The Trend Is Your Friend; Goodman’s FVE Raised to AUD 8.20

Site visits to a series of Goodman Group assets in Hong Kong and Shanghai have highlighted to us how strategically important industrial facilities can be to operators in competitive industries. The rotation of the portfolio up the quality curve by annually selling the circa 5% of assets with the weakest rental outlook is behind the small upgrade to our medium-term rent growth expectations. Increased visibility on the large and high-value facilities being developed in Asia and the establishment of a new Brazilian fund are behind our raised our outlook for development work in progress to rise to AUD 3.9 billion in fiscal 2020. The revisions increase our fair value estimate to AUD 8.20 from AUD 8.00, with narrow-moat-rated Goodman fairly valued at current levels.