EQT AB shares slip after Q3 results flag cautious optimism

Investing.com — EQT AB ‘s (ST:) shares were down on Friday following its third-quarter results, despite the company’s cautious optimism.

At 6:46 am (1046 GMT), EQT AB was trading 4.6% lower at SEK 317.10.

The company’s fee-paying assets under management (AUM) remained steady at €133.6 billion compared to the previous quarter and showed a 4% increase year-over-year. 

The company posted gross inflows of €3.2 billion during the third quarter, boosted by closed-out commitments from its Infrastructure Fund VI, which has reached €16.9 billion in commitments. 

EQT anticipates that active fundraising for this fund will conclude in 2024, aiming for a final close in the first quarter of 2025 with a target size of €20 billion.

“While we are constructive on the medium-term growth outlook, we have consistently argued that downside to consensus EQT PRE estimates means EQT shares carry the greatest risks of earnings downgrades across our coverage of European alts,” said analysts from Citi Research in a note. 

The company reported a total of €6 billion in investments and €3 billion in exits, indicating a recovery in activity levels compared to previous periods. 

Value creation for the quarter stood at 4%, although the multiple on invested capital for all but one key fund remained unchanged. BPEA VIII, the predecessor to the current fund, is now 70-75% invested, while BPEA IX is targeting $12.5 billion with its first close expected in the first half of 2025.

Despite an ambitious €100 billion fundraising target for the upcoming cycle, the brokerage did not provide a specific timeline for achieving this goal. 

Analysts from UBS flagged that the current fundraising cycle is nearing its conclusion, with the final close of Infra VI expected to be a protracted process, taking more than two years since its initiation in December 2022. 

The exit outlook remains cautiously optimistic, with a noted strong pipeline of potential realizations, though the broader market conditions and buyer confidence are still a concern, particularly as the initial public offering market continues to recover.

EQT did not revise its outlook or guidance significantly, which has raised concerns among analysts regarding potential delays in the anticipated launch of EQT XI, potentially pushing it from 2025 into 2026 without a meaningful increase from the previous fund’s €22 billion. 

“Nor is there any comment (nor did we expect) on carried interest generation,” said analysts at UBS.

The year-end results, anticipated on January 23, 2025, are expected to be a more significant catalyst for the company’s shares, as per UBS.