Goodman’s third quarter again reflects a strong operating performance underpinned by customer led demand for assets in their chosen markets.
Greg Goodman, Group CEO, said, “We have concentrated our portfolio in high barrier to entry markets where land is scarce and use is intensifying. With a focus on long-term customer requirements, we are developing to meet demand in these consumer markets, providing essential real estate infrastructure for our customers. Our results demonstrate resilience and growth in cashflows underpinned by this approach. The convergence of structural change, strong fundamentals and quality investments should continue to deliver positive performance and profitability for Goodman.”
Changing consumption trends across the physical and digital spaces are fundamentally changing demand. Urban infill markets are experiencing significant demand as customers respond to consumer desire for convenience. In response, Goodman is developing new space particularly through multi-storey and higher intensity buildings. Currently, approximately 60% of Goodman’s current WIP is now multi-storey.
The Group’s development workbook has grown to 64 projects worth $9.6 billion and averaging 19 months in duration. Almost 50% of the WIP is in Asia and 26% in UK/Europe. Approx $5.3bn of work was commenced during the quarter, 51% of which were pre-committed. The forecast yield on cost for the development work is 6.8%.
Goodman secured new leases over 2.8 million sqm of space in the portfolio over the 9 months to 31st March, equating to $374.3 million of rent per annum and representing an like-for-like NPI growth of 3.3% pa. The Portfolio WALE is 4.5yrs.
High occupancy and strong cashflow growth is supporting increased valuations across the portfolio. Total AUM at March has grown to $53 billion and with transactional evidence implying lower cap rates, we expect further growth in valuations.
High barriers to entry and limited supply of infill locations are underpinning Goodmans’ high occupancy and cash flow resilience. This is expected to continue to lead to growth in asset values. The Group is well positioned financially with significant liquidity and low gearing. The Goodman Partnerships are also in a strong position with $18.9 billion of committed capital which enables the Group to pursue select investment opportunities.
Goodman reaffirmed their forecast FY21 operating profit of $1.2 billion, representing EPS growth of 12% on FY20, and a full year distribution of 30cps.
Our Views
Goodman have an exceptional business model which is very well positioned in the changing consumer markets.
The Groups strong cash flows and their use of capital, means the group naturally trades at a premium to NTA.
A 30cps distribution represents a distribution yield of just 1.56% at the current price of $19.24.
Goodman are on our Top Picks List.
Disclaimer: The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
Related Articles
