HPI's First-Half Distributions Fall on Equity Dilution, as Expected

Hotel Property Investments, or HPI, is tracking in line with our full-year expectations. First-half fiscal 2021 revenue increased 6% to AUD 28.8 million on rent average increases of 2.3% and acquisitions, partly offset by rental reductions at eight pubs in July 2020 after negotiating lease extensions. Adjusted funds from operations increased 3% to AUD 15.5 million but dilution from the 2020 equity raising to fund acquisitions caused distributions to fall 7% to AUD 9.6 cents per security. Guidance is for full-year distributions of AUD 19.3 cps, broadly in line with our expectations and representing a yield of 6.3% at the current price. We maintain our AUD 3.00 fair value estimate and consider the stock fairly valued.