New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

Goodman Property Trust / Equity Bottom-Up

<h2>Goodman Property Trust (GMT)</h2>
NZ$165m capital raise
GMT is undertaking a NZ$150m underwritten placement at $2.10 (versus NZ$2.195 last trade price) and is also targeting to raise NZ$15m via a retail offer (Unit Purchase Plan with a record date of 17 September also at NZ$2.10) with the maximum subscription being NZ$50,0000 of units.
The capital raise reduces GMT’s committed gearing to 21%, and keeps it at the low end of the gearing range within the NZ LPV sector and below its preferred gearing range of 25% to 35%. Proceeds are to be used to pay down debt initially and fund a series of acquisitions and development activity.
Interim revaluation gain of ~NZ$170m expected
This is&nbsp; a revaluation gain of +6% over the six months to 30 September 2019, highlighting the strength of the prime Auckland industrial market. On a like-for-like basis the portfolio cap rate firmed 30bps to 5.4%. This lifts the NTA by around 15 cpu to ~NZ$1.72.
Executing to strategy
GMT has announced NZ$169m of new investments including a new infill location in line with other recent activity (i.e a relatively short lease period providing a modest holding return but with significant development/expansion opportunity) and five new projects on existing GMT industrial estates (NZ$75m with initial yield on total cost of 6.1%).
Flat guidance
GMT has maintained its flat dividend guidance for FY20 of 6.65 cpu and also expects ‘cash earnings’ to be flat. The portfolio remains in robust shape with 99.4% occupancy and strong underlying rental growth.
Our view
Given the significant premium to NTA, GMT is being opportunistic raising equity, however it has had a consistent strategy of maintaining sector low gearing, recycling non-core assets (which it has done at sector leading levels) and executing well in terms of acquiring in-fill brownfield development sites that are well located and building out its existing industrial estate pipeline. &nbsp;While offering little growth in distributions, GMT has strong defensive qualities and a specialist prime Auckland industrial focus which has its appeal, but investors are paying a large premium for this (relative to the NZ LPV sector). While GMT has successfully recycled non-core assets in large numbers in recent years and has its portfolio well positioned with an Auckland focus, there remains very strong demand from international and local investors for this product (such as specialist industrial funds from AUG, SPG and Oyster Group), accordingly there is still scope for GMT to divest further assets at peak cycle / record pricing levels. GMT is trading on the firmest valuation metrics in the sector and our rating is UNDERPERFORM.
<a href="http://www.forsythbarr.co.nz/about-us/our-people/research/jeremy-simpson/" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://www.forsythbarr.co.nz/about-us/our-people/research/jeremy-simpson/&amp;source=gmail&amp;ust=1568846417519000&amp;usg=AFQjCNEi5LWQ7J7WZU_YQD28HayIfzbdoQ" rel="noopener">Jeremy Simpson</a>&nbsp; CFA
Director / Senior Analyst, Equities
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+64 21 995 998
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0800 367 227
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+64 9 368 0092
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PO Box 97, Auckland 1140
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Goodman Property Trust (GMT)
NZ$165m capital raise
GMT is undertaking a NZ$150m underwritten placement at $2.10 (versus NZ$2.195 last trade price) and is also targeting to raise NZ$15m via a retail offer (Unit Purchase Plan with a record date of 17 September also at NZ$2.10) with the maximum subscription being NZ$50,0000 of units.
The capital raise reduces GMT’s committed gearing to 21%, and keeps it at the low end of the gearing range within the NZ LPV sector and below its preferred gearing range of 25% to 35%. Proceeds are to be used to pay down debt initially and fund a series of acquisitions and development activity.
Interim revaluation gain of ~NZ$170m expected
This is&nbsp; a revaluation gain of +6% over the six months to 30 September 2019, highlighting the strength of the prime Auckland industrial market. On a like-for-like basis the portfolio cap rate firmed 30bps to 5.4%. This lifts the NTA by around 15 cpu to ~NZ$1.72.
Executing to strategy
GMT has announced NZ$169m of new investments including a new infill location in line with other recent activity (i.e a relatively short lease period providing a modest holding return but with significant development/expansion opportunity) and five new projects on existing GMT industrial estates (NZ$75m with initial yield on total cost of 6.1%).
Flat guidance
GMT has maintained its flat dividend guidance for FY20 of 6.65 cpu and also expects ‘cash earnings’ to be flat. The portfolio remains in robust shape with 99.4% occupancy and strong underlying rental growth.
Our view
Given the significant premium to NTA, GMT is being opportunistic raising equity, however it has had a consistent strategy of maintaining sector low gearing, recycling non-core assets (which it has done at sector leading levels) and executing well in terms of acquiring in-fill brownfield development sites that are well located and building out its existing industrial estate pipeline. &nbsp;While offering little growth in distributions, GMT has strong defensive qualities and a specialist prime Auckland industrial focus which has its appeal, but investors are paying a large premium for this (relative to the NZ LPV sector). While GMT has successfully recycled non-core assets in large numbers in recent years and has its portfolio well positioned with an Auckland focus, there remains very strong demand from international and local investors for this product (such as specialist industrial funds from AUG, SPG and Oyster Group), accordingly there is still scope for GMT to divest further assets at peak cycle / record pricing levels. GMT is trading on the firmest valuation metrics in the sector and our rating is UNDERPERFORM.
Jeremy Simpson&nbsp; CFA
Director / Senior Analyst, Equities




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+64 9 368 0022




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+64 21 995 998




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0800 367 227




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+64 9 368 0092




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PO Box 97, Auckland 1140




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www.forsythbarr.co.nz



Twitter:

@forsythbarr



