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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 FY21 Result – Initial thoughts</h2>
Goodman Property Trust (GMT) has produced a solid FY21 result with cash earnings +6.6% yoy to NZ$89.1m and +1.5% vs our expectation reflecting higher top line rental income. Net rental income was +5.3% with solid contributions from acquisitions and developments as well as strong like-for-like rent growth (+4.1% like-for-like rental income). Portfolio metrics remain solid and development activity has picked up but with GMT’s greenfield land bank now largely built out focus has switched to brownfield redevelopment of existing sites. GMT provided FY22 guidance of cash earnings per share of 6.5cps (+2% vs. our current 6.4cps) and DPS of 5.5cps (+2% vs. our current 5.4cps).
Key take-outs
<ul>
<li>Guidance for +4% DPS growth: GMT have guided to FY22 cash earnings of 6.5cps and DPS of 5.5cps. This represents +4% growth in GMT’s distributions but comes after it was rebased -20% in FY21 with management fees no longer being paid in units. GMT has also adjusted its definition of underlying cash earnings and will now adjust for straight lining of lease income, this closer aligns GMT’s cash earnings measure with sector peers AFFO.</li>
<li>Performance fees liability diminished: GMT paid a performance fee of NZ$13.7m in FY21 but, unlike FY20 where it carried forward NZ$89.5m, there is no carry forward balance given GMT’s share price underperformance vs. the property sector.</li>
<li>Developments back on the menu: GMT has NZ$250m of developments in progress including redevelopment of Roma Rd for NZ Post and Favona Rd for Mainfreight. Total development work is 64% preleased and includes spec builds at M20 (9,000sqm completes 2H22), Highbrook (8,100sqm completes 1H23), and Favona (10,800sqm competes 2H23). The El Kobar project at Highbrook remains paused.</li>
<li>Asset backing stable NZ$2.125: NTA per unit lifted +23% in FY21 driven by a +NZ$560m (or +17.3%) lift in its portfolio valuation underpinned by -70bp of cap rate compression to 4.7%.</li>
<li>Committed gearing remains low at 22.5%: Acquisitions and development spend were offset by asset revaluations leaving GMT gearing end of year gearing broadly flat at 19.2%. On a fully committed basis gearing lifts to 22.5% and remains below GMT’s medium term target of 25-35%.</li>
</ul>
Conference call 10:30am, Webcast:&nbsp;<a href="https://edge.media-server.com/mmc/go/goodman-fyr20/" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://edge.media-server.com/mmc/go/goodman-fyr20/&amp;source=gmail&amp;ust=1620951430440000&amp;usg=AFQjCNGhZCZycwayteQvF5GYmlhsfBuASA" rel="noopener">https://edge.media-server.com/mmc/go/goodman-fyr20/</a>
FY21 result summary (NZ$m)
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.2&amp;permmsgid=msg-f:1699590213027007028&amp;th=1796284b3f348a34&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ9WQaZ5coiBMnhdPsOsBl1TzPz3AFCQW5fww8WMRCFFqsYU8IGDOtXRs9da33PVI3Fe5b8EhV9EgJBqBcd18NBwelGF_Mkh4WDYGeaTm0F3C6ECjGnU1oZhb8A&amp;disp=emb" width="565" height="215" class="editor-image img-responsive" data-image-whitelisted=""></figure>
Source: Forsyth Barr analysis
Rohan Koreman-Smit&nbsp; Senior Analyst, Equities
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.1&amp;permmsgid=msg-f:1699590213027007028&amp;th=1796284b3f348a34&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ-hmfV_GmEfNezhMr9Wk6BrxApEwjvlnI180yDPYx0RPdl3mqjF2_hjrbJ7cOgtm3b3_vSqOpeIPRcB8tKh43iPqzYA86flpucGnDStZ0Kmou4IQEGXd3kZJ30&amp;disp=emb" class="editor-image img-responsive"></figure>
 P: +64 9 368 0085 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Goodman Property Trust FY21 Result – Initial thoughts
Goodman Property Trust (GMT) has produced a solid FY21 result with cash earnings +6.6% yoy to NZ$89.1m and +1.5% vs our expectation reflecting higher top line rental income. Net rental income was +5.3% with solid contributions from acquisitions and developments as well as strong like-for-like rent growth (+4.1% like-for-like rental income). Portfolio metrics remain solid and development activity has picked up but with GMT’s greenfield land bank now largely built out focus has switched to brownfield redevelopment of existing sites. GMT provided FY22 guidance of cash earnings per share of 6.5cps (+2% vs. our current 6.4cps) and DPS of 5.5cps (+2% vs. our current 5.4cps).
Key take-outs

Guidance for +4% DPS growth: GMT have guided to FY22 cash earnings of 6.5cps and DPS of 5.5cps. This represents +4% growth in GMT’s distributions but comes after it was rebased -20% in FY21 with management fees no longer being paid in units. GMT has also adjusted its definition of underlying cash earnings and will now adjust for straight lining of lease income, this closer aligns GMT’s cash earnings measure with sector peers AFFO.
Performance fees liability diminished: GMT paid a performance fee of NZ$13.7m in FY21 but, unlike FY20 where it carried forward NZ$89.5m, there is no carry forward balance given GMT’s share price underperformance vs. the property sector.
Developments back on the menu: GMT has NZ$250m of developments in progress including redevelopment of Roma Rd for NZ Post and Favona Rd for Mainfreight. Total development work is 64% preleased and includes spec builds at M20 (9,000sqm completes 2H22), Highbrook (8,100sqm completes 1H23), and Favona (10,800sqm competes 2H23). The El Kobar project at Highbrook remains paused.
Asset backing stable NZ$2.125: NTA per unit lifted +23% in FY21 driven by a +NZ$560m (or +17.3%) lift in its portfolio valuation underpinned by -70bp of cap rate compression to 4.7%.
Committed gearing remains low at 22.5%: Acquisitions and development spend were offset by asset revaluations leaving GMT gearing end of year gearing broadly flat at 19.2%. On a fully committed basis gearing lifts to 22.5% and remains below GMT’s medium term target of 25-35%.

Conference call 10:30am, Webcast:&nbsp;https://edge.media-server.com/mmc/go/goodman-fyr20/
FY21 result summary (NZ$m)

Source: Forsyth Barr analysis
Rohan Koreman-Smit&nbsp; Senior Analyst, Equities

 P: +64 9 368 0085 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Goodman Property Trust: FY21 Result – Initial Thoughts