Eastnine delivered a Q1 report with a slight miss on most operating lines. Rental income was EUR 9m (-1.2% vs. ABGSCe), the NOI margin weakened 30 bps y-o-y to 92.2%, and central admin and net financials were slightly higher than expected. Overall, this led to a rec. PTP miss of -6.1% vs. ABGSC. Vacancies ticked up by 40bps q-o-q, while the WAULT was extended after Danske Bank prolonged its lease for around 14,500 sqm in Vilnius for five years.
Awaiting news on acquisitions in Poland
Other than this, the quarter was fairly uneventful, giving little reason for any material estimate revisions. The key driver of the case will be announcements relating to a rebooted acquisition agenda. Management have been clear on where they want to spend their money (i.e. Poland), but we have yet to see any material news. With its historically low net LTV ratio of ~27% after the divestment of its holdings in Russian fashion retailer Melon Fashion Group (MFG) in H2'23, we can easily see the company doing ~EUR 200m in acquisitions without breaching its 50% target. To this end, ABGSC intends to visit some of Eastnine's properties in Poland together with management in May, where we expect to learn more about the drivers of the Polish real estate market.
P/CEPS 15.5x 2024e (~18% disc. to sector)
We adjust our rental income estimates by ~1.2% '24e-'26e on soft results, and bring down CEPS ~4.1-2.5% '24e-'26e on lower NOI margins and higher net interest. The Eastnine share is trading 15.5x 2024e P/CEPS, implying an ~18% discount (to the sector), which deepens even further if the company begins adding cash flow-generating properties in line with the acquisition scenario outlined above.
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