The Goodman Group (ASX: GMG) share price is up another 2% today, meaning its shares have risen by 9% this week already.
Goodman is a global property group. It owns, develops and manages industrial real estate including logistics and industrial facilities, warehouses and business parks.
Yesterday, the real estate business released its quarterly update for the first three months of FY22.
Goodman said that its first quarter was the result of the deliberate positioning of its portfolio over the last decade to adapt to and leverage the changes in the digital economy, are now being realised. Customer demand for high-quality properties close to consumers has never been greater, according to Goodman.
The business is experiencing rental growth, increased development activity, stronger than expected performance from its partnerships and generally higher levels of profitability, leading to upgraded earnings guidance for FY22.
Goodman outlined some of the key highlights from the quarter. Its total assets under development (AUM) increased from $57.9 billion to $62 billion over the three months. That growth was driven by “strong” revaluation gains, development completions and net acquisitions. AUM growth can help the Goodman share price.
It also saw 3.2% of like for like net property income (NPI) growth in its managed partnerships. Goodman said that underlying property fundamentals remain strong globally. Management stated that the growth in demand is driving higher utilisation of space as customers seek to improve their supply chains. The occupancy rate remained “high” at 98.4% with the portfolio having a weighted average lease expiry (WALE) of 4.7 years.
Goodman continues to have a large pipeline of work. It had $12.7 billion of development work in progress (WIP).
All of the above highlights allowed the business to increase its earnings guidance for FY22 with operating earnings per share (EPS) now expected to grow by more than 15%.
What is driving the demand for Goodman properties?
Goodman said that the significant level of customer demand, combined with supply restrictions in its markets, is creating a significant shortage of available space. It’s executing on its strategy, focusing on infill markets to deliver sustainable opportunities for customers and investors, while securing cashflow growth for the long-term.
This could continue to be influential for the Goodman share price.
Greg Goodman, the CEO of Goodman Group, said:
High utilisation of space, barriers to entry and limited supply in our markets are underpinning occupancy and cash flow growth in our portfolio, with strong rental growth occurring globally. We remain focused on regeneration of existing land and buildings in our portfolio, supporting future development work and reducing our impact on the environment.
Goodman says that it’s well positioned financially, with significant liquidity and low gearing. It has the ability to grow development activity and pursue select investment opportunities.
It’s expecting AUM to continue growing to around $70 billion by June 2022.
Goodman noted that COVID-related disruptions in FY22 have been managed in such a way that they have had less impact on the full year projections than it had initially assumed. This combines with the strength of its development projects, leasing success and stronger-than-expected performance from its partnerships.
The broker Credit Suisse thinks that the Goodman share price is a buy, with a price target of $25.01, which thinks FY22 could be might even better than expected.