Industrial real estate firm Goodman Group is converting traditional warehouses into data centers to meet surging demand for artificial intelligence infrastructure. Citi added the Australian stock to its Pan-Asia Focus List as it believes the trend is likely to deliver “double-digit earnings growth in the medium term.” Data centers are large buildings that house critical computing infrastructure and equipment. Demand for these facilities has increased significantly due to the rapid growth of AI applications, which require vast amounts of computing power to run complex AI models. “The opportunity to convert Goodman's assets from traditional warehouses into data centers offers robust growth opportunities,” Citi analyst Howard Penney said in a client note on June 13. “As the data center opportunity evolves, the company has the potential to offer a broader range of products from powered sites and turnkey projects.” The Sydney-based company, which also trades shares in the U.S., said it has access to more than 4 gigawatts of power supply in 12 major cities where it already owns properties. Power has been a major bottleneck preventing further expansion for many data centers. Data center size is also measured by access to power. The company's shares have risen more than 40% this year in anticipation of a change in its business model. Citi's target price of A$40 ($26.50) a share suggests the stock could rise another 12% from the current A$35.77. GMG-AU 5-year lineCiti also compared Goodman to key global peers in the industrial property sector, including U.S.-listed Prologis and U.K.-listed Seguro. The bank concluded that Goodman's higher price-to-earnings multiple is justified because the company's earnings profile “outperforms peers on a one-year forward basis.” However, the Wall Street bank suggested the shares are undervalued compared to Australia's main AI beneficiaries NextDC and Megaport, as they underperform these peers on an enterprise value to adjusted earnings (EV/EBITDA) basis. Goodman announced its expansion of data center capacity in Asia in January, revealing plans to supply up to 1,000 megawatts of power in Japan and to start construction of a new 50-megawatt data center in Hong Kong. Founded in 1989, the company also opened a new regional office in Singapore to support its new strategic growth.
