NOI to grow 3% (8%) y-o-y and 2% (0%) q-o-q

EPRA NAVPS up 14% (10%) y-o-y, 3% (2%) q-o-q

Valuation still below the sector average

Operational growth will expand in Q2 and Q3
We expect net operating income to grow by 6% in 2021, which has only been surpassed historically in ’12 and ’17 (130% and 34%) when large portfolio acquisitions were made. The increase in growth is driven to an equal extent by projects and acquisitions. Nordic Choice Hotel in Sundsvall will drive income from projects in ’21 and the three acquisitions (mainly offices) announced in Q1 will drive income from transactions. As the above properties will be accessed in Q2 and Q3, we expect the largest NOI contributions from Q2. Q1 will be more modest with NOI growth of 3.4% (8.2%) y-o-y. We factor in 2.4% (8%) growth in recurring PTP and 5.6% (12%) growth in cash earnings per share, both y-o-y.

9% cash yield and strong balance sheet
An eventful 2020 ended with higher demand, primarily for offices but also for residentials, in the ten northern Swedish cities where Diös operates. Diös’ property values grew by 7%, resulting in yield compression, while net operating income grew by 3%. We forecast property values to grow by 8% (2% like-for-like) in ‘21. We estimate EPRA NAVPS for Q1 of SEK 82, corresponding to increases of 3% q-o-q and 14% y-o-y. The cash yield (CEPS/EPRA NAVPS) is among the highest in the sector at ~9%. We estimate a net LTV of 53.6%, just below Diös’ target of 55%, and a NIBD/EBIT of 12x (11.6x in Q1’20 and 11.2x in Q1’19) for Q1’21.

Share is up 1% YTD vs. the sector at 8%
The Diös share is up 1% year-to-date vs. CREX at +8%. Its ’21e P/cash earnings is at 10.7x, 49% below the sector average. On ‘21e P/EPRA NAV it is 11% below, at 89%. It is now trading slightly higher than its P/EPRA NAV last 5Y average of 93% on last reported figures (97%). Meanwhile, ’21e NOI growth is its highest ever. Diös reports on 23 April.

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