Eastnine has tried to sell its holding in MFG for quite some time and reached an agreement with a buyer earlier this week. Today, Eastnine announced that the payment has been cleared and ~EUR 146m sits on its European bank account.
Lower net LTV more important than the NAV impact
The MFG book value as of Q2'23 amounted to EUR 163m, meaning Eastnine will recognise a loss of ~EUR 17m (~4% of EPRA NRV). More importantly, net LTV will decrease from >50% to <30%, all else equal. As we have previously stressed, Eastnine may now be able to add ~EUR 18m of NOI (assuming 50% gearing and a NIY of 6.1%, equivalent to the portfolio average), or >50% of our 2024e NOI.
P/CEPS in line with sector average, but >20 pp lower leverage
The share has been trading up on the two announcements (+>30% last week) and is now trading at a 2023e P/CEPS of ~17.5x, basically bang in line with the sector average at ~17.3x. However, we forecast the sector to have an average net LTV of >50% as of Q4'23, compared to Eastnine <30%. At a time when most companies are looking to divest in order to deleverage, Eastnine now has a position of strength and may do acquisitions. We also think it's worth noting Eastnine's stellar operational metrics such as an occupancy of >96%, LTM NOI margin of >92% and high property valuation yield (>6%).
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