The Goodman Group (ASX:GMG) share price has notched up 8 all-time highs this month. Here's why

Goodman shares keep rising, here's why.

| More on:
Builder with back to camera wearing hard hat watching tractor earthmover in sunset

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Goodman Group (ASX: GMG) share price has kept rising this month. It has notched up several all-time highs in December 2021. What's going on?

Goodman is one of the world's biggest industrial property groups. It has a presence in Australia, New Zealand, Asia, Europe, the UK, North America and Brazil. Goodman aims to create innovative property solutions that meet the individual requirements of customers, whilst finding long-term returns for investors.

What's going on with the Goodman share price?

Since the start of the month, Goodman shares have risen another 6.5%.

The business has been benefiting from structural trends for a while now and COVID-19 effects are accelerating those trends.

Indeed, Goodman says that it has been deliberately positioning its portfolio over the last decade to adapt to and leverage the changes in the digital economy. Those changes are now being realised. Customer demand for high-quality properties close to consumers has never been greater, according to Goodman.

Those trends are helping Goodman's rental growth, increased development activity and higher valuations.

The rental side of the business is seeing very high levels of utilisation. At 30 September 2021, Goodman had an occupancy rate of 98.4% with a portfolio weighted average lease expiry of 4.7 years. Its 12-month like for like net property income growth was 3.2% in the last quarter.

The assets under management (AUM) had increased to $62 billion.

Further growth is expected

Goodman is benefiting from increased customer demand, which has resulted in an acceleration of development, particularly in infill locations.

At 30 September 2021, its work in progress (WIP) had reached $12.7 billion, with an annual production rate for the year expected to average approximately $6.8 billion. The strong demand is driving "strong margins" and the yield on cost is currently at 6.8%. These are some of the underlying factors that may be helping the Goodman share price.

The pre-commitments have a long WALE of 14 years.

Regeneration of existing brownfield sites is providing more sustainable development opportunities closer to consumers. Goodman expects this activity to continue to be a major source of development into the future.

Goodman said that its outlook is strong and it's expecting its AUM to grow to around $70 billion by June 2022. Last month, Goodman acknowledged that COVID disruptions have been managed so that they have had less impact on the business than initial assumptions.

The property business also said that due to the strength of development projects, leasing success and stronger-than-expected performance of its partnerships, it increased its FY22 market guidance for operating earnings per security (EPS), which is now expected to be at least 15%.

Broker rating on the Goodman share price

There are still quite a few buy ratings on the business. However, Goodman shares have risen to those price targets.

One of the highest price targets at the moment is from Morgan Stanley, which has a target of $26.50 on the business. That's only slightly higher than where it is now, suggesting the price may not move much over the next year if the broker is right (or doesn't change the target).

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on REITs

Magnifying glass in front of an open newspaper with paper houses.
Share Market News

How did ASX REITs vs. residential property investment perform in FY25?

We review the share price growth of the largest ASX REITs vs. residential property investment in FY25.

Read more »

Male hands holding Australian dollar banknotes, symbolising dividends.
REITs

2 ASX REITs announcing new dividends today

Money, money, money!

Read more »

REIT written with images circling it and a man touching it.
REITs

Buy one, sell the other: Expert's verdict on 2 ASX REITS

Dylan Evans from Catapult Wealth offers his views on the ASX REITs, Goodman Group and BWP Trust.

Read more »

A man stares out of an office window onto a landscape of high rise office buildings in an urban landscape.
REITs

Aiming to beat the ASX 200 in 2025? I'd invest in this sector

I think this could be the right sector for building returns.

Read more »

A health professional sits contemplating in the corridor of a hospital.
REITs

Healthco Healthcare and Wellness REIT rips 17% higher on Healthscope update

HCW REIT owns several hospitals leased to private operator, Healthscope, which is now in receivership.

Read more »

Woman and man calculating a dividend yield.
REITs

What price target does Macquarie have on Goodman Group shares?

Goodman Group posted an interesting set of numbers in Q3. Here's Macquarie's take.

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
Dividend Investing

Looking for passive income amid falling interest rates? Check out this top ASX All Ords dividend stock

This high-yielding ASX dividend stock can help boost your passive income amid falling interest rates.

Read more »

Image of a shopping centre.
REITs

Capitalising on interest rate cuts: Should I buy an ASX REIT?

REITs tend to benefit more than most from interest rate cuts.

Read more »