Brookfield Infrastructure Partners LP BIP.PR.B

TD

[retiredcf]

Have a $49.00 target. GLTA

LOOKING FOR SOLID Q2/24 RESULTS; EARNINGS GROWTH SHOULD INFLECT HIGHER IN H2/24

THE TD COWEN INSIGHT

BIP has enjoyed a recent bounce on lower interest rate expectations, but still yields ~5% and trades at only 12.4x EV/EBITDA, based on an average of 2024E/2025E EBITDA (consensus), which we see as a very modest multiple to pay to access a high-quality infrastructure portfolio that is well-diversified by sector/geography and has meaningful and increasing exposure to decarbonization/digitalization.

Event

BIP will report its Q2/24 results on Thursday, August 1 (pre-market).

Impact: NEUTRAL

• Q2/24 Results: We/the Street are forecasting FFO/unit of $0.77, a healthy ~7% y/y increase. We expect y/y earnings growth to inflect to ~10%-11% in H2/24, with particularly strong growth in Q3/24, which has the easiest prior-year comparable (2023 divestitures were heavily weighted to H1/23, and new acquisitions were heavily weighted to H2/23).

• Capital Deployment/Recycling: BIP has deployed $500mm+ to new investments YTD, and has a robust M&A funnel. Tuck-in deals, which tend to offer the highest returns, are BIP's primary current focus, but it is also pursuing an early-stage pipeline of larger opportunities, such as asset carve-outs/strategic partnerships in OECD countries, which could exceed its 12%-15% return targets. BIP is confident in hitting its $2bln capital recycling target, regardless of sector transaction velocity, having already secured $1.2bln. Admittedly, ~$1bln has come from opportunistic asset-level refinancings vs. asset sales, but these financings relate to assets that BIP intends to sell within 2 years, where the debt is fully portable to the buyer, and arguably just represent a pull-forward of future sale proceeds.

• Leveraged to Decarbonization/Digitalization: We see BIP as an unmatched opportunity for public market investors to access a high-quality infrastructure portfolio that is well- diversified by sector/geography. In effect, investing in BIP provides exposure to each active vintage of Brookfield's private infrastructure funds, with the benefit of daily liquidity. Furthermore, BIP was early in anticipating the trends towards decarbonization/ digitalization: ~30% of BIP's 2023 FFO was leveraged to those trends, an exposure that we see rising to ~50%+ over time, with ~70% of BIP's backlog and ~75%-80% of its M&A pipeline linked to those themes.

• Valuation Still Very Compelling: Despite a recent bounce, driven by lower interest rate expectations, we believe BIP's valuation remains very compelling. The units trade at 12.4x EV/EBITDA based on an average of 2024E/2025E EBITDA (consensus), which is at the low-end of the 10-year trading range of 12.5x-16.7x.