Goodman Group (ASX:GMG): It looks expensive at A$65bn, but can its expansion into Data Centers make it worth its high price?

Ujjwal Maheshwari Ujjwal Maheshwari, May 13, 2025

Goodman Group (ASX:GMG), the ASX’s biggest industrial property player, is making a shift into the world of data centres.

On one hand, this could be a good opportunity for Goodman given it can surmount the high barriers to entry and because the demand for data storage is sky-high. On the other hand, this won’t come cheap to the company, and that’s even assuming it can fund these ambitions.

 

All about Goodman Group

Capped at over $60bn today, Goodman has been listed on the ASX since 2005. After shedding over half its value during the GFC and consolidating its shares in 2012, the company recovered and has gained over 100% in 5 years.

As of mid-May 2025, it has a property portfolio of over $84bn, which delivered it an operating profit of $1.2bn in the first half of FY25. It has 422 total properties, spread across 14 countries. Most of its assets reside in partnerships where GMG has an average stake of 28%. Its traditional specialty was in industrial properties. Just look at some of its top 20 clients and you’ll get an idea of what kind of facilities it operates. Names include Amazon, Samsung, DHL, Equinix, Coles, Brickworks, United States Postal Service, BMW and Google. A further $15bn projects are in development – work in progress, commenced or recently complete.

Demand for logistics facilities was growing pre-COVID and could arguably have got to this point eventually if not for COVID, although a lot slower. Demand took off exponentially when COVID-19 restrictions hit, leaving to substantial growth in eCommerce.

It made a $2bn operating profit in FY24, 15% up on FY23’s $1.8bn operating profit. Its EPS grew at a CAGR of 15.8% in the preceding 5 years, although it made a statutory loss of $98.9m. The company closed the period with $3.8bn in liquidity, not counting the $13bn+ of liquidity in partnerships.

 

A pivot to data centres

However, as with many of its eCommerce peers, GMG suffered a decline in the post-pandemic as investors pondered what the ‘new normal’ would look like. However, unlike niche, unprofitable players in the space, Goodman has regathered some of the lost ground in the past couple of years. And it may have another trick up its sleeve that can help the company grow further – data centres.

We all know there’s a need for data centres given the growth in data consumption. Although there has been speculation that ‘Edge AI’ (i.e. devices that can process data ‘on site’ rather than by transferring data to and from a centre somewhere else) could render them obsolete, we would suggest that there will always be some tasks that will not be able to be done ‘on edge’ and will need data centres.

We also know that data centres can be money making, just ask long-term investors in NextDC (ASX:NXT) that has gone from a $80m company at IPO to an $8bn company off the back of growth in demand for data centres. Also remember the $23.5bn AirTrunk deal sealed last year? That imprinted into investors minds how valuable data centre can be.

 

A work in progress, but when will it be complete

Goodman is no NextDC just yet. But it is planning on gradually entering the space, with 25% of its WIP projects being data centres. It has a 5GW power bank (in other words data centre pipeline), just over half of which is secured. This pipeline is spread across several cities (LA, London, Amsterdam, Frankfurt, Paris, Madrid,, Tokyo, Osaka, Hong Kong, Sydney, Melbourne and Auckland) and are in locations consistent with its existing approach to logistics.

Earlier in 2025, Goodman raised $4bn to fund some of its future development. But this is only a fraction of the $13bn in ‘Work In Progress’. More money will need to be found. Can it be found?

 

Brokers have a Positive Outlook, but the valuation looks stretched

Yesterday, UBS released a report on Goodman answering that question in the affirmative. Even though it estimated over $10bn would be needed in the next 5 years, up to $4bn more could be contributed by a joint venture partner. That means only $2bn more would be needed, and the company could wait for a couple of years. Analyst Tom Bodor noted that,’ the recent capital raising has improved GMG’s optionality to deliver the pipeline and expectations have moderated’. The 12-month price target is $36 per share. Even though this was an 80c cut in the target price, shares in GMG rose 2% yesterday. The price target is 12.5% ahead of the $32 per share it is trading at.

There are another 10 brokers covering Goodman stock and their mean target price of $36.79, with the highest being $40 per share and the lowest being $28 per share. They expect A$2.9bn in revenue (a 11% jump) in FY25, followed by $3.3bn in FY26 (up 15%) and $3.7bn in FY27 (up 13%). Turning to the bottom line, analysts expect a $2.15bn in FY25 (marginally higher on an underlying basis but well ahead on a statutory basis considering the FY24 loss), then $2.9bn in FY26 and $3.2bn in FY27.

The company’s P/E is 23.9x but its PEG is 2.3x. and it is trading at a PEG of 2.3x and is trading several times ahead of its NTA, which is just $8.80 per share. You could argue you get what you pay for, but is it worth such a premium at a time when so many REITs are trading at discounts or single digit percentage premiums?

Goodman has told shareholders it anticipates paying 30c per share in dividends. This is a yield of just <1% at the current share price. We would argue this is low for a property stock, especially one going as well as Goodman.

 

Should you consider buying Goodman Group?

Certainly not if you are an income investor who wants a stock with a high yield – you won’t get it here any time soon. Growth investors may consider this one, but they should keep in mind that you are buying this stock at a premium and that it has higher capex than many other property stocks.

All this said, there are few opportunities to buy a company at early stage when it comes to data centres and where you can have a hope that a company will be able to deliver on its ambitions given its balance sheet…and this is one of them.

 

 

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