Here’s why Goodman Group (ASX:GMG) should be on investors’ radar

Summary

  • Goodman Group has clocked $614.9 million of operating profit, up by 16 per cent over 1H FY20.
  • The group has reduced gearing to 4.8 per cent from 7.5 per cent in FY20.
  • Property investment income was down from $213.3 million in 1H FY20 to $196.1 million in 1H FY21.

On 19 February 2021, Goodman Group (ASX:GMG) released its earnings update for the period of six months, ended 31 December 2020. The substantial contribution from development business during the reported period has reflected the quality, execution and scale of the development operations. The company has clocked $614.9 million of operating profit, up by 16 per cent over 1H FY20.

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The asset pricing strength has driven revaluation gains worth $1.5 billion across the group and partnerships. This has resulted in a global weighted average cap rate, tightening to 4.7 per cent.

The partnerships have continued to perform strongly during the reported period, resulting in an uptick of 6 per cent in external AUM to $48.5 billion, with total AUM notching up by 5 per cent to 51.8 billion. The net acquisitions worth $1.1 billion have been offset by a currency move of $2.1 billion.

Property investment income was down from $213.3 million in 1H FY20 to $196.1 million in 1H FY21 due to repositioning of assets for development and asset sales in FY20 and 1H FY21.

Growth in development earnings was supported by the increase in the annualised production rate of the WIP. Operating expenses were stable during the reported period as the business concentrated on its selected markets and utilised performance-based compensation.

The group is also expecting a further reduction in its borrowing costs in 2H FY21 due to repayment of bonds, refinancing and the impacts of recent movements in market rates of interest and Forex.

The group has maintained a strong balance sheet as gearing has been decreased to 4.8 per cent (from 7.5 per cent FY20) and 16.6 per cent on a look-through basis. The period-end Forex strength has reduced the A$ translated value of foreign-denominated assets and liabilities.

Read More: Goodman Group produced a strong first quarter for FY2020.

Stock Performance

Goodman Group’s share price closed at A$16.99 on 18 February 2021. The stock price has been trending down for the last three months, delivering a negative return of 8.2 per cent. The one-year return stands at 3.15 per cent.

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