Eastnine: Signs of strength from the underlying biz - ABG
1-2% better than ABGSCe
Occupancy rate of 91.1% vs 90.1% in Q4
EPRA NRVPS -9% from -36% cut in Melon Fash. Group
Net leasing of EUR 0.358m (-0.138m)
Rental income amounted to EUR 6.2m (5.1m), 1% higher than our forecast of EUR 6.1m. Net operating income was EUR 5.5m (4.6), 2% higher than our estimate of EUR 5.4m. Income from property management of EUR 2.7m (2.5m) was however in line with ABGSCe, which appears to be due to slightly higher interest costs (avg. interest rate of 2.9% vs 2.8% in Q4) but the average interest maturity grew to 1.6 years (1.5 in Q4). Net leasing was EUR 0.358m (-0.138m) driven by leases in Vilnius (move-ins in April ’22 and July ‘22) and the occupancy rate increased to 91.1% (90.0% in Q4). Income from property management in the earnings capacity improved by 1% to EUR 11.1m.
Negative writedowns as expected
The value of Eastnine’s holding in the Russian retail group Melon Fashion Group fell by 31% in Q1 (-36% from unrealised value changes while +5.3% positive from received dividends). The CEO highlights that there is large uncertainty surrounding what the correct level of WACC should be (22.4% now vs 16.5% in Q4 before the Ukraine invasion). Unrealised and realised property value changes in Q1 amounted to EUR -0.034m (+1.5m) or -0.01%. The average valuation yield came down 1pp q-o-q (3pp y-o-y) to 5.5%. EPRA NRVPS fell 9% q-o-q while still up 7% y-o-y (adj. for dividends), now at SEK 167. The Q1 net LTV fell to 41.0 % from 45.1% in Q4’21. The cash position increased by EUR 38m q-o-q to EUR 67m due to a new loan with Luminor (EUR 21m) and redemption of the last fund shares in ECBPF II (EUR 15m).
‘23e P/IFPM of ~14x on post Q4’21 numbers
On post Q4’21 numbers (which considers no writedowns of Melon Fashion Group), the share is trading at on ’23 estimates at ~14x P/IFPM and 0.49x P/EPRA NRV. These valuation metrics are ~20% above (P/IFPM) and ~30% below (P/EPRA NRV) the average of a peer group consisting of CAST, DIOS, FPAR and WIHL.
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Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/eastnine/Equity-research/2022/5/eastnine---signs-of-strength-from-the-underlying-biz/