Goodman Group Earnings: Data Centers a Major Profit Driver, but It Is More Than Priced in

Goodman Group posted a strong half-year result, with operating earnings per security of AUD 0.59, 28% higher than the first half of 2023. Management now signals fiscal 2024 OEPS growth of 11%, up from the 9% guidance provided in August 2023. We increase our OEPS estimate to AUD 1.05, up from AUD 1.03, mainly driven by increased assumptions for rental growth this year. We also increase our medium-term rent assumptions, given Goodman’s current rents are an estimated 25% below market rents. This, combined with the time value of money, pushes our fair value estimate up 7.0% to AUD 20.75 per security. Even so, Goodman Group securities look overvalued, with the market seemingly more optimistic than we are about industrial property and Goodman’s fast-growing opportunity in data centers.