GPT Group: Modest Rise in Our Fair Value on Transfer of Analyst Coverage; Securities Undervalued

Following the transition of coverage to a new analyst, we raise our fair value estimate for GPT Group by 3% to AUD 5.70 per security. A key driver of this upgrade is our more positive view on the funds management business. We lift our medium-term growth forecast for funds management net income to 2.5%, from 0% previously, reflecting our expectations of solid inflows from mandates and the impact of likely revaluations, which will increase the asset base. The group’s funds under management grew to AUD 22 billion in June 2024, from AUD 13 billion in 2019. Notably, GPT secured the Commonwealth Superannuation Corporation mandate of AUD 2.6 billion last year and the asset transition is expected to settle in the second half of 2024. We expect GPT to achieve longer-term inflows given its long-established brand, strong track record, and management expertise.