Diös - Occupancy to continue up in 2023e - ABG

Operationally sound
Diös delivered a Q4 report with rental income -2% vs ABGSCe. Our top-line estimates remain largely unchanged for 2023e and 2024e, however, as projects completed in Q4 (e.g. the police station in Umeå and the office premises for the Transportation agency in Borlänge) did not fully contribute during the quarter. On an operational basis, Diös continues to deliver strong net letting (+SEK 18m in Q4, +SEK 77m in 2022), which we expect will filter through to slightly higher occupancy in 2023e. The forward-looking occupancy will also be supported by project completions that are 100% pre-let. Compared to a majority of the companies in the Swedish real estate sector, the NOI margin holds up well (party thanks to low exposure to volatile electricity prices). Looking ahead, management is confident that tenants will bear the 10.9% rental income indexation, and notes that rent reversion might still be positive, as in-place rents are coming from a low base. Our CEPS estimates contract by ~16-8% due to higher interest rates, and the short interest maturity.