New Zealand Professional Investment Services Firm

Forsyth Barr

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

Goodman Property Trust / Equity Bottom-Up

<h2>Goodman Property Trust 1H22 Result – Initial thoughts</h2>
Goodman Property Trust (GMT) has reported a solid FY22 result, with cash earnings +4.5% yoy to NZ$93.1m. This was +2.3% vs. our forecast but was largely due to lower interest and tax expense; EBITDA was -1.9% below our expectations with net rental income slightly lower and administration costs slightly above. Net rental income was +2.7% with strong underlying rent growth of +5.1%&nbsp;partly offset by redevelopment withdrawals and some transitory vacancy. GMT believes its portfolio is c.10% under-rented (or NZ$17.9m of annual rent). GMT has added the 4.0ha former Sleepyhead site in Otahuhu to its value-add portfolio (purchase price NZ$49m). GMT has provided guidance for FY23 cash earnings +4% to 6.9cps (ForBarr 6.6cps) and DPS +7% 5.9cps (ForBarr 5.7cps, Bloomberg consensus 5.9cps).
Key take-outs
<ul>
<li>Strong demand lifts rents: Underlying like-for-like rent growth was +5.1%. GMT believes its portfolio to be c.10% under-rented (NZ$17.9m). Leasing remains solid with average rental increases of 10.7% across 11% of income that is new or renewing leases in FY23 already agreed and a further 14% of rental income facing an expiry or market event in FY23.</li>
<li>Development: GMT has NZ$426m (NZ was $354m at 1H22) of developments in progress with a yield on cost of 5.0% (was 5.5% 1H22). This lower yield on cost reflects the addition of the NZ Post site in Albany and pausing of the Highbrook office and carpark project. Total development work is 98% pre-leased. GMT is current marketing 3 additional new builds at Roma Rd that are not included in this pipeline.</li>
<li>Asset backing continues to grow: 2H22 valuations lifted NTA a further 11cps to NZ$2.61. This was driven by market rent growth with the portfolio cap rate unchanged at 4.2%.</li>
<li>Committed gearing steady: Including the additional NZ$70m of development spend and the acquisition of the old Sleepyhead site in Otahuhu committed gearing lifts to 25.8% (was 22.6% at 1H22). This is at the mid-point of GMT’s 20-30% target gearing range.</li>
<li>Outlook: GMT has provided guidance for FY23 cash earnings +4% to 6.9cps (ForBarr 6.6cps) and DPS +7% 5.9cps (ForBarr 5.7cps, Bloomberg consensus 5.9cps).</li>
</ul>
Conference call 10:30am, link&nbsp;<a href="https://s1.c-conf.com/diamondpass/10021435-HFd30J.html" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://s1.c-conf.com/diamondpass/10021435-HFd30J.html&amp;source=gmail&amp;ust=1653006506179000&amp;usg=AOvVaw0eVnbKAq7kwoskK6NFSJuK" rel="noopener">here</a>
FY22 result summary (NZ$m)
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/275/305/original/image_40136116471652924030568.png?1652924029" class="editor-image img-responsive" data-smartkarma-image-id="275305"></figure>
Source: Forsyth Barr analysis

Goodman Property Trust 1H22 Result – Initial thoughts
Goodman Property Trust (GMT) has reported a solid FY22 result, with cash earnings +4.5% yoy to NZ$93.1m. This was +2.3% vs. our forecast but was largely due to lower interest and tax expense; EBITDA was -1.9% below our expectations with net rental income slightly lower and administration costs slightly above. Net rental income was +2.7% with strong underlying rent growth of +5.1%&nbsp;partly offset by redevelopment withdrawals and some transitory vacancy. GMT believes its portfolio is c.10% under-rented (or NZ$17.9m of annual rent). GMT has added the 4.0ha former Sleepyhead site in Otahuhu to its value-add portfolio (purchase price NZ$49m). GMT has provided guidance for FY23 cash earnings +4% to 6.9cps (ForBarr 6.6cps) and DPS +7% 5.9cps (ForBarr 5.7cps, Bloomberg consensus 5.9cps).
Key take-outs

Strong demand lifts rents: Underlying like-for-like rent growth was +5.1%. GMT believes its portfolio to be c.10% under-rented (NZ$17.9m). Leasing remains solid with average rental increases of 10.7% across 11% of income that is new or renewing leases in FY23 already agreed and a further 14% of rental income facing an expiry or market event in FY23.
Development: GMT has NZ$426m (NZ was $354m at 1H22) of developments in progress with a yield on cost of 5.0% (was 5.5% 1H22). This lower yield on cost reflects the addition of the NZ Post site in Albany and pausing of the Highbrook office and carpark project. Total development work is 98% pre-leased. GMT is current marketing 3 additional new builds at Roma Rd that are not included in this pipeline.
Asset backing continues to grow: 2H22 valuations lifted NTA a further 11cps to NZ$2.61. This was driven by market rent growth with the portfolio cap rate unchanged at 4.2%.
Committed gearing steady: Including the additional NZ$70m of development spend and the acquisition of the old Sleepyhead site in Otahuhu committed gearing lifts to 25.8% (was 22.6% at 1H22). This is at the mid-point of GMT’s 20-30% target gearing range.
Outlook: GMT has provided guidance for FY23 cash earnings +4% to 6.9cps (ForBarr 6.6cps) and DPS +7% 5.9cps (ForBarr 5.7cps, Bloomberg consensus 5.9cps).

Conference call 10:30am, link&nbsp;here
FY22 result summary (NZ$m)

Source: Forsyth Barr analysis 

Goodman Property Trust: 1H22 Result – Initial Thoughts