffirmed at 7%. Our fair value estimate remains at AUD 10.20 and narrow-moat-rated Goodman screens as fairly valued at current levels.

Goodman Group's fiscal 2018 operating earnings rose 8% to AUD 46.7 cents per security, or cps, marginally above guidance and our forecast. Compositionally, this was a strong result, with Goodman beating our expectations for growth in assets under management, or AUM, and margins on development completions. Upgrades to our forecasts for management fees, development margins and rents, results in a 6% and 12% upgrade, respectively, to our fiscal 2020 and 2021 EBIT forecasts. Our fair value estimate for narrow-moat-rated Goodman increases 14% to AUD 10.20. Goodman screens as fairly valued, currently trading at AUD 10.60. Guided fiscal 2019 earnings (adjusted for forthcoming dilution of staff options) is AUD 50.0 cps, implying growth of 7% and a forward P/E of 21.