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Goodman Profit Rises, Forecasts More Growth in FY20

By David Winning

 

SYDNEY--Goodman Group (GMG.AU) reported a 48% rise in annual profit, as demand intensifies for inner-city sites in Asia-Pacific and North America that can host everything from data centers to warehouses used by online retailers.

Goodman on Friday said its net profit totaled 1.63 billion Australian dollars (US$1.10 billion) in the 12 months through June, up from A$1.1 billion a year ago and including its share of property valuation gains.

Global real-estate investment trusts are getting a big tailwind from the recent fall in bond yields, as central banks from the U.S. to Australia ease monetary policy.

Underscoring management's confidence in the outlook, Goodman said it expects an operating profit per security of 56.3 cents in the 12 months through June 2020. If achieved, that would be 9.1% higher than the 51.6 cents reported for the 2019 fiscal year.

Goodman said it also expected an operating profit of A$1.04 billion, up 10% on fiscal 2019, and an annual distribution of 30.0 cents in the fiscal year that began last month.

Warehouse space and logistics operations close to major cities are increasingly in demand as more consumers buy products online, prompting investors to favor Goodman over shopping mall owners. Over the past year, Goodman's shares have outperformed rivals including Shopping Centres Australasia Property Group (SCP.AU) and Scentre Group (SCG.AU).

Property values and rents have also been driven up by the growth of technology industries, which want sites that are close to their customers. Goodman recently said a data center operator had agreed to a 15-year pre-commitment on a development in Hong Kong, while data center users were also interested in developments planned by the company in Tokyo.

Goodman said its property was 98% occupied at the end of June, with like-for-like net property income growth of 3.3% over the past year.

"Our continued strategic focus on owning, developing and managing high-quality industrial properties for customers in key urban centres is delivering positive results," Chief Executive Greg Goodman said.

Commercial real estate typically is valued based on its capitalization rate, or the annual net income produced by a property divided by the purchase price. Like bond yields, falling cap rates indicate rising values, and vice versa.

Goodman, along with many real-estate investment trusts, has benefited from strong inflows of capital and asset sales that have tightened the cap rates for industrial property.

Goodman has been aggressively pursuing a strategy of focusing on so-called gateway cities such as Sydney, Hong Kong and Los Angeles that share characteristics such as a scarcity of land, close proximity to wealthy consumers, and serviced by modern infrastructure and transport networks.

That strategy has seen it sell assets, while taking additional steps to reduce its debt burden. Goodman said its gearing--a measure of debt relative to equity--was 9.7% at the end of June.

Goodman has also invested in new projects that it believes offer superior returns, seeking to lock in tenants to most space prior to the completion of any development. The company's development pipeline is worth A$4.1 billion, with 55 projects underway across 13 countries.

This is expected to reach around A$5 billion in the next 12 months, Mr. Goodman said.

"We have raised and deployed more capital in partnerships to fund developments, which combined with solid property fundamentals, has led to robust partnership returns, averaging 16% for the year," he said.

 

Write to David Winning at david.winning@wsj.com

 

(END) Dow Jones Newswires

August 22, 2019 19:23 ET (23:23 GMT)

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