Brookfield Infrastructure Partners LP T.BIP.UN

TD Raise Target

[retiredcf]

To US$50.00. GLTA

Brookfield Infrastructure Partners L.P.

(BIP-N, BIP.UN-T) US$31.86

Q2/23 FFO/Unit Up 8% Y/Y; Very Attractive Valuation

Event

BIP reported Q2/23 FFO/unit of $0.72, in line with Street/TD at $0.73/$0.72.

Impact: NEUTRAL

• Q2/23 Results: FFO/unit was up a healthy 8% y/y, with growth in the utilities/data segments more than offsetting slightly lower y/y results in midstream, reflecting a normalization of market-sensitive revenues, and what we would characterize as normal start-up issues at the HPC. BIP is securing mid-single-digit inflationary tariff increases in 2023, building on the high-single-digit increases captured in 2022, which will continue to compound forward, even as inflation subsides.

• Marquee Data Centre Platform: BIP has already exceeded its annual capital deployment target of $1.5bln, having secured three new investments totalling ~$2bln. Most recently, BIP agreed to buy a co-controlling stake in Compass Datacenters, a leading North American data centre platform, in partnership with Ontario Teachers. The Compass deal, along with the recently closed acquisition of Data4, a European hyperscale data centre platform, plus BIP's existing data centre investments, will combine to form one of the largest global hyperscale data centre platforms. BIP expects to earn single-digit going-in yields on its recent data centre investments, which should materially improve as it develops the highly visible and large-scale growth pipelines acquired with those platforms. BIP intends to fund the capital backlog by monetizing fully operating and contracted data centres, creating a self-funding structure, and anticipates that its data investments will ultimately generate returns in the mid-to-high teens range, and perhaps even higher, depending on the success of its capital recycling initiatives.

• Corporate Liquidity: BIP ended Q2/23 with $2.3bln of corporate liquidity, and, in our view, has demonstrated very flexible access to capital, including the potential to use BIPC shares as an acquisition currency (e.g., IPL/Triton deals), and the opportunity to monetize partial asset stakes (e.g., NGPL).

  TD Investment Conclusion

  The units yield ~5% and trade at 12.4x EV/2024E EBITDA (consensus), which is at the low-end of the 10-year range of 12.4x-16.7x, a valuation that we consider very attractive for a high-quality and well-diversified portfolio of long-life infrastructure assets, which has delivered 11% FFO/unit growth and 9% distribution/unit growth over 2012-2022.