Why Goodman Group is an impressive investment option


In the dynamic world of investments, it's essential to keep an eye on opportunities that might not always be in the limelight but have the potential to reshape the landscape.

One such opportunity that's been capturing my attention lately is Goodman Group. Let's dive into what makes Goodman Group an impressive investment option and why its recent results represent a quantum leap in its transformation.

What is Goodman Group?

goodman group amazon warehouses

Goodman Group isn't your typical real estate player. It's a global property giant that has etched its name in the industry by constructing warehousing infrastructure for giants like Amazon.

But what sets Goodman Group apart is its ability to adapt and evolve. It represents a significant portion of the ASX A-REIT index, making up around 27% of it. It is also one of the few offshore earners in the A-REIT index.

What makes it a good investment option?

Goodman Group might not always appear to be a bargain compared to its domestic peers. Still, when we look at the broader context, it consistently delivers superior returns at lower leverage levels. It's a real estate fund manager that has real pricing power, a quality that's often underappreciated.

In equity generalist terms, Goodman Group trades on a forward earnings multiple of 19 times with at least low teens growth for the next five years. Indeed, a premium to its property peers (whose earnings are mostly shrinking) but a lot cheaper than growth companies that trade on revenue multiples. Even Coles was trading at 20 times just before the recent downgrade.

What also makes Goodman Group particularly enticing as an investment option is its strategic shift into the data centre industry and its partnerships with hyper-scalers like AWS, Microsoft, and Oracle. These developments signify a quantum leap in its business transformation.

Why the quantum leap?

The recent 2023 financial year results from Goodman Group unveiled two game-changing announcements.

First, it revealed an expansive pipeline of data centre sites with secured and potential power allocation exceeding 3 gigawatts (GW), with the possibility of reaching up to 4GW as agreements are finalised. This scale surpasses initial expectations and significantly diversifies Goodman Group's operations.

Secondly, Goodman Group is exploring partnerships with hyper-scalers to provide a complete solution as a developer and operator. This shift represents a monumental step from its historical focus on power shell developments. The timing couldn't be better as hyper-scaler demand surges with the evolving landscape of artificial intelligence (AI).

What's more, these strategic moves aren't just about expansion; they de-risk medium-term development earnings. The data centre developments are seen as accretive to margins and yields, potentially underpinning a substantial portion of development earnings over the medium term.

In conclusion, Goodman Group isn't just a real estate giant; it's a forward-looking powerhouse that's seizing opportunities in the data-driven era. Its recent results and strategic moves signify a quantum leap in its business transformation, making it an investment option that demands attention.

As the world becomes increasingly digital, Goodman Group's ventures into data centres and partnerships with hyper-scalers position it as a key player in the evolving landscape, offering significant growth potential.

In the ever-changing investment landscape, Goodman Group stands out as a beacon of innovation and adaptability, ready to ride the wave of the data revolution.

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Jun Bei Liu is the portfolio manager of Tribeca's Alpha Plus Fund. Since taking over sole responsibility for managing the fund, she has doubled AUM to over $1 billion. She started as at Tribeca an equity analyst and spent several years as a portfolio manager before taking over the Alpha Plus Fund in 2019. Jun Bei is fluent in Chinese, and learned English as a teenager upon leaving China and emigrating to Australia at 16. She has a Bachelor of Commerce from the University of NSW, is a graduate member of the Australian Institute of Company Directors, and a Chartered Financial Analyst. She serves on the advisory committee for Australian Student Asset Management and is also a volunteer for Raise Foundation Board.