GPT Group: Retail and Industrial Robust, Office Near the Bottom; Securities Undervalued

No-moat GPT Group posted a reasonable first-quarter update, with near full occupancy across its retail and industrial portfolio, but office leasing conditions declined 0.3% to 92%. However, GPT Group made progress during the quarter, with more than double the amount of office space leased than in the first quarter of 2023. We expect sluggish office conditions to eventually improve, driven by population growth, new transport infrastructure close to GPT’s assets, and less rival supply. In line with our full-year estimates, management reaffirmed its fund from operations of AUD 0.32 per security and distribution of AUD 0.24 guidance. GPT appears undervalued, trading at a material discount to our AUD 5.55 per share fair value estimate.