Invast Blog

Goodman Group takes on the world

Most people think of Westfield Group when pinpointing Australian property success stories. Goodman Group is also a global player and has built a very impressive portfolio, brand and reputation.

I’ve written to Invast clients this week – outlining an exact trader recommendation on Goodman shares. They have been edging higher over the past few months. Where they go from here and what that means for the company is outlined in my report. If you’re not getting the Invast Flashnotes – speak to the team and they will take you through the procedure.

Goodman operates in the logistics property space. Think big, large industrial complexes right around the world. This is the space in which Goodman operates. I’ll take you through some numbers that may raise an eyebrow or two:

  • Goodman manages $33.4bn of industrial assets and has development work in progress of around $3.4bn. This is across 72 projects in 11 countries with a forecast yield on cost of 8.3%.
  • The group has high occupancy, estimate at around 96% across the portfolio with a 74% retention rate and a weighted average lease expiry of just under 5 years.
  • Goodman leased 1.5m square metres of industrial property across its global platform in the first six months of this financial year.

We’re talking about some big numbers here, in a niche that will continue to grow as the global economic recovery improves. Property businesses are usually a function of income, debt and interest rates. Goodman’s portfolio is currently valued on a yield of around 6.6%. Given that US 10 year bond yields are struggling to rise and stay above 2.0% since the 2009 downturn, I see this as an attractive yield on what are high quality assets.

There is a lot more to Goodman that just these numbers. There are always risks and cyclicality for any business that undertakes property development. Success is by no means guaranteed. One of the things that I always look for is track record – show me what you have achieved, over a long period of time and let me weigh that up against your future promise.

I live by that rule.

The company grew first half earnings by 9% and remains on track to achieve 7.5% earnings growth in 2016 compared to last year. It is currently trading on a dividend yield of around 3.5% and on a price to earnings ratio of around 1.5x next year’s forecasts.

This isn’t a stock that is likely to see a large appreciation in price, unless there is corporate activity. I wouldn’t completely rule that out, given how cheap interest rates are in the United States, Europe and Japan. There is a fair bit of international interest on the share register already. It has significant interest in properties it jointly owns and wholly manages in Hong Kong, China and Japan.

Goodman is though a stock that has a sense of earnings stability, development upside and consistency in a market that is now gripped with volatility.  If it’s not on your watchlist, it should be. If you want to know our explicit recommendation, get on our Invast Flashnote list by coming a client.

Invast clients get a higher level of research and analysis, including weekly trading calls written by myself and other members of our investment committee. I invite you to get access to these by joining as a client. You can self-navigate through our simplified account opening process here.

 

Happy investing,

Peter Esho

Chief Market Analyst

 

Peter Esho is a member of Invast’s Investment Committee and Chief Market Analyst at Invast Financial Services in Australia.   The Invast’s Investment Committee constructs professionally constructed global thematic portfolios of Direct Market Access (DMA) CFDs over highly liquid global shares and ETFs through its new PortfolioInvestor platform. Since 1960, the Invast Group has grown to become one of the largest and most successful global brokerage firms, offering state-of-the-art trading technology and unparalleled service catering to all levels of traders.

 

Invast Financial Services Pty Ltd (ABN 48 162 400 035) is regulated by the Australian Securities and Investments Commission and holds an AFS Licence 438283 which authorises it to carry on a financial services business in Australia.

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