Eastnine: Strong Q1 coupled with Polish acquisition - ABG

Acquisition income boost now in our estimates
Higher central bank rate assumptions hit CEPS
15x P/IFPM and 43% discount to EPRA NRV 2022e

Office segment appears the most attractive
Through its Polish acquisition Eastnine made quick use of the large (EUR 67m) cash position reported in Q1, and improved its earnings capacity. The impact on rental income is EUR 7.5m isolated (+28% NTM on ABGSCe). As for our other real estate names, we have raised our indexation figures following higher inflation expectations, to 3.0% for 2023 and 2.5% for 2024 (+100 and +50bps). However, we have removed our previously modelled template acquisition in 2022e (EUR 1.9m rental income), which explains our lower rental income estimate (23% 2023e). Management underscored on the conference call that the office segment is highly interesting, with many untapped opportunities. The trends of moving home production and returning to the office should both be supportive. Vilnius demand stands out strongly, as do some Polish cities. Riga has been slower, and the Pine project is now being reviewed as production costs have risen. However, we have had no projects included in our estimates.

EPRA NRVPS down mainly on Russian write-down
The valuation yield compressed by 0.1pp to 5.5% in Q1, but our EPRA NRVPS estimates are down 9-9.3%, mainly due to the write-down of EAST’s Russian asset, Melon Fashion Group. A possible exit remains uncertain, and we continue to assume only the last reported NAV in our estimates (21% of EPRA NRVPS Q1’22). The lower positive revisions to our CEPS estimates are due to us incorporating a gradual European central bank rate hike of 75bps until 2024e, which translates to a 62bps higher average interest rate in Q4’24e. Most of the increasing costs are in 2024e, when 55% of EAST’s interest rates mature (2.7% in ’22 and 26% in ’23).

Fair value range of SEK 90-120 (130-160)
Multiples for real estate names have fallen by ~25% (P/CE) and ~40% (P/EPRA NRV) in 2022, while most companies have repo ...
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Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/eastnine/Equity-research/2022/5/eastnine---strong-q1-coupled-with-polish-acquisition/