Recurring PTP to grow by 9% in ’19e and ~4% in ’20e

CEPS alone increases EPRA NAV by ~10% in ’19e

Trading in line with 2019e EPRA NAVPS

Growth effect from lowered funding cost fades out in H2’19
Growth in recurring PTP continues to be strong and reached 13% y-o-y in Q1 (14% in Q4 and 9% FY’18), driven by ~2% LFL rental growth, higher surplus margins partly owing to a milder winter, and a lower average funding cost. We reiterate our view that the average interest rate troughed in Q4 (at 1.2% vs. 1.3% in Q1) and expect the growth rate to slow down in H2’19, due to tougher comps, resulting in a FY’19e recurring PTP growth of 9% and ~4% in ‘20e. We make minor revisions to our estimates, reflecting the transactions in Q1.

We expect 14% EPRA NAVPS growth in 2019e
Diös raised its property values by SEK 65m, or by 0.3% of the portfolio value, which was below our forecast of 0.5%. However, with CEPS contributing close to 2.1% alone, EPRA NAVPS reached SEK 69.5 in Q4, corresponding to y-o-y growth of 18% (adj. for DPS). We argue that the future growth prospects are solid for Diös, with an estimated additional property value uplift of 1.5% throughout 2019 from CPI revisions as well as developments, but mainly due to the large contribution from CEPS, which adds ~10% to EPRA NAVPS alone, taking it to SEK 74 by year-end.

2019e P/CE of 11.4x implies it is ~40% below Swedish sector
Diös is the top-performing share YTD among the Nordic real estate companies with at +32% total return vs. the Swedish sector at +19%. The stock is currently trading in line with its 2019e EPRA NAVPS compared to the Swedish sector average (ABGSC coverage), which is trading at a 10% discount. The 2019e P/CE of 11.4x, however, still corresponds to roughly a 40% discount vs. the Swedish sector and the dividend yield of 4.3% is the highest among the Swedish peers.

info@introduce.se (Introduce.se)

ABG Sundal Collier - Introduce.se