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On Monday, UBS analyst Tom Bodor upgraded Goodman Group (GMG:AU) (OTC:GMGSF) stock from Neutral to Buy, adjusting the price target to AUD36.00 from the previous AUD36.80. Bodor’s upgrade comes with an analysis of the company’s development pipeline and funding strategies, particularly in light of a recent unexpected $4 billion equity raise by Goodman Group.
Bodor addressed concerns regarding the need for additional capital to support Goodman Group’s data center (DC) strategy. He explored the possibility of development joint ventures (JVs) as a means to fund the company’s 5GW/$100 billion DC pipeline. According to UBS estimates, Goodman Group may require over $10 billion by the fiscal year 2029 to initiate the 5GW project without JVs or $6 billion with JVs. Bodor suggests that the latter amount could be comfortably funded through retained earnings and asset sales.
Despite a slight reduction in operating earnings per share (OEPS) and the price target (PT) by 2%, Bodor upgraded the stock to Buy. The decision was influenced by increased confidence in Goodman Group’s DC funding picture, moderated market expectations, and the potential for approximately 10% medium-term OEPS growth, which he notes is distinctive within the Australian Real Estate Investment Trust (A-REIT) sector. The growth range is estimated to fluctuate between a decrease of 8% and an increase of 18%.
In his optimistic scenario, Bodor sees a potential upside of 44%, with a price per share reaching as high as $44.70. This projection is based on the expansion of the DC pipeline beyond the current 5GW and is supported by strong anticipated demand growth driven by artificial intelligence (AI) and cloud services.
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