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</h2>
Upgraded to NEUTRAL
NEUTRAL
In our sector report Real Estate Reflections, dated 26 March 2020, we looked at sector gearing and provided an update on our preferred LPVs. We also provided some thoughts on how investors should be positioned as uncertainty persists, and a reminder of what happened during the global financial crisis (GFC) and how things may be 'different this cycle' and upgraded our GMT investment rating to NEUTRAL. GMT remains well positioned given the quality of its portfolio and sector low gearing levels.
<table class="table table-striped"><colgroup><col> <col> <col> <col> <col> <col> <col span="2"> <col span="2"> <col> <col></colgroup>
<tbody>
<tr>
<td style="width: 48pt;">NZX Code</td>
<td style="width: 48pt;">GMT</td>
<td style="width: 48pt;">Financials:Mar/</td>
<td style="width: 40.2pt;">19A</td>
<td style="width: 42.6pt;">20E</td>
<td style="width: 43.2pt;">21E</td>
<td style="width: 48pt;">22E</td>
<td style="width: 48pt;">Valuation (x)</td>
<td style="width: 42.6pt;">19A</td>
<td style="width: 42.6pt;">20E</td>
<td style="width: 48pt;">21E</td>
<td style="width: 42.6pt;">22E</td>
</tr>
<tr>
<td style="width: 48pt;">Share price</td>
<td style="width: 48pt;">NZ$2.14</td>
<td style="width: 48pt;">NPAT* (NZ$m)</td>
<td style="text-align: left; width: 40.2pt;">90.9&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">90.3</td>
<td style="text-align: left; width: 43.2pt;">95.1&nbsp;</td>
<td style="text-align: left; width: 48pt;">98.7&nbsp;</td>
<td style="width: 48pt;">EV/EBITDA</td>
<td style="text-align: left; width: 42.6pt;">26.8&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">26.2&nbsp;</td>
<td style="text-align: left; width: 48pt;">23.9&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">22.6&nbsp;</td>
</tr>
<tr>
<td style="width: 48pt;">Target price</td>
<td style="width: 48pt;">NZ$1.92</td>
<td style="width: 48pt;">EPS* (NZc)</td>
<td style="text-align: left; width: 40.2pt;">7.0&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">6.7&nbsp;</td>
<td style="text-align: left; width: 43.2pt;">6.9&nbsp;</td>
<td style="text-align: left; width: 48pt;">7.1&nbsp;</td>
<td style="width: 48pt;">EV/EBIT</td>
<td style="text-align: left; width: 42.6pt;">26.8&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">26.2&nbsp;</td>
<td style="text-align: left; width: 48pt;">23.9&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">22.6&nbsp;</td>
</tr>
<tr>
<td style="width: 48pt;">Risk rating</td>
<td style="width: 48pt;">Low</td>
<td style="width: 48pt;">EPS growth* (%)</td>
<td style="text-align: left; width: 40.2pt;">-3.1</td>
<td style="text-align: left; width: 42.6pt;">-3.9</td>
<td style="text-align: left; width: 43.2pt;">2.0&nbsp;</td>
<td style="text-align: left; width: 48pt;">3.8&nbsp;</td>
<td style="width: 48pt;">PE</td>
<td style="text-align: left; width: 42.6pt;">30.5&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">31.7&nbsp;</td>
<td style="text-align: left; width: 48pt;">31.1&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">29.9&nbsp;</td>
</tr>
<tr>
<td style="width: 48pt;">Issued shares</td>
<td style="width: 48pt;">1294.9m</td>
<td style="width: 48pt;">DPS (NZc)</td>
<td style="text-align: left; width: 40.2pt;">6.7&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">6.7&nbsp;</td>
<td style="text-align: left; width: 43.2pt;">6.7&nbsp;</td>
<td style="text-align: left; width: 48pt;">6.7&nbsp;</td>
<td style="width: 48pt;">Price/NTA</td>
<td style="text-align: left; width: 42.6pt;">1.4</td>
<td style="text-align: left; width: 42.6pt;">1.2</td>
<td style="text-align: left; width: 48pt;">1.2</td>
<td style="text-align: left; width: 42.6pt;">1.2</td>
</tr>
<tr>
<td style="width: 48pt;">Market cap</td>
<td style="width: 48pt;">NZ$2,771m</td>
<td style="width: 48pt;">Imputation (%)</td>
<td style="text-align: left; width: 40.2pt;">100</td>
<td style="text-align: left; width: 42.6pt;">100</td>
<td style="text-align: left; width: 43.2pt;">100</td>
<td style="text-align: left; width: 48pt;">100</td>
<td style="width: 48pt;">Cash div yld (%)</td>
<td style="text-align: left; width: 42.6pt;">3.1</td>
<td style="text-align: left; width: 42.6pt;">3.1</td>
<td style="text-align: left; width: 48pt;">3.1</td>
<td style="text-align: left; width: 42.6pt;">3.1</td>
</tr>
<tr>
<td style="width: 48pt;">Avg daily turnover</td>
<td style="width: 48pt;">1,301k (NZ$2,708k)</td>
<td colspan="3" style="width: 130.8pt;">*Based on normalised profits</td>
<td style="width: 43.2pt;"></td>
<td style="width: 48pt;"></td>
<td style="width: 48pt;">Gross div yld (%)</td>
<td style="text-align: left; width: 42.6pt;">4.4</td>
<td style="text-align: left; width: 42.6pt;">4.4</td>
<td style="text-align: left; width: 48pt;">4.4</td>
<td style="text-align: left; width: 42.6pt;">4.4</td>
</tr>
</tbody>
</table>
Industrial well positioned
Good, well located, industrial property has proven to be fairly resilient through the cycle, typically with a lower level of vacancy than office, but it has had a massive re-rating in terms of asset values over the last eight years. The industrial space in the NZ LPV market is GMT at 100% (although that includes some office space in industrial parks), PFI ~90%, ARG ~50% and SPG ~30%. Most are typically Auckland based and/or good quality
GMT has a focus on large prime industrial property and is very well located in some of NZ's leading industrial estates. Recently it has been pursuing a strategy of acquiring well-located brownfield redevelopment sites and is well positioned financially to continue to acquire good sites, should these become available as a result of a slower economic environment. Quality listed industrial occupancy only dropped to around the ~95% level last cycle.
Upgraded from UNDERPERFORM to NEUTRAL
The GMT unit price has continued to outperform and hence remains at a large premium to the sector. However, it has a strong portfolio with prime industrial assets and is well managed, and well placed with the lowest gearing in the sector at just 17.9% (see Figure 1) and has the largest headroom to gearing levels with asset values having to fall by over -60% to get close to covenants (Figure 2). Committed gearing is a low 20.6%. GMT can also continue to leverage the global expertise of its manager and it has done a good job divesting non-core assets through the cycle, including Auckland leasehold office assets.
Jeremy Simpson CFA jeremy.simpson@forsythbarr.co.nz +64 9 368 0022

Goodman Property Trust
Upgraded to NEUTRAL
NEUTRAL
In our sector report Real Estate Reflections, dated 26 March 2020, we looked at sector gearing and provided an update on our preferred LPVs. We also provided some thoughts on how investors should be positioned as uncertainty persists, and a reminder of what happened during the global financial crisis (GFC) and how things may be 'different this cycle' and upgraded our GMT investment rating to NEUTRAL. GMT remains well positioned given the quality of its portfolio and sector low gearing levels.
         


NZX Code
GMT
Financials:Mar/
19A
20E
21E
22E
Valuation (x)
19A
20E
21E
22E


Share price
NZ$2.14
NPAT* (NZ$m)
90.9&nbsp;
90.3
95.1&nbsp;
98.7&nbsp;
EV/EBITDA
26.8&nbsp;
26.2&nbsp;
23.9&nbsp;
22.6&nbsp;


Target price
NZ$1.92
EPS* (NZc)
7.0&nbsp;
6.7&nbsp;
6.9&nbsp;
7.1&nbsp;
EV/EBIT
26.8&nbsp;
26.2&nbsp;
23.9&nbsp;
22.6&nbsp;


Risk rating
Low
EPS growth* (%)
-3.1
-3.9
2.0&nbsp;
3.8&nbsp;
PE
30.5&nbsp;
31.7&nbsp;
31.1&nbsp;
29.9&nbsp;


Issued shares
1294.9m
DPS (NZc)
6.7&nbsp;
6.7&nbsp;
6.7&nbsp;
6.7&nbsp;
Price/NTA
1.4
1.2
1.2
1.2


Market cap
NZ$2,771m
Imputation (%)
100
100
100
100
Cash div yld (%)
3.1
3.1
3.1
3.1


Avg daily turnover
1,301k (NZ$2,708k)
*Based on normalised profits


Gross div yld (%)
4.4
4.4
4.4
4.4



Industrial well positioned
Good, well located, industrial property has proven to be fairly resilient through the cycle, typically with a lower level of vacancy than office, but it has had a massive re-rating in terms of asset values over the last eight years. The industrial space in the NZ LPV market is GMT at 100% (although that includes some office space in industrial parks), PFI ~90%, ARG ~50% and SPG ~30%. Most are typically Auckland based and/or good quality
GMT has a focus on large prime industrial property and is very well located in some of NZ's leading industrial estates. Recently it has been pursuing a strategy of acquiring well-located brownfield redevelopment sites and is well positioned financially to continue to acquire good sites, should these become available as a result of a slower economic environment. Quality listed industrial occupancy only dropped to around the ~95% level last cycle.
Upgraded from UNDERPERFORM to NEUTRAL
The GMT unit price has continued to outperform and hence remains at a large premium to the sector. However, it has a strong portfolio with prime industrial assets and is well managed, and well placed with the lowest gearing in the sector at just 17.9% (see Figure 1) and has the largest headroom to gearing levels with asset values having to fall by over -60% to get close to covenants (Figure 2). Committed gearing is a low 20.6%. GMT can also continue to leverage the global expertise of its manager and it has done a good job divesting non-core assets through the cycle, including Auckland leasehold office assets.
Jeremy Simpson CFA jeremy.simpson@forsythbarr.co.nz +64 9 368 0022


Goodman Property Trust: Upgraded to NEUTRAL