Industrial property firm Goodman Group is converting its traditional warehouses into data centers to meet the surging demand for artificial intelligence infrastructure. Citi believes this trend will likely drive “double-digit medium-term earnings growth” and has added the Australian stock to its “Pan-Asia Focus list.” Data centers are large buildings that house critical computing infrastructure and equipment. The demand for these facilities has risen significantly due to the rapid growth of AI applications, which require vast amounts of computing power to run complex AI models. “The conversion opportunity of Goodman’s assets from traditional warehouses into data centres presents a robust growth opportunity,” said Citi analyst Howard Penny in a note to clients on June 13. “As it progresses opportunities in data centers, it is likely to deliver a large range of products from powered sites and turnkey projects.” The Sydney-based company, whose stock is also traded in the United States , said it has access to more than 4 gigawatts of electric supply across twelve major cities where it already owns real estate. Electricity has been a key bottleneck preventing many data centers from further expansion. The size of a data center is also measured by its access to power. The stock has risen by more than 40% this year in anticipation of the change in its business model. Citi’s price target of 40 Australian dollars ($26.50) a share suggests that the stock could rise by another 12% from the current price of 35.77 Australian dollars. GMG-AU 5Y line Citi also compared Goodman to key global peers in the industrial real estate sector, such as U.S.-listed Prologis and U.K.-listed Segro . The bank concluded that Goodman’s rise in the price-to-earnings ratio is justified since the company has an earnings profile “above the peers on a one-year forward basis”. However, the Wall Street bank suggested that the stock is undervalued relative to key artificial intelligence beneficiaries in Australia, namely Next DC and Megaport as it remains below these peers on an enterprise value to adjusted earnings basis (EV/EBITDA). In January, Goodman announced the expansion of its data center capacity in Asia by revealing plans to deliver up to 1,000 megawatts of power in Japan and start constructing a new 50-megawatt data center in Hong Kong. The company, founded in 1989, also opened a new regional office in Singapore to support the growth of its new strategy.
