Brookfield Infrastructure
Quick Take: Results and 6% distribution increase were close to our forecast
NYSE: BIP | USD 31.39 | Outperform | Price Target USD 40.00
Sentiment: Neutral
Our take
With the quarterly results and the distribution increase coming in close to our forecast and consensus, we do not expect the results to materially impact the unit price. Directionally, we believe the market will be encouraged by the asset level financing activity that generated roughly $550 million of proceeds at the partnership level, while also setting up those pipeline assets for a potential sale.
Details
FFO/unit was in line with our estimate and consensus. In Q4/23, Brookfield Infrastructure's FFO/unit was $0.79 versus our forecast of $0.80 and consensus of $0.80 (seven estimates; range of $0.79-0.80). From a segment perspective, FFO was as follows:
• Utilities: FFO for the quarter was $218 million versus our forecast of $209 million.
• Transport: During the quarter FFO was $292 million compared to our estimate of $287 million. • Midstream: In Q4/23, FFO was $162 million compared to our forecast of $164 million.
• Data: Quarterly FFO was $67 million versus our estimate of $71 million.
• Corporate: FFO was ($117) million compared to our forecast of ($100) million.
Distributions increased by 6%. BIP announced an increase in its distribution to a new annualized rate of $1.62/unit (up from $1.53/ unit), which compares to our estimate for an increase in the distribution to $1.64/unit and consensus of an increase to $1.63/unit (eight estimates; range of $1.62-1.64).
Continued expansion in Data. Following recent investments in Data4, Compass and Cyxtera, in Q1/24, BIP agreed to acquire ATC India in a transaction that it valued at $2 billion, which the partnership noted resulted in a multiple of below 6x 2024E EBITDA. BIP expects its net investment to be around $150 million, and the partnership anticipates the transaction closing in H2/24. This acquisition marks the third data infrastructure investment in India by BIP, with ATC India's portfolio of roughly 78,000 sites adding to the roughly 175,000 sites currently held by its existing business (most of the towers were acquired from Reliance in 2020).
Set up well to achieve its $2 billion capital recycling target for 2024. BIP noted that it recently completed several asset level financings at two North American pipeline operations, which generated about $550 million for the partnership. Further, these financings reduce the equity required if BIP looks to sell those pipelines in the future. BIP believes these activities, combined with "optimism" that it sees as having returned to the investment landscape, set the partnership up well to achieve its $2 billion capital recycling target for this year. In addition to the mention of the North American pipeline assets, BIP also profiled Quantum, its electricity transmission business in Brazil, in its Letter to Unitholders as an asset that would be in a position to be monetized following the scheduled completion of its build-out in Q1/24.
Conference Call: Today at 9:00 AM (ET)