NYSE:BIP - Post Discussion
Post by
retiredcf on Sep 25, 2024 8:55am
TD 2
QUICK TAKE: COMPANY UPDATE
INVESTOR DAY HIGHLIGHTS; TAILWINDS FOR THE BUSINESS HAVE NEVER BEEN STRONGER
THE TD COWEN INSIGHT
Lower interest rates increase the appeal of infrastructure. Further, inflation is moderating but may remain above recent norms, which is a tailwind for BIP (~85% inflation indexation). Digitalization has broadly positive implications for the value of BIP's portfolio: not only its data centers/telecom towers/fiber, but also its utility/midstream assets (~60% of FFO is directly/indirectly exposed).
Event
BIP hosted an Investor Day in Toronto (link). Impact: SLIGHTLY POSITIVE
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Strong Year Underway: BIP is tracking to ~10% FFO/unit growth in 2024. Large-scale M&A has been subdued; therefore, BIP has focused on tuck-ins, organic growth, and capital structure optimization. BIP expects YTD tuck-in deals to add ~$150mm of FFO (~6% of TTM FFO) and has a record capex backlog of ~$8bln. The LP has already hit ~90% of its ~$2bln capital recycling target and anticipates selling $5-$6bln of assets over the next 2 years, which should be redeployed into 1) AI infrastructure; 2) industrial carve- outs; and 3) electric/gas utilities. Deal activity resumed over the summer and BIP's deal pipeline is stronger than it has been in 18-24 months.
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Broad Implications of Digitalization (Fig. 1): Data center demand is expected to grow at an ~10% CAGR through 2030. BIP owns one of the largest global hyperscale data center platforms, as well as ~50 North American retail colocation data centers. Natural gas is largely accepted as a critical transition fuel to support related power needs and BIP owns one of the largest independent North American gas storage platforms, which is seeing robust commercial interest, due to the increased value/scarcity of gas storage.
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Significant Embedded Gains in Data: BIP has assembled a leading global data center development platform and expects to earn a ~300-400bps development spread. Realizing that spread, by monetizing 1.7 GW of stabilized sites over the next 5 years, could increase FFO by ~5%/year and should self-fund the development pipeline.
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Vast Need for AI Infrastructure: AI infrastructure, i.e., the essential assets required for high-compute operations, is emerging as a specialized asset class on its own (>$8tln opportunity over 3-5 years+), and one that we see as a natural extension for BIP, while staying true to its definition of infrastructure: essential to society/economy, long-term, predictable CFs, strong creditworthy counterparties, limited/no technological risk, inflation indexation, high barriers to entry, etc.
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Compelling Valuation: BIP yields ~5% and trades at 12.6x EV/2025E consensus EBITDA, which we see as a compelling opportunity.
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