Brookfield Infrastructure
Quick Take: In-line Q3/22 FFO; groundwork being laid for potential new deals?
NYSE: BIP | USD 36.51 | Outperform | Price Target USD 47.00
Sentiment: Neutral
Our take
With Q3/22 FFO being in line with our estimates and consensus, we do not expect the results to materially impact the share price. However, we point to BIP's commentary in its quarterly Letter to Unitholders that highlighted BIP's historical acquisition success during periods of market dislocation as seemingly laying the groundwork for potential new deals.
Details
Q3/22 FFO was in line with our forecast. BIP's FFO/unit in Q3/22 was $0.68 versus our forecast of $0.67 and consensus of $0.68 (eight estimates; range of $0.66-0.70). From a segment perspective, FFO was as follows:
• Utilities FFO was $196 million compared to our forecast of $196 million and $182 million in Q3/21;
• Transport FFO came in at $203 million versus our estimate of $191 million and Q3/21 FFO of $181 million;
• Midstream FFO was $172 million compared to our forecast of $175 million and FFO in Q3/21 of $103 million; • Data FFO came in at $60 million versus our estimate of $63 million and $58 million in Q3/21; and
• Corporate FFO was ($106) million compared to our forecast of ($106) million and Q3/21 FFO of ($102) million.
No material updates on specific transactions. The company continues to note that it has "several sales processes" underway that it expects could generate roughly $1.5 billion in proceeds, while on the growth front, BIP's focus for the rest of the year will be closing the HomeServe and DFMG (towers) acquisitions that the partnership expects to be completed in Q4/22 and Q1/23, respectively.
Laying the groundwork for potential new deals? In the opening portion of its quarterly Letter to Unitholders, BIP highlighted its history of making "several deep value investments in marquee regulated or contracted assets" (e.g., Babcock & Brown Infrastructure in 2010; investments in Brazil in 2016), and that it believes its competitive advantages will allow it to make deep value acquisitions during periods of market dislocation, which it noted "we are currently experiencing". BIP also stated that some of its strongest realized returns have been a "direct result" of its contrarian approach as well as its access to "flexible and large- scale capital".
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