Diös announced this morning that it has acquired a portfolio of residential (~50% of total portfolio), hotel and commercial properties for SEK 15,670 per sqm and a current rental value of SEK 1,111 per sqm. These are both below Diös’ averages of ~SEK 18,500 and ~2,140 per sqm, i.e. there should be potential to raise the rental and property values. We see it as positive that management is delivering on its recent communication regarding a strong pipeline. We expect more acquisitions and/or project announcements in the near-term. The total acquired portfolio today amounts to SEK 564m and 36,000 sqm and the properties are located at strategic locations in Borlänge and Falun, complementing the existing portfolios.
Expected activity boost in Borlänge as Northvolt establishes
On Friday Northvolt announced that it will remodel Stora Enso’s discontinued paper mill in Borlänge into a factory supporting its battery production, reportedly creating 1,000 new jobs in the area. As of Q4, Borlänge corresponded to ~7% of Diös’ property value (median city size was ~9%). However, Diös’ presence is growing and the company’s largest and third largest projects are taking place in Borlänge. The largest, Intagan 1, is a ~SEK 500m investment that will house the Swedish Transport Administration upon completion in Q3 2022. The third largest, Mimer 1, is a refurbishment for the new campus of the University of Dalarna in central Borlänge. The project should just have been started in Q1, has expected completion in Q3 2023, and holds a total investment of ~SEK 350m.
2023e P/CEPS of 11x, ~25-30% below peers
The share is trading at a 2023e P/CEPS of ~11x and a 2023e P/NRV discount of ~18%. These valuation metrics are some ~25-30% (P/CEPS) below or ~5% (P/EPRA NRV) above the average valuation for the peer group of Castellum, Eastnine and Wihlborgs. Meanwhile Diös presents a solid cash flow generation (CEPS/EPRA NRV) of >
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