* Q3 report solid with small underlying revisions
* Net LTV coming down in Q4'26e on VAT settlement
* Significant earnings growth in 2027e/2028e
Large reported swings, small underlying deviations
Eastnine's Q3 report saw rental income +1% vs ABGSCe, while the rec PTP deviation of +9% was heavily impacted by positive non-recurring FX in net financial items. The occupancy rate was down a lot q-o-q (M&A mix on "The Bridge" acquisition), but up q-o-q in the like-for-like portfolio. Value changes were positive, and the average interest rate moved slightly less than we had anticipated (reported 4.6% also negatively impacted by debt related to VAT receivables to be settled in Q4). All in all, the report itself was solid, showing continued operational momentum and lower-than-expected credit margins.
Large cash position and several moving parts
Eastnine has a cash position of ~EUR 95m as of Q3. In addition to this, receivables of ~EUR 57m related to VAT/M&A will be settled as of Q4, and the financial holding of ~EUR 7m related to the divestment in Riga in Q2 might be sold ahead. Eastnine has paid ~EUR 220m for the Bridge acquisition so far (underlying property value of EUR 285m), where we understand that the delta relates to ~EUR 20m of delayed purchase price (to be paid when the VISA premises have been completed), ~EUR 20m of capex to be taken by Eastnine, and ~EUR 25m of settlement related to rental discounts and vacancies. The property is now fully let (57% have moved in). Even so, Eastnine's cash position indicates that growth may continue from here. Our estimate revisions in 2028e relate to higher long-term interest rate expectations, while 2027e is impacted by timing effects of move-ins.
Prime assets but with high yields
Unlike the Swedish office market, Eastnine's core markets are seeing strong GDP growth, low office vacancies and positive rent reversion. Supply growth is falling and demand remains solid. We forecast 2027/2028e earnings growth of almost 20% p.a.