---
endpoint: analytics
pattern: Property
status: done
latency_ms: 204935
conversation_id: 28ab1ff2-e767-4c0f-a701-5c3285fb02d6
citations: 16
created: 2026-05-31 20:48:53Z
---

# What is the investment thesis for Goodman in the current market environment?

# Goodman Group (GMG AU) — Investment Thesis in Current Market Environment

**CLSA Rating: High-Conviction Outperform | Price A$34.16 | 12M Target A$38.54 (+12.8% / +17%) | Mkt Cap US$43–45bn**

CLSA's most recent dedicated note (28-May-25, James Druce / Adam Calvetti) and the 19-Jun-25 sector update both keep Goodman as the top large-cap A-Reit pick. The thesis has been explicitly re-pivoted away from "industrial REIT" and toward sizing the data-centre platform [1][12].

---

## 1. Core Thesis: A Sizeable Data-Centre Pipeline Underwrites Double-Digit Earnings Growth

CLSA's thesis has shifted to sizing up the **seriously large data centre opportunity**. The pipeline disclosed at the FY23 result was 3GW; it has since been **upsized to 5GW**. At a minimum, this pipeline underwrites **double-digit EPS growth over the next five years**, with an end value of **A$100–A$200bn over 10 years** and the initial **0.5GW set to start before June-26** [5][15].

- **Total power**: 5.0GW stable (2.3GW procuring + 2.7GW secured as of 3Q25) [11]
- **Management's stated yields on cost**: data-centre development **9%–12%**, logistics **7%–8%** [2]
- **Recent activity**: A$1.9bn of development starts at a **9% yield on cost** [2]
- Goodman is being **re-rated alongside data-centre peers** (Prologis, Equinix, Digital Realty), not pure-play industrial peers — share-price correlation with DC stocks has been the dominant pattern for two years [16]

## 2. Trough Confirmed: WIP and Asset Values Have Bottomed

3Q25 confirmed the inflection. After two years of stagnant work-in-progress (WIP), the data point has turned:

| Metric | FY23 | FY24 | 1H25 | 3Q25 |
|---|---|---|---|---|
| Development WIP (A$bn) | 13.0 | 13.0 | 13.0 | **13.7 (+5% QoQ)** [10] |

- Logistics cap rates "**starting to compress again**," providing valuation ballast to the funds-management platform [2]
- Management is **aggressively restocking the logistics development pipeline with very large acquisitions** [2]
- Investment operating metrics still sliding (mainly tough conditions in China) but overall portfolio remains healthy [2]

## 3. News-Flow Roadmap Is Now Mapped

CLSA argues the corrected share price (-19% earlier in 2025 on DeepSeek / Microsoft pullback / A$4bn raise) now sits in front of a **positively-trending news roadmap** [1]:

- **August 2025**: Significant data-centre **starts** dominate news; CLSA still expects a **1% August earnings upgrade** [1][3]
- **November 2025**: Earnings de-risking via **new DC capital partnerships** [1]
- **February 2026**: **Pre-lease** news flow [1]

The May trim of earnings 1%–4% (FY25–28CL) reflects the delay in JV'ing the **US logistics development portfolio into a fund** (tariff uncertainty) and management guidance that DC leasing typically lands **9–12 months after a build starts**, slowing near-term profit recognition because leases are normally required to sell the development into a fund [7].

## 4. Earnings Trajectory — Step-Change from FY27

CLSA forecasts (Year to 30 June, CLe) [9]:

| | FY23A | FY24A | FY25CL | FY26CL | FY27CL |
|---|---|---|---|---|---|
| Revenue (A$m) | 2,313 | 2,620 | 2,886 | 3,375 | 3,895 |
| Net profit (A$m) | 1,783 | 2,049 | 2,321 | 2,727 | 3,156 |
| EPS (A¢) | 94.3 | 107.5 | 118.2 | 132.7 | 152.5 |
| **EPS growth (% YoY)** | 16.0 | 13.9 | **10.0** | **12.3** | **14.9** |
| PE (x) | 34.9 | 30.7 | 27.9 | 24.8 | 21.6 |
| ROE (%) | 10.4 | 11.5 | 11.1 | 10.9 | 11.7 |
| Net debt/equity (%) | 10.7 | 10.8 | (3.5) | 0.6 | 3.4 |

The crucial inflection is **FY27 EPS growth of ~15%**, when the first 0.5GW of DC capacity has been built, leased, and sold into a fund — converting development effort into recurring management fees + crystallised dev profits [3][7]. The A$4bn equity raise leaves the balance sheet **net cash by FY25-end** (-3.5% net debt/equity), giving Goodman dry powder for DC acquisitions and partnerships [9].

## 5. Valuation — Looks Reasonable on a Growth-Stock Frame

- Trading on **25.1x 12m-fwd PE**, a **38% premium to ASX 200** [4]
- Versus the post-2019 step-change era (the relevant comparison window), Goodman is at the **bottom end of its 5-year average premium** [4]
- Against **ASX 50 growth stocks growing earnings at 11–12% p.a., GMG's PE is in line with peers** — i.e., not expensive on growth-adjusted terms [4]
- **Target A$38.54** = blend of SOTP (A$40.57) and forward DCF (A$36.50), assuming **5.5% cap rate, 24x development/management multiple, cost of equity 9.3%, terminal growth 5.3%** (raised from 4.7%, reflecting the structural shift to an operating DC business) [8][16]

## 6. Quality Overlay — Management Is the Lead Premium

CLSA's June "Who's who in the zoo II" piece reinforces the soft-factor edge:

- **Greg Goodman has been CEO since Aug-98** — over four years all other large-cap A-Reits (Dexus, GPT, Mirvac, Vicinity, Scentre, Lendlease, Stockland) have rotated CEOs; only Goodman and Charter Hall haven't [13]
- **Glassdoor CEO approval**: GMG at **99% in Jun-25** (vs. Dec-24 99%; flat near the ceiling), well ahead of peers (DXS 86, SGP 81, MGR 91, VCX n/a) — Goodman remains on top of the large-cap REITs [13]
- CLSA lists Goodman as the **top large-cap pick**, joined by Vicinity, and small-caps Ingenia and National Storage [14]

## 7. Key Risks

The principal risk is execution on the 5GW data-centre pipeline — **leasing, development, and capital raising**. **Delays in DC development starts pose downside given the current PE multiple**; conversely, pipeline upsizing is incremental upside risk [6]. China remains the operational soft spot in the existing logistics portfolio [2].

---

## Summary — Why Goodman in This Market

1. **Cleanest listed exposure on ASX to the AI-data-centre buildout** — 5GW pipeline, A$100–A$200bn 10-year end value, with the first 0.5GW already breaking ground [5][15].
2. **Trough call has data behind it** — WIP and asset values turned in 3Q25; logistics cap rates compressing again [2][10].
3. **Earnings step-change visible by FY27** — 10%/12%/15%+ EPS growth FY25/26/27, supported by net-cash balance sheet post-raise [3][9].
4. **Valuation is mid-cycle for a growth stock, not expensive** — 25x PE at the bottom of its 5-yr average premium and in line with ASX-50 growth peers on growth-adjusted terms [4].
5. **Management quality is best-in-class** — 27-year founder/CEO, top Glassdoor scores in the sector [13].
6. **Catalysts are mapped quarter-by-quarter** through to Feb-26 (DC starts → capital partnerships → pre-leasing) [1].

The position carries ~17% potential to CLSA's target A$38.54 from May-28 pricing (~13% from June-19 A$34.16) before considering further pipeline upsizing [14].

---

**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 — Key points (WIP, DC yields, restocking)
[3] Goodman – HC O-PF (Roadmap becoming clearer) — CLSA, 28 May 2025 — Earnings changes
[4] Goodman – HC O-PF (Roadmap becoming clearer) — CLSA, 28 May 2025 — What's in the price (PE vs ASX200)
[5] Goodman – HC O-PF (Roadmap becoming clearer) — CLSA, 28 May 2025 — Investment thesis (5GW DC pipeline)
[6] Goodman – HC O-PF (Roadmap becoming clearer) — CLSA, 28 May 2025 — Investment risks
[7] Goodman – HC O-PF (Roadmap becoming clearer) — CLSA, 28 May 2025 — Earnings revisions detail
[8] Goodman – HC O-PF (Roadmap becoming clearer) — CLSA, 28 May 2025 — Valuation details (SOTP/DCF)
[9] Goodman – HC O-PF (Roadmap becoming clearer) — CLSA, 28 May 2025 — Financials table (FY23A–FY27CL)
[10] Goodman – HC O-PF (Roadmap becoming clearer) — CLSA, 28 May 2025 — Development WIP table
[11] Goodman – HC O-PF (Roadmap becoming clearer) — CLSA, 28 May 2025 — Procuring/secured power table
[12] Australian Property (Who's who in the zoo II) — CLSA, 19 June 2025 — Goodman investment thesis
[13] Australian Property (Who's who in the zoo II) — CLSA, 19 June 2025 — CEO approval / leadership
[14] Australian Property (Who's who in the zoo II) — CLSA, 19 June 2025 — Top large-cap picks table
[15] Australian Property (Who's who in the zoo II) — CLSA, 19 June 2025 — Pipeline end value A$100–A$200bn
[16] Goodman – HC O-PF (Roadmap becoming clearer) — CLSA, 28 May 2025 — Valuation methodology / DC peer alignment

## 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] **607960765LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960765LinqAlpha.PDF>
- [8] **607960765LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960765LinqAlpha.PDF>
- [9] **607960765LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960765LinqAlpha.PDF>
- [10] **607960765LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960765LinqAlpha.PDF>
- [11] **607960765LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960765LinqAlpha.PDF>
- [12] **607962339LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962339LinqAlpha.PDF>
- [13] **607962339LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962339LinqAlpha.PDF>
- [14] **607962339LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962339LinqAlpha.PDF>
- [15] **607962339LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962339LinqAlpha.PDF>
- [16] **607960765LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960765LinqAlpha.PDF>

