The Goodman Group (ASX: GMG) share price has risen by around 24%. Can the e-commerce boom continue to help the business?
In-fact, Goodman shares have gone up by around 14% in the last month alone.
Many brokers believe that the business is still a buy, despite its strong run up of value. For example, Credit Suisse thinks it’s a buy with a price target of $25.01.
The brokers at Macquarie Group Ltd (ASX: MQG) believe that Goodman is a buy with a price target of $26.45.
Morgan Stanley thinks it’s a buy with a price target of $26.50 for the Goodman share price.
All of those brokers recently updated their thoughts on the real estate giant after the latest quarterly update from Goodman.
Financial strength and growth in FY22 Q1
Goodman said that at 30 September 2021, its total assets under management (AUM) had grown to $62 billion.
The business experienced 3.2% like for like net property income (NPI) growth in its managed partnerships. The occupancy across the partnerships was 98.4%. The development pipeline of work in progress (WIP) had grown to $12.7 billion.
Goodman noted that COVID-related disruptions in FY22 have been managed so that they have had less impact on the full year projections than initially assumed.
In addition, given the strength of its development projects, leasing success and the stronger-than-expected performance of its partnerships, the outlook for FY22 is ahead of previous forecasts.
It’s now expecting operating earnings per share (EPS) growth to be more than 15%.
Goodman made a number of observations that explained why it is seeing such a strong operating environment, which may be helping the Goodman share price.
The real estate business said that well-located industrial real estate is recognised as essential infrastructure for the digital economy and making it a highly sought-after asset class. Recent market transactions and strong demand is driving asset values higher. Combined with “significant” rental growth, this is expected to support further valuation growth similar to FY21.
By June 2022, Goodman is expecting its AUM to rise to around $70 billion. Investors often like to think about the upcoming financial year when considering the Goodman share price.
The business also said that the significant level of customer demand, combined with supply restrictions in its markets, is creating a shortage of available space. It’s focusing on infill markets, to deliver sustainable opportunities for customers and investors, while securing cashflow growth for the long-term.
The boss of Goodman, Greg Goodman, said:
The results of the deliberate positioning of our 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.
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.
The value added to our properties through intensification of use, and strong investor appetite for logistics real estate will drive further positive revaluation outcomes in FY22.
Valuation of the Goodman share price
Using Morgan Stanley’s estimates, Goodman is valued at 32x FY22’s estimated earnings.