Post by
retiredcf on May 04, 2023 9:49am
CIBC
Have a US$46.00 target. GLTA
EQUITY RESEARCH
May 3, 2023 Earnings Update
BROOKFIELD INFRASTRUCTURE
PARTNERS L.P.
Q1/23: Capital Deployment Strong Despite Market Conditions
Our Conclusion
Operational performance remains strong in keeping with the outlook. Organic
growth of 9% is helping to offset the ramp period for HPC, which is no longer
capitalizing interest, and contracts should begin ramping-up in H2/23. BIP
has already achieved the capital deployment target for the year, but there is
some progress to be made to achieve the $2B divestiture target. We reiterate
our Outperformer rating and maintain our DCF-based price target of $46.
Key Points
Capital Deployment Target Met For The Year: FFO/u growth visibility
remains high as new acquisitions have been announced, including equity
deployments of $1B for Triton International and $600MM for Data4. Both
acquisitions fit with BIP’s strategy, with Triton an especially interesting
transaction given the ability to provide real-time insights into global trade
patterns. The acquisition will also be funded with $900MM of BIPC shares.
The acquisitions indicate that BIP has already met its capital deployment
target for the year, meaning the focus now turns to the integration of
investments and the execution of the capital recycling program. With the
deployment target already met, vs. the budget of $1.5B, BIP has
demonstrated an ability to transact even during market volatility.
Capital Recycling Still Progressing Despite Headwinds: Despite the
weakening macroeconomic outlook and tightening market conditions, BIP
has still managed to execute six asset sales in the past twelve months, with
the remaining Indian Toll Road portfolio sale scheduled to be closed in Q2.
BIP also sourced $5B of capital from eight banks during the quarter, further
boosting liquidity. Liquidity now stands at $2.4B vs. $3.4B at the end of
Q4/22. BIP is targeting to generate $2B of proceeds through sales this year,
with $150MM secured to date. BIP maintains a diverse base of quality assets
that buyers still find attractive, providing options for the asset recycling plan.
Results In Line: Q1/23 FFO/unit of $0.72 was in line with both our estimate
of $0.72 and consensus of $0.73, representing 12% Y/Y growth. BIP is well
positioned for inflation and is also benefitting from volume gains and strong
commodity prices. We saw strong performance in the Utilities segment,
delivering $208MM of FFO compared to our estimate of $198MM (+5.1%), as
well as the Transport segment, with reported FFO of $192MM compared to
our estimate of $188MM (+2%). Midstream was in line, with reported FFO of
$198MM compared to our estimate of $197MM. Data missed, with reported
FFO of $70MM vs. our $86MM and Corporate was in line at ($114MM) vs.
our ($113MM) estimate.