Stock in Focus: Goodman Property Group (GMT.NZX)
Goodman Property Trust shares fell -1.7% after revealing it expects a $238m or 4.7% reduction in the valuation of its $4.8 billion portfolio for the 2023 financial year ending March 2023. With capitalisation (rental yield) rate increasing from 4.2% last year to 5.2% as the property sector continues to be weighed down by rising interest rates. While commercial properties are yet to see significant declines like the residential market has, we anticipate things are likely to get worse and see room for cap rates to rise further. Whilst Goodman trades at a discount to its NTA, it offers a lower dividend yield compared to KPG, ARG and PCT (which we prefer) and that is one reason why we avoid the stock.
We could see value later in the year, if valuations were to pull down further from recent elevated levels and investors are able to receive ‘some’ premium to risk free rate, as rental growth is tipped to slow down, and rising interest rates also impact free cash flow to pay out dividends. For now, we remain neutral on GMT and may consider full coverage if we see value later in the year.
New Zealand Market Movers
The New Zealand market (NZX50, -0.3%) closed lower again, property and gentailers leading losses.
Fonterra fell -5.1% giving back some of its gains after it’s strong result last year, whilst A2 Milk and Synlait continue to slide due to high farmgate price guidance, which has an outsized impact on cost for the latter two. Preference is to avoid milk producers — too much China + commodity risk.
Australia Market Movers
The Australian Market (ASX200, -0.8%) was up on Tuesday, following a strong lead from Wall Street.
It was a “risk on” day, with most sectors moving higher. Consumer discretionary, financials and materials leading gains as banking sector jitters appear to ease. Note that major institutionals are upgrading Aussie banks on their strength.
US Market Movers
Another optimistic day in the US – the S&P 500 +1.30% higher. Manchester United moved +2.13% to $24.03, as credible rumours spread that the Glazers have agreed to a verbal offer with the Qataris. Charles Schwab, which we had as a buy last week at ~$52.00, moved up 6.04% to ~$59.47 per share. We’re always happy when our “buys” do well but we have to wonder – with the Fed annoucing rates tomorrow – does a 25 bps hike mean a day of “blood” on the market?
What Markets will be Watching this Week
Wednesday
CPI (Inflation) data from the UK
Westpac NZ Consumer Confidence
Kathmandu Earnings
Thursday
US Fed Interest Rate decision
Friday
Bank of England (BoE) Interest rate Decision