Initiating Coverage on Hotel Property Investments, an Attractive Income Stock Flying Under the Radar

We initiate coverage on Hotel Property Investments with a fair value estimate of AUD 2.60. We consider Hotel Property Investments attractive and recommend it for income investors. At current prices of about AUD 2.12, Hotel Property Investments trades at an 23% discount to our fair value estimate. The fiscal 2015 distribution yield is 7.6%, or 7.9% after adjusting the share price for the second-half 2014 distribution of AUD 8.8 cents to be paid shortly (ex-dividend date is 26 June). In addition to the attractive yield, distribution growth should be strong as rents are contracted to grow at about 4% per annum.