TD Follows Suit And raises their target by a buck to US$46.00. GLTA
Brookfield Infrastructure Partners L.P.
(BIP-N, BIP.UN-T) US$31.84
Q4/23 FFO/Unit in Line; Strong Momentum Entering 2024
Event
BIP reported Q4/23 FFO/unit of $0.79, roughly in line with the Street/TDSI at $0.80.
The LP also increased its annual distribution by 6% to $1.62/unit, as expected, and
telegraphed a strong start to 2024.
Impact: SLIGHTLY POSITIVE
Q4/23 Results: FFO/unit increased 10% y/y, reflecting 7% organic growth
(including ~5% inflation), and the benefit of BIP's asset-rotation program, which
was back-end-loaded. Asset sales of ~$2bln primarily closed in Q2/23, while ~
$2bln was deployed to new investments in Q3/23-Q4/23.
2024 Outlook: BIP completed $2bln+ of new investments in transport/data in
2023, at expected returns above its 12-15% target range. The LP anticipates
a more balanced market in 2024, but still sees opportunities to invest for value.
BIP is off to a strong start in 2024, having closed a $1.3bln acquisition to
acquire a North American retail co-location data center business out of bankruptcy
(330MW), plus the associated real estate for an all-in multiple of ~8x EV/2024E
EBITDA, which was fully financed and did not require any new equity. The LP
has also agreed to acquire 78,000 Indian telecom towers, which should have
significant synergies when combined with BIP's existing portfolio of 175,000
towers in India. The Indian telecom deal was done at a sub-6x EBITDA multiple
and will make BIP the largest telecom tower owner in India, currently one of the
fastest growing regions for data and 5G. BIP has also already surfaced ~$550mm
through capital recycling to-date in 2024, demonstrating good progress towards
its $2bln target.
Liquidity: BIP ended Q4/23 with $2.8bln of corporate liquidity, which should be
supplemented by ~$2bln of capital recycling, and the potential to use BIPC shares
as an acquisition currency.
TD Investment Conclusion
We believe that BIP offers a compelling combination of yield (~5%) plus high-single-
digit to low-double-digit FFO/unit growth, and note that, by owning BIP, investors
effectively gain exposure to each active vintage of Brookfield's private infrastructure
funds, with the benefit of daily liquidity. BIP is trading at 12.5x EV/2024E EBITDA
(consensus), which is at the low end of the 10-year range of 12.5x-16.7x, and
a valuation that we consider very attractive for a high-quality portfolio of long-life
infrastructure assets.