Goodman Group

Greencape High Conviction Fund recently initiated a position in Goodman Group (GMG) based on its strong operational fundamentals and attractive valuation. GMG, a leader in owning, developing, and managing industrial properties in high-demand global locations, has benefited from strong alignment between its founder-led management team and shareholders. While the company was previously affected by the low-interest-rate environment, the Fund believes GMG’s current share price reflects the risks of higher rates in the longer term. Greencape sees continued growth in GMG’s assets under management, which increased by nearly 7% in the last quarter despite broader market concerns. The Fund is particularly optimistic about GMG’s below-market rents, driven by rising demand for specialized logistics and technology-focused sites. With expectations for rental revisions of 20%-60% upon lease expiry, Greencape anticipates strong cash flow growth and asset value appreciation. Additionally, GMG has significant flexibility in its operations, including $1.2 billion in performance fees and over $600 million in deferred development revenues, which could further support earnings growth. Overall, the Fund views GMG as a high-quality business, well-positioned for solid medium-term growth, especially given its conservative balance sheet and embedded opportunities.

Greencape High Conviction Fund continues to hold Goodman Group (GMG) due to its strong competitive advantages and strategic positioning in the data center market. The Fund initially added GMG to the portfolio nearly two years ago, recognizing the company’s focus on lower gearing and the recycling of assets into higher-quality locations. The recent sell-off in GMG's stock, driven by rising interest rates, presented a unique opportunity to invest in a founder-led business with substantial balance sheet flexibility. This flexibility, combined with GMG's expertise in securing key locations and power supply, has allowed the company to unlock significant latent value through data center developments. The Fund believes GMG’s ability to leverage its prime land holdings, including in Japan and Europe, will drive continued growth, particularly with the surge in demand for data centers fueled by the rise of Generative AI. GMG's ability to secure power in high-demand regions is a key catalyst for future value. After recent site visits and research, the Fund is confident that GMG is well-positioned to manage execution risks and capitalize on opportunities in underserved markets. Given this strong outlook, Greencape expects GMG to deliver mid-teens earnings growth in the foreseeable future, supporting a higher valuation.

CI Australian Equities Fund continues to hold Goodman Group (GMG) in its portfolio, recognizing the company's strong position to capitalize on the growing demand for data center capacity. With a substantial development pipeline of 4.3GW across 12 global cities, Goodman is well-placed to benefit from the expansion of the data center sector over the medium term. However, the Fund is observing developments in this space with caution, particularly due to the significant hype surrounding the AI thematic, which could influence market dynamics. Despite this, CI Australian Equities Fund remains optimistic about Goodman’s prospects, given its robust pipeline and strategic positioning in the global data center market.