Goodman Group shares jump 9% to 52-week high as investors ponder AI impact

Goodman Group (ASX: GMG) shares are rising strongly on Friday, up 9% at their intraday peak and setting a new 52-week high of $22.74 per share.

This comes on top of a 5.72% surge yesterday after the company released its full-year FY23 report.

Goodman revealed a 17% bump in operating profit to $1.78 billion and operating earnings per share (EPS) of 94.3 cents, up 16%.

The company expects operating EPS to go up another 9% to 102.9 cents in FY24.

Goodman shares are currently trading at $22.50, up 7.76%.

Goodman shares running hot on Friday

The ASX property share is currently the third best-performing stock within the ASX 200 on Friday.

Goodman's report is easily one of the best we have seen from the ASX property stocks so far this year.

A key reason for this could be Goodman's industrial property focus.

In today's digitising economy, there is strong demand for large industrial properties to house stock for online retailers as well as data centre space for cloud computing and artificial intelligence uses.

A lack of supply of land and high barriers to entry including planning difficulties are also playing a role.

Rising interest rates have been a challenge for all real estate companies in FY23, and rising inflation especially in relation to the cost of building supplies and labour has made it more expensive to develop sites.

Despite these challenges, Goodman Group CEO Greg Goodman said the quality and location of their existing sites underpinned rental growth, property values and development activity in FY23.

Goodman said:

These locations are also providing value-add opportunities, as we see increased competition for
industrial sites from other uses such as data centres and potential residential rezoning.

Significant growth in data storage and AI in particular, is driving data centre demand which is now approximately 30% of our $13 billion development workbook, and importantly we have a pipeline of over 3GW which has significant value over time.

Goodman's assets are currently 99% occupied, and the group's gearing is low at 8.3%.

Its total assets under management are now worth $81 billion, up 11% on FY22, primarily due to $6.9 billion in development completions, acquisitions, and revaluations.

There was an $800 million uplift in revaluations across group and partnership assets, with strong gains in North America and Australia offsetting other parts of the world.

Like-for-like net property income (NPI) growth came in at 4.7%.

What's ahead for Goodman in FY24?

Goodman said competition for land was constraining supply, but the company was seeking to diversify its customer base to offset this.

It also wants to enhance the value of existing assets through redevelopment. There is $13 billion worth of development work in progress across 81 projects, with a forecast yield on cost of 6.6%.

He said:

Our focus on the digital economy, and our concentration in high barrier-to-entry markets, is supporting the positive outlook for occupancy, rents, continued development activity and the performance of our Partnerships.

Competition for land from a broad range of alternative uses is further impacting supply in our markets
but broadening the customer base and opportunities for development.

These opportunities include intensification to create multi-level industrial, data centre developments where we have secured or identified greater than 3GW of potential power within our existing portfolio, and the next phase of the urban renewal cycle where we potentially have significant opportunities to realise value within our Australian portfolio.

Goodman shares snapshot

The Goodman Group share price has ascended 30% in the year to date.

This compares favourably to the S&P/ASX 200 Index (ASX: XJO), which is up 3.1% over the same period.