Goodland Group Limited (SGX:5PC), a SGD$93.78M small-cap, operates in the real estate industry which is the most prevalent industry globally, and has continued to play a crucial role in the portfolios of investors. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year . Today, I will analyse the industry outlook, as well as evaluate whether Goodland Group is lagging or leading in the industry. See our latest analysis for Goodland Group
What’s the catalyst for Goodland Group’s sector growth?
Over the past couple of years, as yields for high quality real estate investments have become under pressure, investors have swung towards more niche and diversified buildings such as medical offices, student housing and data storage facilities. In the past year, the industry delivered growth in the teens, beating the Singapore market growth of 7.79%. Given the lack of analyst consensus in Goodland Group’s outlook, we could potentially assume the stock’s growth rate broadly follows its real estate industry peers. This means it is an attractive growth stock relative to the wider Singapore stock market.
Is Goodland Group and the sector relatively cheap?
Real estate companies are typically trading at a PE of 11x, relatively similar to the rest of the Singapore stock market PE of 15x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 7.37% on equities compared to the market’s 7.92%. On the stock-level, Goodland Group is trading at a lower PE ratio of 5x, making it cheaper than the average real estate stock. In terms of returns, Goodland Group generated 7.26% in the past year, in-line with its industry average.
What this means for you:
Are you a shareholder? Real estate stocks are currently expected to grow slower than the average stock on the index. This means if you’re overweight in this sector, your portfolio will be tilted towards lower-growth. If growth was one of your main investment catalyst in the sector, now would be the time to revisit your holdings in Goodland Group. Keep in mind the sector is trading relatively in-line with the rest of the market, which may mean you’ll be selling out at a reasonable price.
Are you a potential investor? The real estate sector’s below-market growth and average valuation hardly makes it an exciting investment case. If you’re looking for a high-growth stock with potential mispricing, it seems like real estate companies like Goodland Group isn’t the right place to look. However, if you’re interested in the stock for other reasons, I suggest you research more into the company’s cash flow as well as its financial health in order to gain a holistic view of the stock.