Rotation to Better Assets Is Paying Dividends for Goodman. FVE Increases to AUD 8.00

Goodman Group’s fiscal 2017 earnings of AUD 43.1 cents per security, or cps, were 1% ahead of forecast mainly due to stronger-than-expected earnings in the funds management division. Our fair value estimate increases slightly to AUD 8.00 from AUD 7.90 due to modestly raised expectations for rental growth and funds management earnings. An offsetting factor is a very generous executive share plan, which totaled AUD 85 million in fiscal 2017. With Goodman currently trading around AUD 8.50, the stock screens as overvalued, with the guided distribution of AUD 27.5 cps, representing a yield of 3.3% based on a 60% payout ratio.