* Q1 earnings capacity +2% q-o-q * Riga divestment impacts estimates negatively short-term... * ...but we are confident in the cash being re-invested
Cold Q1, but improved earnings capacity
Eastnine delivered a Q1 report with rental income broadly in line with our estimates, while NOI and rec PTP were lower due to an unusually cold Q1. The occupancy rate was basically flat q-o-q (-0.2pp to 95.6%) and net letting was positive. The earnings capacity IFPM increased by 2% sequentially, driven by rental income. We understand that Rockwool is expected to enter new premises in June, adding to Q2 occupancy earnings capacity rental income.
Riga divestment and estimate revisions
Eastnine has announced that it will sell two of its properties in Riga for ~EUR 38m. Eastnine will obviously pay off debt related to these assets, and will thereafter get ~EUR 12m of liquidity and a ~EUR 6m investment in the fund acquiring the properties (we expect Eastnine to divest this holding). We estimate that this will shave off some ~EUR 2.6m in rental income on an annual basis. Eastnine will still own an 8,800 sqm property in Riga, but with limited earnings given the occupancy rate. We would not be surprised if this also turned out to be divested in 2027, following some refurbishment and letting. In terms of estimate revisions, we now include the divestment, and even though this is expected to drive liquidity, and we know the company aims to re-invest the funds in Poland, we never include template M&A in our estimates. This way, our CEPS revisions look negative, but we expect acquisitions to more than make up for the difference.
Stronger office fundamentals
Contrary to the Swedish office market, vacancies in Eastnine's markets (especially after leaving Riga) are lower, GDP growth is stronger, and we expect some positive rent reversion in Poland. The share is trading at a 2026e P/CEPS of ~14x, and we see upside potential to estimates, driving earnings growth and lower multiples.