Brookfield Infrastructure Partners L.P.
(BIP-N, BIP.UN-T) US$35.28
Expecting Solid Q2/23; Building Strong Visibility into 2024
Event
BIP will report its Q2/23 results on Thursday, August 3 (pre-market).
Impact: NEUTRAL
Q2/23 Results: The Street/TDSI are forecasting Q2/23 FFO/unit of $0.73/$0.72, which implies a solid ~7-9% y/y increase.
M&A Target Already Exceeded: BIP exceeded its $1.5bln annual capital deployment target by the end of Q2/23, agreeing to deploy: 1) ~$600mm to acquire Data4, a premier European hyperscale data center platform; 2) ~$1bln to privatize Triton, the world's largest owner/lessor of intermodal shipping containers, funded largely with BIPC shares (~$900mm); and 3) ~$300mm-$400mm (our estimate) to purchase Compass Datacenters, a North America-centric data center platform, in partnership with Ontario Teachers' Pension Fund. We believe that BIP's patience/ capital discipline have been rewarded, with these data investments made at going- in multiples that represent a discount of several turns vs. the peak in mid-to-late 2021 (25x-30x). We also note that the Triton shareholder vote is scheduled for late August, meaning that the deal could close in late Q3/23, one quarter earlier than expected.
Successful Exit of Early Data Investment: BIP closed the sales of an Australian port stake and the Indian toll roads in Q2/23 (~$360mm total proceeds). The LP also announced and closed a very successful exit of its investment in One NZ/ Vodafone NZ, agreeing to sell an ~50% stake to its existing joint venture partner for net proceeds of $1.1bln ($275mm to BIP). That sale followed an earlier carve- out and monetization of the associated telecom towers for 34x 2023 pro forma EBITDA, which generated net proceeds of $140mm to BIP, returning substantially all the LP's invested capital. Across the two transactions, we understand that BIP earned an ~30%+ IRR in U.S. dollars and achieved an exit EV/EBITDA multiple roughly ~2x its entry multiple (~13x vs. ~7x). In mid-June, BIP also sold a 12.5% stake in NGPL to ArcLight Capital Partners for an undisclosed sum.
TD Investment Conclusion
BIP is trading at ~13.0x EV/2024E EBITDA (consensus), which is towards the low end of its 10-year range of 12.4x-16.7x (average of 14.5x plus/minus one standard deviation). We see this valuation as quite attractive relative to BIP's very high- quality and well-diversified portfolio of long-life infrastructure assets.