CIBCEQUITY RESEARCH
February 2, 2023 Earnings Update
BROOKFIELD INFRASTRUCTURE
PARTNERS L.P.
Q4/22 Results: Performing Well With Visible Growth For 2023
Our Conclusion
Operational performance remains strong, including 10% organic growth for
the year with inflation tailwinds persisting. While negative market sentiment
and investor concerns about availability of capital have weighed on the units
recently, we believe the opportunity set for infrastructure assets remains
strong, creating an attractive opportunity. We reiterate our Outperformer
rating and maintain our DCF-based price target of US$46.00.
Key Points
Capital Deployment And Growth: FFO/u growth visibility remains high as
the HomeServe and DFMG acquisitions closed subsequent to year-end.
While management highlighted its bias for inflation to revert to normal ranges
over the course of the year, it remains a tailwind. Management expects to
continue performing well, targeting 12%-15% FFO/u growth for 2023. With
$2.9B deployed during 2022, well over the budget of $1.5B, BIP has
demonstrated an ability to transact even during market volatility. BIP expects
public-to-private transactions to be a large part of the new investment
pipeline and it has started the next round of asset sales.
Distribution Increase: The distribution was increased 6% to $1.53/u
annualized, vs. our estimate of $1.52/u and consensus of $1.54/u. The
FFO/u payout ratio of 64% is within the targeted 60%-70% range.
Capital Recycling A Focus: During Q4, BIP closed on the telecom tower
portfolio in New Zealand and the first tranche of the transmission lines in
Brazil, raising $400MM net to BIP. The liquidity position will be further
enhanced by the proceeds from sales of the Indian toll road portfolio and the
50%-owned port in Victoria, Australia for net proceeds of $260MM. BIP now
has $3.4B of corporate liquidity, well above $2.3B in Q3 prior to closing on
asset sales.
Results In Line: Q4/22 FFO/unit of $0.72 was in line with both our estimate
of $0.71 and consensus of $0.72, representing 11% Y/Y growth. BIP is also
well positioned for inflation, and is benefitting from volume gains and strong
commodity prices. We saw strong performance in the Transport segment,
with reported FFO of $207MM compared to our estimate of $189MM, as well
as Utilities delivering $188MM of FFO compared to our estimate of $173MM.
Midstream was in line, with reported FFO of $205MM compared to our
estimate of $204MM. Data missed, with reported FFO of $61MM vs. our
$78MM and Corporate also slightly missed at ($105MM) vs. our ($96MM)
estimate.