---
endpoint: analytics
pattern: Property
status: done
latency_ms: 190558
conversation_id: 2e4d47bd-ba8b-4154-a9a7-b720ebf4ea21
citations: 5
created: 2026-05-31 19:06:37Z
---

# What’s the bull case bear case for Goodman?

# Goodman Group (GMG AU) — Bull Case vs. Bear Case

**Current set-up**: HC Outperform on CLSA's coverage list, 12-month price target A$38.54 (~+17% upside, blended SOTP/DCF), trading at 25.1x 12M-fwd PE — a ~37.5% premium to the ASX200 [1][6][7]. Today the issue is no longer "what is Goodman?" — it's an industrial REIT that has retooled itself into a global data-centre developer — but rather "can it execute the 5GW pipeline at the multiple the market is paying?"

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## Bull Case — the data-centre pipeline underwrites a multi-year earnings step-change

**1. Pipeline size & monetisation.** CLSA's investment thesis explicitly hangs on "sizing up the seriously large data centre opportunity." The DC pipeline has been upsized from 3GW (revealed at FY23) to 5GW, with an estimated **end value of A$100bn–A$200bn over 10 years**; the initial 0.5GW is set to start before June 2026, and at a minimum the pipeline underwrites CLSAe double-digit EPS growth over the next five years [2]. Goodman has since pushed the global power bank to **6.4GW** as of Q3 FY26 — an additional buffer at the top of the funnel [10].

**2. WIP roadmap is now positively-skewed.** 3Q FY25 confirmed the trough in development WIP (A$13.7bn, +5% QoQ) and asset values. CLSA flagged a constructive news flow roadmap: meaningful DC project starts in Aug, capital-partnership de-risking events in Nov, and pre-lease announcements in Feb 2026 [1][4]. Management has now formally guided WIP to **~A$18bn by June 2026** — i.e., another ~A$4bn build-out in a single year [10].

**3. Earnings step-change visible.** CLSA forecasts **10% EPS growth in FY25, 12% in FY26, jumping to 15%+ from FY27** [5]. Management itself has set a minimum **9% operating EPS growth target through FY2026** and confirmed it is "on track to deliver at least this level" [11] — the upside drivers (performance fees, percentage-of-completion, transaction timing) point one way only.

**4. Yield economics are favourable.** Management has guided DC development yield-on-cost to **9%–12%** vs. logistics at **7%–8%**, and reported **A$1.9bn of development starts at a punchy ~9% yield** [4]. Cap rates on logistics are starting to compress again — providing ballast to the funds-management platform [4].

**5. Underlying portfolio remains healthy.** Occupancy is **~97%** with **like-for-like NPI growth of ~4.5%** through 3Q FY25 — operating metrics are softening at the margin (driven by China — see bear case) but absolute levels are still healthy [4][8].

**6. Secular tailwinds management is leaning into.** Greg Goodman framed the backdrop bluntly: "AI adoption is accelerating and compute capacity remains constrained… Energy availability is the most significant constraint to delivering the required infrastructure" — adding that the scale of land, approvals, power procurement and capital required "increasingly favor the small number of groups" who can execute, raising the barriers to entry [9]. Total customer demand is "vast… It's a matter of how much you can actually supply" [12]. On the industrial side, "people-less warehouses" / robotics + agentic AI is being positioned as the second leg of growth alongside DC [13].

**7. Multi-year capacity to keep starting projects.** Power bank of 6.4GW gives Goodman ~10–11 years of run rate at current production tempo, and management plans long-term funding (over A$10bn potentially raised through retained earnings over five years) so the business can fund its share of long-term holdings without excessive debt reliance [10].

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## Bear Case — premium multiple + execution-heavy story

**1. Valuation already prices it in.** GMG trades at **25.1x 12-month forward PE, a ~38% premium to the ASX200**, and a 29x at CLSA's target price (reflecting the FY27 step-change) [6][7]. CLSA argues this is "close to the bottom end of the five-year average" and in-line with ASX 50 growth stocks growing 11–12% pa [6] — but that "in line" framing means there is no margin of safety: the market is paying full price for an outcome that hasn't yet shown up in printed earnings.

**2. Execution risk on the 5GW pipeline is THE risk.** Per CLSA, "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" [3]. All three legs (leasing, build, capital) must clear for the FY27 acceleration to land.

**3. Slower revenue recognition than the market may model.** CLSA trimmed earnings 1%–4% across FY25–FY28, citing two factors: (a) delay in joint-venturing the US logistics development portfolio into a fund due to tariff uncertainty, and (b) management's comment that **data-centre leasing typically lands 9–12 months after build starts**, slowing profit recognition near term because leases are typically required to sell the development down into a fund [5]. The 3Q FY25 print broke the historical pattern of in-quarter upgrades [5].

**4. Investment-portfolio operating metrics are softening.** Occupancy slipped from ~99% (FY22-23) to ~97% (3Q FY25) and LFL NPI growth has rolled from 4.9% in FY24 to 4.5% by 3Q FY25 — CLSA attributes the drag primarily to **tough conditions in China** [4][8]. Goodman is still healthy but the trajectory is the wrong way.

**5. Pre-lease commitments not yet locked.** Management has been candid that customer discussions are at "negotiations and finalizations" stage and they are under multiple NDAs / exclusivity arrangements [10]. Goodman is starting **early-works packages and shells while still negotiating leases**, which de-risks the back end but means investors are paying a 25x multiple ahead of headline lease announcements. First potential billings for LAX is Q1 2027 earliest; European projects late-2026 / early-2027 [10] — i.e., the meaningful revenue conversion is still 6–18 months away.

**6. Tariff / geopolitical overlay.** Tariff policy uncertainty has already delayed the North American JV sell-down [4] — a profit event that was implicitly in the FY25 set-up. Any escalation in trade friction directly slows funds-management AUM recycling and therefore performance-fee crystallisation.

**7. Concentration risks lurking.** Major shareholders include **China Investment Corporation at 7.9%** alongside Vanguard at 8.8% — a structural overhang in a geopolitically-sensitive moment, though not an immediate catalyst.

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## Net View (Per CLSA)

| Metric | Value | Source |
|---|---|---|
| Rating | **HC Outperform** (reiterated) | [1] |
| 12M Target Price | **A$38.54** (avg of SOTP A$40.57 and DCF A$36.50) | [7] |
| Implied PE @ target | **29x FY26** | [7] |
| Spot PE / Premium to ASX200 | 25.1x / **+37.5%** | [6] |
| EPS growth (CLSAe) | FY25 **10%** → FY26 **12%** → FY27+ **15%+** | [5] |
| Mgmt guidance | Min. **9% operating EPS growth through FY26** | [11] |
| Development WIP (3Q25 → June 2026 target) | A$13.7bn → ~**A$18bn** | [4][10] |
| DC pipeline / power bank | 5GW pipeline / **6.4GW power bank** | [2][10] |
| DC yield on cost (mgmt) | **9–12%** (vs logistics 7–8%) | [4] |
| Investment thesis hinge | Pipeline end value **A$100–A$200bn over 10 yrs** | [2] |
| Principal risk | **5GW execution** (leasing, dev, capital) | [3] |

The thesis is asymmetric in scenario terms but not in price terms. **The bull case is large in absolute size (A$100–200bn end value pipeline, multi-year EPS step-up), but the bear case is concentrated in time** — any slip in DC starts, capital-partner closure, or pre-leasing in the Aug-2025 → Feb-2026 corridor will be punished against a 25x multiple. The dominant question for the next 9 months is not "is the demand there?" — Greg Goodman calls the book "vast" and supply-constrained globally [12] — but "is the conversion to printed earnings on time?"

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**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 thesis (5GW DC pipeline / A$100-200bn end value)
[3] Goodman - HC O-PF (Roadmap becoming clearer) — CLSA, 28-May-2025 — Investment risks
[4] Goodman - HC O-PF (Roadmap becoming clearer) — CLSA, 28-May-2025 — Key points (WIP, yields, China drag)
[5] Goodman - HC O-PF (Roadmap becoming clearer) — CLSA, 28-May-2025 — Earnings revisions
[6] Goodman - HC O-PF (Roadmap becoming clearer) — CLSA, 28-May-2025 — What's in the price (25.1x PE, 38% premium)
[7] Goodman - HC O-PF (Roadmap becoming clearer) — CLSA, 28-May-2025 — Valuation (target A$38.54)
[8] Goodman - HC O-PF (Roadmap becoming clearer) — CLSA, 28-May-2025 — Occupancy / LFL NPI table
[9] Goodman Group Q3 FY2026 Operational Update — 25-May-2026 — Greg Goodman opening remarks (AI / energy constraint)
[10] Goodman Group Q3 FY2026 Operational Update — 25-May-2026 — WIP target A$18bn / 6.4GW power bank
[11] Goodman Group Q3 FY2026 Operational Update — 25-May-2026 — 9% operating EPS growth target
[12] Goodman Group Q3 FY2026 Operational Update — 25-May-2026 — "Constrained market… cannot meet currently the demand"
[13] Goodman Group Q3 FY2026 Operational Update — 25-May-2026 — Logistics / robotics / agentic AI

## Citations

- [9] **Goodman Group, Q3 2026 Sales and Revenue Call - Operational Update, 25-May-2026 7** · external
- [10] **Goodman Group, Q3 2026 Sales and Revenue Call - Operational Update, 25-May-2026 7** · external
- [11] **Goodman Group, Q3 2026 Sales and Revenue Call - Operational Update, 25-May-2026 7** · external
- [12] **Goodman Group, Q3 2026 Sales and Revenue Call - Operational Update, 25-May-2026 7** · external
- [13] **Goodman Group, Q3 2026 Sales and Revenue Call - Operational Update, 25-May-2026 7** · external

