Q2/24 RESULTS IN LINE; EXPECTING UPTICK IN LARGE-SCALE M&A IN H2/24
THE TD COWEN INSIGHT
BIP yields 5%+ and trades at 12.6x EV/2024E/2025E consensus EBITDA, which is at
the low-end of the historical range (12.5x-16.7x), and what we see as a very compelling valuation for a high-quality, globally diversified infrastructure portfolio that delivers stable/ predictable, and growing cash flows over the cycle. We believe BIP could achieve >12.5x on a sale of most of its individual assets.
Event
BIP reported Q2/24.
Impact: SLIGHTLY POSITIVE
Q2/24 Results: FFO/unit of $0.77 was in line with the Street/TDSI, and up a solid 7% y/y. Transportation was again the major growth driver, reflecting the acquisition of the Triton intermodal logistics business, and an incremental 10% stake in the Brazilian integrated rail and logistics operation.
Market Backdrop: BIP indicated that deal flow was a little slower-than-expected to start the year, but with a global interest rate easing cycle now underway, it expects H2/24
to be a more active period for large-scale M&A. Rapid AI adoption is also generating substantial organic capital deployment opportunities across BIP's data, electric utility, and natural gas businesses.
Capital Deployment: During H1/24, BIP focused on tuck-in M&A and organic growth opportunities, which tend to be among the highest-return/lowest-risk forms of capital deployment. The LP has secured/closed seven tuck-in deals YTD, totaling over $500mm of equity investment, and has replenished its capital project backlog to a record $7.7bln, which represents 20%+ of the existing asset base. Across the data center platform, BIP is investing >$1bln in near-term growth capital to build capacity for hyperscale customers, and has strategically acquired land in Athens, Chicago, Frankfurt, Milan and Phoenix to support future growth. BIP also indicated that its novel Intel partnership has provided the blueprint for similar large-scale opportunities with several blue-chip technology companies, which are gaining momentum.
Capital Recycling/Corporate Liquidity: BIP has completed $1.4bln towards its annual capital-recycling target of $2bln, including a ~$200mm asset sale in Q2/24. The LP has three advanced sale processes underway and is progressing a further six, which are expected to generate ~$2.5bln of net proceeds over the coming quarters, supplementing BIP's existing corporate liquidity of $1.9bln. BIP also took advantage of near record-low credit spreads to opportunistically refinance ~$5bln of non-recourse debt during Q2/24, with the objective of extending duration and reducing overall financing costs.