Goodman Group at A$31: The 9% OEPS Guide and a A$14B Data Centre Pipeline

Goodman reaffirmed 9% operating EPS growth for FY26 alongside 1H operating profit of A$1.203 billion, and the stock sits at A$31.13 against a consensus target of A$34.11. That is the case. The growth rate is not a sell-side forecast. It is a guide the company has now repeated through both the February interim and the May Q3 update, with the machinery, occupancy, like-for-like rental growth, and work-in-progress conversion, visible in each disclosure.

Start with the spine of an industrial REIT: occupancy and same-store NOI. Portfolio occupancy was 95.9% at the December 2025 balance date and the May update referenced 96%. 1H like-for-like NPI growth was 4.2%, with management guiding to the higher end of that trajectory as rent reviews and renewals roll through.

For a logistics portfolio anchored in prime urban infill, that combination, high-90s occupancy and mid-single-digit cash rental growth, is what feeds the property investment line and answers the question of whether the stabilised book is doing its job. Leasing spreads on renewals are the leading indicator, and they have been running well ahead of in-place rents for several reporting periods. That is why the same-store number keeps printing in the 4-5% band even as the headline market softens in places.

Then the work-in-progress, which is where the multiple-compression argument breaks down. WIP is being guided above A$14 billion by June 2026, with roughly 73% data centre by value and power secured on the bulk of it. The European A$14 billion partnership with CPPIB is the largest single piece, and the Australian projects, SYD01 at 90MW being the visible one, anchor the domestic pipeline. The earnings flow is not really a 2026 story. It is a 2027-2029 story: development management fees and performance fees feed the management segment as projects move through gateways, then the completed assets either stabilise on balance sheet or seed new partnerships at scale. WACR on the stabilised portfolio sits around 5.0%, which against current Australian 10-year yields leaves a cap rate spread that is tight but no longer compressing.

What is not yet in the price is the conversion economics on the data centre WIP. Goodman’s historical industrial development margin sat in the high teens to low twenties. Data centre developments at hyperscale, with power as the scarce input and Goodman controlling the land bank in markets where power queues stretch for years, do not need to repeat that margin to justify the current multiple. They need to land somewhere reasonable on a stabilised yield-on-cost basis, and the early signals from the European JV suggest the structure preserves Goodman’s development economics rather than handing them to the capital partner. The market has been pricing this as if every dollar of WIP carries industrial-warehouse risk-adjusted returns, which understates what a power-secured, pre-leased hyperscale site actually monetises at.

Why this set-up looks familiar

Industrial REITs went through a similar repricing when e-commerce fulfilment demand pulled urban logistics rents from a 10-year flat line into a multi-year reversion cycle. The market priced cap rate compression first and missed the rent-reversion tailwind, which kept compounding NOI growth for years after the initial re-rating.

The rhyme with data centres is the land-bank conversion. The asset-class shift is visible and the multiple has moved, but the second-derivative earnings effect, development fees, performance fees, and stabilised NOI from completed campuses, lags by 18-24 months. Owners who waited for proof points historically paid the higher multiple to get them.

The macro frame matters because data centre supply is becoming a regulated commodity in both Goodman’s home market and its largest growth corridor. The EU’s energy efficiency package moving through Q2 2026 layers a common rating scheme on top of national rules, Germany’s AI data centre incentives, Italy’s authorisation regime, Ireland’s renewable-linked grid access, and the practical effect is to favour developers who already have power secured and sustainability spec built in. Australia’s March 2026 expectations document, tied to the National AI Plan, does the equivalent at home: grid cost allocation, water security, national interest tests, with NSW running a faster approvals lane for projects that clear the conditions. Both regimes raise the entry cost for new competitors more than they raise the marginal cost for Goodman’s existing pipeline. The AUD at roughly 0.717 USD is a translation headwind on offshore earnings, but the offshore book is largely AUD-funded asset by asset, so the P&L drag is narrower than the FX move suggests.

On capital structure, net debt sits around A$1.2 billion against a book value per share of A$11.62, which keeps gearing well below levels that would force equity issuance to fund the pipeline. The fee-earning management business carries the variable revenue, the property investment book carries the recurring NOI, and the development book sits between them. That mix lets Goodman renew and redevelop sites without the balance-sheet stress pure-play developers have run into in this cycle.

The risks are specific. If FY26 OEPS growth lands materially below the 9% guide, say at 6% or under, the multiple compresses because the market has been underwriting that number as a floor, not a target. The second risk is power. If a meaningful share of the A$14 billion WIP slips on grid connection timing in either FLAP markets or NSW, the development fee profile pushes into FY28 and the segment earnings curve flattens for a year. The third is cap rate. The stabilised book at a 5.0% WACR is defensible against current rates, but a 75bp move higher in long bonds without corresponding rent reversion would compress the P/NAV gap that currently supports the share price.

If WIP conversion stalls and FY26 OEPS prints below 8%, the thesis at this price does not hold.

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