It’s impossible to invest in Amazon directly on the ASX. However, there is a share on the ASX that generates some of its earnings from Amazon.
Goodman Group (ASX: GMG) is one of the largest property businesses on the ASX with earnings generated across the world and it just reported its operational update for the first quarter of FY19.
Goodman Group now has $39.6 billion of total assets under management with $3.6 billion of development work in progress.
A key attraction for me to Goodman Group is its high occupancy rate. It reported that its occupancy rate was 98%. There are few real estate investment trusts (REITs) on the ASX with a higher rate.
Goodman Group also reported like for like (LFL) net property income (NPI) growth of 3.3%, soundly beating inflation, with a weighted average lease expiry (WALE) of 4.7 years.
What does Goodman Group have to do with Amazon?
When Goodman Group reported its June 2018 result it reported that its largest customer by net income was Amazon by some distance. Around 4.5% of its net income came from Amazon, with the next customer – Deutsche Post (DHL) – only generating 3.1% of net income.
However, Amazon isn’t the only customer to be excited about.
Goodman Group CEO Greg Goodman said “Our customers across all industries are investing in the evolution of their supply chains. With more than US$67 billion expected to be invested in robotics by 2025, having high-quality industrial facilities, close to their customers, that are designed to house their investment in technology, is a key component of their strategy.”
Goodman Group reaffirmed that its FY19 operating earnings per security will be 50 cents, translating to growth of 7% compared to FY18.
The growth in customer demand, combined with scarce availability of land in most of the markets it operates, and competition from alternate uses, is creating a strong environment for its business according to Goodman Group. This is translating into “strong rental growth, occupancy and development volumes.”
I think Goodman Group is one of the best property businesses on the ASX – its global earnings, its customers and industry is attractive to be in for at least the medium-term. It’s trading at 20x FY19’s operating earnings with a trailing distribution yield of 2.75%.
However, ideally I’d prefer to buy it with a yield of above 3%. So, it’s on my watchlist for now.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.