Have a US$40.00 target. GLTA
PARTNERS L.P
Q3/23 First Look: In-line Results; Beginning Share Repurchases
Financial Results In Line: BIP reported an in-line quarter, including
FFO/unit of $0.73, in line with our $0.73 estimate but just below consensus of
$0.74, an increase of 6.6% Y/Y, reflecting strong base business
performance, higher tariffs, and contributions from investments. Momentum
should remain strong as $1.6B of investments closed recently and will
contribute in Q4/23. We see these results as neutral for the unit price, with
market sentiment offsetting organic growth and more aggressive unit
repurchases.
The market backdrop has created a strong environment for capital
deployment, with returns on new investments expected to exceed the
12%-15% target. BIP continues to buy for value but notes it is harder to sell,
an overall net positive for infrastructure assets. We expect it to match
investments with capital recycling activity. It reiterated its distribution growth
outlook and has over $2B in corporate liquidity, including the impact of
acquisitions that closed after quarter-end.
Cyxtera Agreement: BIP announced that it would acquire all of Cyxtera’s
assets for $775MM. BIP will also purchase the associated real estate
underlying the sites, allowing Cyxtera to increase existing facility ownership,
secure expansion opportunities, and provide control over its cost structure.
The total purchase price is $1.3B and is expected to close in Q1/24.
Capital Allocation: Despite market weakness we remain confident in BIP’s
outlook based on its sizeable organic growth, ability to recycle capital, and
well-positioned debt structure. As a result, following quarter-end BIP began
repurchases for 1MM units under the normal course issuer bid. Going
forward, BIP will consider further buybacks versus capital deployment.
Large Midstream Miss And HPC: The Midstream segment missed, with
reported FFO of $163MM vs. our estimate of $205MM (-20.5%) due to the
partial sale of a U.S. gas pipeline and the normalization of market-sensitive
revenues. This quarter also saw initial contributions from the HPC as the
facility is now operating at target production rates and is expected to continue
into 2024. All commercial arrangements underpinning ~70% of capacity are
in-service, with Q4 expected to have full run-rate contributions.
Other Operating Results: The Utilities segment outperformed, reporting
FFO of $229MM compared to our estimate of $202MM (+13%), on benefits
from inflation indexation. The Transport segment also posted a beat, with
reported FFO of $205MM vs. our estimate of $196MM (+4.4%), benefiting
from 7% organic growth. The Corporate segment missed, with FFO of
($103MM) vs. our estimate of ($92MM). The Data Infrastructure segment
beat, with reported FFO of $66MM vs. our $54MM estimate.
The company will host a conference call today at 9:00 a.m. ET. The dial-in
number is 1-855-513-1368