Goodman upgrades earnings outlook as online retail spurs warehouse demand

Macquarie Equities analysts said the upgrade was due to better-than-expected returns from its developments and the fact that its business returns (performance fees, development completions and investment income) are skewed towards the second half, which implies a level of conservatism in the full-year earnings guidance.

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Goodman chief executive Greg Goodman said by having projects across Asia, Australia, Europe and North America, the business can withstand any specific country issues, such as the coronavirus, which he said has not had any direct impact on its Chinese operations.

“Our result continues to be driven by our focus on specific markets where e-commerce is growing, consumer expectations are rising and the need for more efficient supply chains is becoming greater,” Mr Goodman said.

“We continue to build scale in our target markets, with development work in progress growing to $4.3 billion at the half, and expected to exceed $5 billion.”

He said the lack of land availability and rising values will see more vertical warehouses being developed, particularly around southern Sydney and suburban fringe areas of Melbourne.

Goodman is also undertaking development at its Oakdale industrial estate in Sydney’s west, where it has been long-rumoured that Amazon could build its third fulfilment centre. Amazon has already leased a 43,000 square metre facility in the Goodman Centenary Distribution Centre in Moorebank, Sydney.

‘Goodman have a track record of upgrading guidance throughout the year.’

Macquarie Equities’ Darren Leung and Stuart McLean

“The increasing urbanisation of cities means people want the convenience of delivery for goods bought online located near their homes,” Mr Goodman said.

Matthew Moore, vice president and senior credit officer at Moody’s Investors Service, said the reflect its portfolio of high-quality assets focused on infill locations with limited vacancy.

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“These assets continue to benefit from e-commerce growth and a push for more efficient supply chains,” Mr Moore said.

Macquarie Equities’ Darren Leung and Stuart McLean said new developments in the pipeline continue to underpin growth in the business, supplemented by capitalisation rate compression in the past six to 12 months.

“Goodman have a track record of upgrading guidance throughout the year. We believe the full-year guidance is relatively conservative given greater performance fees and development completions expected in second half to June 30.”

In late afternoon trade, Goodman securities were up 5.3 per cent at $16.21.