Goodman banks on industrial might to beat sell-off
INDUSTRIAL property powerhouse Goodman says it is on track to grow its empire past $70bn and has upgraded its earnings outlook on the back of strong demand for warehousing.
The Greg Goodman-led company confirmed its earnings guidance of a 23 per cent lift for this financial year and is increasing its workbook around the world amid ongoing supply chain disruptions from Covid-19 and geopolitical tensions.
The company warned that these factors were placing pressure on already constrained global supply chains, inflating costs and making projects more complex.
Goodman shares were sold off in the market rout as investors dumped fund managers and the rapid growth of online retail sales started to slow as shoppers venture out after the pandemic.
But the company is backing its thesis that consumers are still seeking out faster and more flexible delivery options, which will require more nextgeneration warehouses, packed with robots, as the likes of Amazon distribute products.
Goodman has properties in major global centres that are benefiting from it intensifying their uses, which big companies are committing to as they look to boost productivity.
The company expects work in progress at its sites to remain around current levels at the end of June, and is working through brownfield sites and regeneration of existing assets. Although building costs are up, yields on cost are expected to remain at 6.5 per cent.
Goodman will break through the $70bn barrier mainly by finishing existing developments, and it said its funds were well positioned as it released its 2022 operating earnings per security forecast of 23 per cent, and a full-year distribution of 30c a share.
Analysts said this was up from earlier guidance of a 20 per cent lift and was in keeping with market expectations.
Work in progress bumped up from $12.7bn to $13.4bn across 89 projects, and Goodman expects projects to be running at about $7bn annually.
The portfolio reported strong like-for-like net operating income growth of 3.7 per cent with occupancy rising to 98.7 per cent, and the lease term hitting about five years.
Jefferies trader Michael Vincent said it was a strong result and it appeared as if the funds growth in the fourth quarter was due to late completions.
“We expect Goodman to exceed its fiscal 2022 upgraded guidance and deliver about 25 per cent growth and more than 20 per cent over the next two years,” Mr Vincent said. “We would be buyers today and expect stock to be up based on recent underperformance and stabilisation of the 10 year bond rate.”
The fundamentals of the business are strong and it has had significant market rental growth across many locations globally.
Goodman is also benefiting from industrial developments getting ever larger and their complexity rising.