In the Q4 call, the CEO emphasised a strong transaction and project pipeline in the near term. We believe management has delivered on this in Q1. In Feb and March alone, Diös announced gross transactions of ~SEK 1.5bn, compared to gross total of closed transactions of SEK ~1.1bn in 2020-21. Our ’23-’24 rental income estimates are up from the new acquisitions (~2%) and increased indexation estimates (1-1.5%), but down on the recent divestment (~-3%). Cash earnings (CE) estimates take a hit as ~85% of the outstanding debt has floating terms or interest maturity in 2022 (43%) and (41%) in 2023. We model interest rate hikes of +100bp gradually until ’24.
=SEK 1bn new project investments in 2022e
We expect announcements of new projects in the next 6 months as total investments of SEK 1.3bn will be completed this year, and Diös has said that the project volume will remain at roughly similar levels ahead. We argue that the balance sheet supports further growth, with a Q1e net LTV of 50.2% (48.6% in Q4) and equity ratio of ~39%, compared to Diös’ <55% and>35% targets. We have decreased our estimates for yield compression based on a more uncertain macroeconomic outlook. We estimate an EPRA NRV of SEK 101 in Q1 (+22% y-o-y incl. dividends), and value changes of ~0.7% in Q1 and 2.4-2.2% in ’22-‘24e.
‘22e P/IFPM of ~12x and P/EPRA NRV of 0.90x
The share is trading at a 2022e P/IFPM of ~12x and P/EPRA NRV of 0.90x. These metrics are some ~25% (P/IFPM) below and roughly in line (P/EPRA NRV) with the average valuation for peers such as CAST, EAST, NYF and WIHL (we have excluded NYF on P/IFPM since consensus includes joint ventures, which causes a deviation too large to make the figure useful). We expect Diös to have solid cash flow generation (CE/EPRA NRV) of ~7-6% p.a., which is in t 55%> ...
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