Brookfield Infrastructure
Quick Take: In-line Q1/24 FFO; transactions provide capital to BIP
NYSE: BIP | USD 26.87 | Outperform | Price Target USD 40.00
Sentiment: Neutral
Our take
With the results being in line with our estimates and consensus, we do not expect them to materially impact the unit price. While modest in size, we believe the market will be encouraged by the asset monetization activity and we will look to the conference call for additional details on potential future sales.
Details
FFO/unit was in line with our forecast and consensus. In Q1/24, Brookfield Infrastructure's FFO/unit was $0.78 versus our forecast of $0.79 and consensus of $0.78 (eight estimates ranging from $0.76-0.79). From a segment perspective, FFO was as follows:
• Utilities: FFO for the quarter was $190 million versus our estimate of $200 million.
• Transport: During the quarter, FFO was $302 million compared to our estimate of $291 million. • Midstream: In Q1/24 FFO was $170 million compared to our forecast of $181 million.
• Data: Quarterly FFO was $68 million versus our estimate of $73 million.
• Corporate: FFO was ($115) million compared to our forecast of ($119) million.
M&A environment "should be more balanced" in 2024. BIP noted that market conditions have continued to improve in 2024 and management believes the environment for transacting "should be more balanced" this year versus 2023.
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On the asset sale side, BIP signed a binding agreement in April to sell the fiber platform within its French telecom infrastructure business to a financial buyer at an enterprise value of over EUR 1 billion (roughly EUR 175 million net to BIP). The partnership noted that it expects to realize a 17% IRR on its investment and a multiple of capital of roughly 1.9x. BIP anticipates generating up to $100 million of proceeds (net to BIP) when the deal closes later in 2024.
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Commenting on the acquisition environment, BIP noted that its investment pipeline "remains quite full", but that it is being "very selective" in pursuing opportunities with high risk adjusted returns. Further, BIP stated that organic and tuck-in opportunities are its primary focus right now, while going on to highlight that those types of investments are typically its highest returning opportunities.
Asset level financings upstream proceeds to BIP. During the quarter, the regulated gas transmission business in Brazil completed a $1.6 billion financing, which resulted in roughly $500 million of proceeds net to BIP. When combined with two previously-disclosed refinancings at its pipeline operations in North America, BIP has generated over $1 billion for the partnership.
Conference call: Today at 9:00 AM (ET)