The Goodman Group (ASX: GMG) share price is up more than 4% after the property group gave its quarterly update to September 2021.
Goodman is one of the world’s largest owners, operators and developers of industrial property around the world.
Goodman’s FY22 first quarter update
The property business said that it has made a strong start in FY22 with the continuing structural changes, significant customer demand and intensification of use of sites in Goodman’s target markets.
At 30 September 2021, Goodman’s assets under management had grown 7% from June 2021 to $62 billion.
The business said that well-located real estate is recognised as essential infrastructure for the digital economy and making it a highly sought-after asset class. Recent market transactions and strong demand for capital markets is driving up values. Together with significant rental growth, this is expected to see valuation growth similar to FY21.
Goodman is expecting AUM to grow to around $70 billion by June 2022. This could be a helpful driver for the Goodman share price.
Looking at the net property income (NPI), it saw 3.2% like for like growth in its managed partnerships, which is a good level of growth. It had a 98.4% occupancy rate across the partnerships.
Development pipeline
Increased customer demand has resulted in an acceleration of development, particularly in infill locations. Work in progress was $12.7 billion at 30 September 2021, with an annual production rate for the year expected to average approximately $6.8 billion.
The strength of demand is driving strong margins and the yield on cost is currently at 6.8% across 81 projects.
Regeneration of existing brownfield sites is providing more sustainable development opportunities, closer to consumers. Goodman is expecting this activity to continue to be a major source of development into the future.
Outlook for Goodman and the share price
The significant level of customer demand, combined with supply restrictions in its markets, is creating a shortage of available space. The company is expecting higher cashflow growth for the long-term as well as further positive revaluations for its properties. It’s a compelling combination.
Goodman increased its market guidance for FY22, with operating earnings per share (EPS) growth expected to be more than 15%. That would be a strong result, in my opinion. No wonder the Goodman share price is rising.
It’s hard to say whether Goodman is good value today or not. The rising demand for logistics and industrial facilities could be offset by the rising interest rates. But in the long-term, operating earnings should keep rising. It could be one for the watchlist if the Goodman share price falls.
