Goodman Group delivers on FY25 earnings and dividends, data centre bet continues

Goodman Group (ASX: GMG) delivered a 'no surprises' set of FY25 numbers, maintaining its continued focus on data centre development and logistics leadership.

The Group reported earnings growth of 9.8%, above its forecast of 9.0%, though this hardly comes as a surprise given the company's consistent track record of beating its guidance. Despite the solid result, the stock is experiencing some volatility, currently down 2.1% ($35.37) after briefly rallying 3.2% ($37.31) in early trade.

"We have looked beyond the volatility in the economic and trade environment over the last 12 months, and actively pursued long-term growth opportunities," said CEO Greg Goodman.

"These include making a number of strategic site acquisitions that will enable us to meet growing demand for data centres and capture future growth in logistics demand across our metropolitan locations."

With multiple moving parts across Goodman's property portfolio and growth aspirations, I spoke to Jack McNally from Airlie Funds Management to get his take on today's results and the path ahead.

Goodman Group (ASX: GMG) FY25 results

• Operating earnings per share up 9.8% to 118 cents vs. 118 cents consensus and guidance of 9.0% growth
• Gearing at 4.3% (vs. 8.4% at 30 June 2024), though look-through gearing at 17.3%
• Final dividend flat year-on-year to 15 cps, total dividend of 30 cents per share, in-line with guidance
• FY26 operating EPS guidance of 9.0% growth year-on-year vs. market expectations of 10-11%

• Total portfolio up 9% to $85.6bn, revaluation gains at $1.6bn
• Portfolio occupancy at 96.5%, with like-for-like net property income (NPI) growth at 4.3%
• Estimated end value of development work in progress (WIP) at $12.9bn across 57 projects, with a forecast yield on cost of 7.5%
• Data centres comprise 57% of development WIP, global power bank at 5.0 GW across 13 major global cities (2.7 GW secured, 2.3 GW in advanced procurement)

One liner: Results were broadly in line with expectations.

The key change was Goodman's decision to pursue regional partnerships for its data centre pipeline rather than a global approach, allowing it to move faster on this highly profitable opportunity.

Were there any surprises in this result that you think investors need to be aware of?

No major surprises overall. The shift to regional partnering model was the standout development.

Would you buy, hold or sell Goodman Group off the back of this result?

Rating: Hold

We see the data centre pipeline as highly attractive with strong barriers to entry and a proven management team. That said, valuation already captures much of this upside, particularly given the significant pipeline still to be executed. So there's obviously embedded risk in terms of executing on quite a substantial data centre pipeline.

Are there any risks investors need to be aware of?

What can be lost is that a lot of Goodman's existing earnings remain tied to global industrial and logistics trends. And so while the worst of the trade war fears are in the past, the uncertainty persists and could pose risks if conditions deteriorate.

From 1 to 5, where 1 is cheap and 5 is expensive, how much value are you seeing on the ASX today?

Rating: 4

Banks look stretched, which account for a large part of the index, with CBA trading at nearly 29 times earnings despite only low single-digit growth over the next few years. And the industrials index is also above its long-term average.

That said, as active managers, we limit our exposure to overvalued areas and instead find value in sectors that may be out of favor cyclically but offer strong valuation support. So BlueScope Steel is probably a prime example of this in our portfolio at the moment.