---
endpoint: analytics
pattern: Property
status: done
latency_ms: 215122
conversation_id: e822ce76-6e02-4c79-87b0-e3c0db326b29
citations: 11
created: 2026-05-31 20:49:57Z
---

# What catalysts could drive upside/downside for Goodman in the next 12–18 months?

# Goodman Group (ASX: GMG) — Catalysts for Next 12–18 Months

CLSA rates Goodman **High-Conviction Outperform** with a target price of **A$38.54** (DCF/SOTP blend, FY26 SOTP A$40.57, forward DCF A$36.50; cost of equity 9.3%, terminal growth 5.3%) [5]. The investment debate over the next 12–18 months is dominated by the execution roadmap on the **5GW data centre (DC) pipeline** — which CLSA argues underwrites double-digit earnings growth for the next five years and has an end value of **A$100–200bn over 10 years** [4].

---

## Earnings Trajectory — The Baseline

CLSA's earnings forecasts step up sharply once DC profit recognition kicks in:

| Year | EPS (A¢) | YoY growth |
|---|---|---|
| FY25CL | 118.2 | +10.0% |
| FY26CL | 132.7 | +12.3% |
| FY27CL | 152.5 | +14.9% |
| FY28CL | 180.2 | +18% |

EPS growth "jumps to 15%+ from FY27" as DC leasing recognition catches up [3]. Management has formally guided **9% operating EPS growth for FY26, equating to over A$2.6bn operating profit** [9].

---

## UPSIDE CATALYSTS (Next 12–18 Months)

### 1. DC Development Starts — August 2025
CLSA's roadmap calls out "significant data centre (DC) starts dominating news in Aug" as the first sequenced catalyst [1]. At Q3 FY25, management reported **A$1.9bn in development starts at a punchy 9% yield**, with DC development yield-on-cost expected in the **9%–12% range** vs logistics at 7%–8% [6]. With 0.5GW of DC starts scheduled by June 2026, each incremental tranche of starts is a profit-recognition event for the development P&L.

### 2. New DC Capital Partnerships — November 2025
The next milestone in CLSA's sequence is "earnings de-risking events of new DC capital partnerships in Nov" [1]. This matters because, as management explained, the significant DC programs will NOT be run inside the existing industrial partnerships — they will sit in new vehicles that better align risk/reward. Goodman has already **raised A$2.7bn in debt (mainly 7/10/20-year bonds) and bank lines**, and 90% of the DC projects are housed within capital partnerships [8]. Successful partnership formation de-risks funding, brings third-party fee revenue, and recycles capital into more starts.

### 3. Pre-Lease News Flow — February 2026
The third leg is "pre-lease news in Feb 2026" — typically aligned with the 1H FY26 result [1]. Management noted that DC leasing typically occurs **9–12 months after a build start**, because pre-leases are required to sell the development into a fund [3]. Hyperscaler pre-commitments unlock fund sell-downs and confirm yield assumptions.

### 4. Powered Land Monetisation Optionality
Management has flagged willingness to **sell powered land** opportunistically rather than always developing it out — generating cash, velocity of capital, and risk-de-risking [10]. With the secured power bank rising from 6GW to 6.4GW (West Melbourne 1GW addition is NOT yet in secured), each new land/power monetisation is incremental NAV.

### 5. Industrial Cap Rate Compression in 2H
CLSA's industry survey ahead of 30-June valuations expects **flat values across industrial/office/retail but cap rate compression in industrial in 2H** — providing ballast to the funds management platform. Management at Q3 separately noted "logistics cap rates are starting to compress again" [6]. Positive revaluations would directly lift NTA and the management-fee base.

### 6. Logistics Pipeline Restocking
Management stated they are "aggressively restocking the logistics development pipeline with very large acquisitions" [6]. This rebuilds the post-FY27 development engine beyond DCs.

### 7. US Logistics JV (delayed but still pending)
Q3 FY25 had no earnings upgrade — against the historical pattern — because Goodman has been delayed in selling-down its North American development assets into a fund due to tariff uncertainty [3]. Resolution of this JV is a near-term earnings unlock; CLSA still sees a 1% upgrade possible in August.

### 8. Re-rating Toward Data Centre Peer Multiples
Goodman trades on **25.1x 12m fwd PE — a 38% premium to the ASX 200, but close to the bottom end of its 5-year average and in line with ASX 50 growth stocks growing at 11–12% p.a.** [5]. As the business mix shifts toward operating-DC economics, CLSA raised its terminal growth assumption from 4.7% to 5.3% — reflecting a structurally larger long-term opportunity set [5].

---

## DOWNSIDE CATALYSTS / RISKS

### 1. Execution Risk on the 5GW DC Pipeline
CLSA states explicitly: "The main risk is whether Goodman can execute on its 5GW data centre pipeline, which involves leasing, development and capital raising. **Delays in ramping up data centre development starts may pose a risk given the current PE multiple.**" [2]

### 2. Capital Intensity & "Barriers to Entry"
CEO Greg Goodman has emphasised that **"The barriers to entry on this data center program around the world for everyone, the barriers to entry are getting higher. Things are more expensive. They're taking longer."** [7] This cuts both ways — it protects scaled incumbents but also means each project consumes more capital, lengthens timelines, and concentrates risk on power energisation rather than planning [7]. Failure to secure power, hyperscaler customers, or capital partners on any individual project drags the whole roadmap.

### 3. Slower Profit Recognition Cadence
Management has flagged that **DC leasing now occurs 9–12 months after a build start (not concurrently)**, slowing near-term profit recognition because leases are typically required to sell the development into a fund [3]. CLSA already trimmed FY25–28 EPS by 1–4% to reflect this signaling [3].

### 4. China Investment Drag
Investment operating metrics are "still sliding, mainly driven by tough conditions in China" — a recurring headwind to property income growth [6].

### 5. Hyperscaler Capex Sentiment Shocks
The March 2025 episode is instructive — **DeepSeek news flow, Microsoft data centre lease cancellations, and the A$4bn equity raise drove the stock down 19% (underperforming the market by 14%) in a single move**. CLSA at the time upgraded into the weakness arguing the correction was overdone. The risk recurs with any negative read-through from US hyperscalers (Microsoft, Meta, Amazon, Google capex announcements, Prologis read-throughs, AI demand questions).

### 6. PE Multiple De-rating Risk
At 25.1x FY26 PE / 29x at target price [5], Goodman has limited buffer if FY27 EPS step-change disappoints. The valuation assumes 15%+ EPS growth from FY27 — any slippage in DC starts/leasing translates directly into multiple compression.

### 7. Tariff / Trade Policy Uncertainty
The US logistics JV delay is explicitly attributed to tariff uncertainty [3]. Further trade-policy escalation could keep the US JV on hold, hostage development monetisation, and crimp the FY26 earnings bridge.

### 8. Sequencing Risk: First Mover Reputational Damage
Management has framed the strategy as needing to give "the customer a date of 2027 today. Otherwise, you might as well pack up your bag and go somewhere else" [7]. Any meaningful delay vs the promised delivery cadence (e.g., 2027 datacentres slipping to 2028) risks losing strategic hyperscaler customers to competitors.

### 9. Industrial Cap Rate Mis-step
CLSA's base case is flat-to-compressing industrial cap rates [9]. A surprise expansion would erode NTA and trigger negative revaluations across the A$13.7bn WIP base [6].

### 10. CEO / Talent Concentration
Goodman's franchise is deeply tied to founder-CEO Greg Goodman. CLSA's June 2025 "Who's who in the zoo II" analysis ranks Goodman top of the A-REIT cohort on Glassdoor CEO approval and employee engagement, but any unanticipated CEO transition or talent attrition (especially in the ~300-person DC team) is a key-person risk [10].

---

## Calendar — The Sequenced Catalyst Path

| Window | Event | Direction |
|---|---|---|
| **30-Jun-2025 draft valuations** | Industrial cap rate signals; possible Sydney office positive revals | Slight upside [9] |
| **August 2025 (FY25 result)** | DC development starts announcement; possible 1% earnings upgrade; US logistics JV update | Primary upside catalyst [1][3] |
| **November 2025 (1Q FY26 update / AGM)** | New DC capital partnership announcements (formation, partner identity, fund structure) | Earnings de-risking [1][8] |
| **February 2026 (1H FY26 result)** | DC pre-lease announcements; first half operating profit ~A$1bn vs A$2.6bn FY26 target (implying 2H skew) | Final leg of CLSA's sequenced upside [1][9] |
| **Calendar 2025/2026** | Bulk of 0.5GW of DC starts; energisation of secured power; pre-leases on first vertical builds | Cumulative re-rating [11] |

---

## Net Read

The next 12–18 months is essentially a **sequenced execution story**: starts (Aug) → partnerships (Nov) → pre-leases (Feb 2026). If those three milestones land on time, CLSA's FY27 EPS step-change (+15%) becomes the consensus base case and the stock re-rates beyond ASX-200 growth peers. If even one materially slips — particularly pre-leasing or partnership formation — the 25x PE has limited downside protection given how much of CLSA's valuation (72% of DCF) sits in terminal value [5].

---

**Sources**

[1] Goodman – HC O-PF (Roadmap becoming clearer) — CLSA (28 May 2025) — 607960765LinqAlpha.PDF
[2] Goodman – HC O-PF (Roadmap becoming clearer) — CLSA (28 May 2025) — Investment risks section
[3] Goodman – HC O-PF (Roadmap becoming clearer) — CLSA (28 May 2025) — Earnings revisions section
[4] Goodman – HC O-PF (Roadmap becoming clearer) — CLSA (28 May 2025) — Investment thesis section
[5] Goodman – HC O-PF (Roadmap becoming clearer) — CLSA (28 May 2025) — Valuation section
[6] Goodman – HC O-PF (Roadmap becoming clearer) — CLSA (28 May 2025) — Key points section
[7] Goodman Group, H2 2025 earnings call — Greg Goodman remarks on capital intensity and barriers to entry
[8] Goodman Group, Q3 2026 Sales and Revenue Call (25-May-2026) — Nick Vrondas on capital management and A$2.7bn debt raise
[9] Goodman Group, Q1 2026 earnings call — Nick Vrondas confirming FY26 9% operating EPS growth target
[10] Goodman Group, Q3 2026 Sales and Revenue Call — Greg Goodman on powered-land monetisation optionality
[11] Goodman Group Q2 2025 earnings call — James Druce (CLSA) Q&A on 0.5GW DC start timing

## Citations

- [1] **607960765LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960765LinqAlpha.PDF>
- [2] **607960765LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960765LinqAlpha.PDF>
- [3] **607960765LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960765LinqAlpha.PDF>
- [4] **607960765LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960765LinqAlpha.PDF>
- [5] **607960765LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960765LinqAlpha.PDF>
- [6] **607960765LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960765LinqAlpha.PDF>
- [7] **Goodman Group, H2 2025** · external
- [8] **Goodman Group, Q3 2026 Sales and Revenue Call - Operational Update, 25-May-2026 7** · external
- [9] **Goodman Group, Q1 2026** · external
- [10] **Goodman Group, Q3 2026 Sales and Revenue Call - Operational Update, 25-May-2026 7** · external
- [11] **Q2 2025 Goodman Group** · external

