Real estate companies we like: Diös, Stendörren and Amasten
2021 has been a strong year for real estate. It is tough to identify companies in the sector that can continue to deliver cash flow growth without bearing high risk or being overvalued, but we have managed to find Diös, Stendörren and Amasten.
Diös has assets from Borlänge to Luleå, concentrated in northern Sweden. It has one of the highest direct returns in the sector, and a high yield spread. One of the ten largest tenants is over 80 percent financed with government funds, and 8 percent of revenues comes from housing, but Diös has not yet received the high valuation of other community real estate companies.
Amasten is a residential real estate company that for many reasons is far too undervalued. 1) Ongoing renovations will provide rent and value increases, 2) New builds will gain momentum going forward, 3) Land acquired from SSM can be partly sold and partly strengthen the new-build portfolio, 4) A recently announced acquisition agenda will double the property value. The company has announced its ambitions to move to the main list, which should lead to increased interest in the share.
Stendörren has warehouse/logistics/light industry properties in the Stockholm area and Mälardalen. The properties are valued at a remarkably high yield compared with how other listed companies value assets in the same sector, which means both potential for re-valuation and, for the time being, a cushion against a weaker market. On top of this are a number of housing construction rights and other potential projects, as well as a large project about to start in Bro with the capacity to increase NAV significantly. While we are waiting for projects, there is an upside in the unusually large vacancy rate for the sector, which management is now prioritising, as well as renegotiations of rents, which in recent quarters have been well over 20 percent.