The Goodman Group (ASX: GMG) share price has kept rising this month. It has notched up several all-time highs in December 2021. What’s going on?
Goodman is one of the world’s biggest industrial property groups. It has a presence in Australia, New Zealand, Asia, Europe, the UK, North America and Brazil. Goodman aims to create innovative property solutions that meet the individual requirements of customers, whilst finding long-term returns for investors.
What’s going on with the Goodman share price?
Since the start of the month, Goodman shares have risen another 6.5%.
The business has been benefiting from structural trends for a while now and COVID-19 effects are accelerating those trends.
Indeed, Goodman says that it has been deliberately positioning its portfolio over the last decade to adapt to and leverage the changes in the digital economy. Those changes are now being realised. Customer demand for high-quality properties close to consumers has never been greater, according to Goodman.
Those trends are helping Goodman’s rental growth, increased development activity and higher valuations.
The rental side of the business is seeing very high levels of utilisation. At 30 September 2021, Goodman had an occupancy rate of 98.4% with a portfolio weighted average lease expiry of 4.7 years. Its 12-month like for like net property income growth was 3.2% in the last quarter.
The assets under management (AUM) had increased to $62 billion.
Further growth is expected
Goodman is benefiting from increased customer demand, which has resulted in an acceleration of development, particularly in infill locations.
At 30 September 2021, its work in progress (WIP) had reached $12.7 billion, with an annual production rate for the year expected to average approximately $6.8 billion. The strong demand is driving “strong margins” and the yield on cost is currently at 6.8%. These are some of the underlying factors that may be helping the Goodman share price.
The pre-commitments have a long WALE of 14 years.
Regeneration of existing brownfield sites is providing more sustainable development opportunities closer to consumers. Goodman expects this activity to continue to be a major source of development into the future.
Goodman said that its outlook is strong and it’s expecting its AUM to grow to around $70 billion by June 2022. Last month, Goodman acknowledged that COVID disruptions have been managed so that they have had less impact on the business than initial assumptions.
The property business also said that due to the strength of development projects, leasing success and stronger-than-expected performance of its partnerships, it increased its FY22 market guidance for operating earnings per security (EPS), which is now expected to be at least 15%.
Broker rating on the Goodman share price
There are still quite a few buy ratings on the business. However, Goodman shares have risen to those price targets.
One of the highest price targets at the moment is from Morgan Stanley, which has a target of $26.50 on the business. That’s only slightly higher than where it is now, suggesting the price may not move much over the next year if the broker is right (or doesn’t change the target).
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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