NYSE:BIP - Post Discussion
Post by
retiredcf on Nov 07, 2024 8:21am
TD Raises Target
By a buck to US$50.00. Also note that the previously posted RBC targets are also USD. GLTA
Q3/24 FFO/UNIT A SLIGHT MISS; DIGITALIZATION A TAILWIND FOR ~60% OF FFO
THE TD COWEN INSIGHT
FFO/unit was a slight miss, but the outlook is very favourable, in our view. BIP has already hit its 2024 capital recycling target of $2bln and expects to sell $5bln-$6bln of assets over the next 2 years at returns well above its 12-15% target range. The capex backlog is a record $8bln, of which data comprises 72%. BIP's M&A pipeline is stronger than it has been in 2 years and continues to grow.
Event
BIP reported Q3/24.
Impact: NEUTRAL
FFO/unit of $0.76 was a slight miss vs. the Street/TDSI at $0.77/$078, partly due to a ~$0.03-$0.04 y/y FX drag. Transportation was again the main growth driver, reflecting the Triton acquisition, but the data segment's earnings are also starting to inflect higher. We trimmed our 2024-2026 FFO/unit estimates by ~1%-2%. Our target price still increased, largely based on a one quarter roll-forward (~14.5x EBITDA for the TTM ended Sept/2026E).
BIP has already hit its 2024 capital recycling target of $2bln. Corporate liquidity of $1.6bln should be supplemented by two pending asset sales ($225mm), including a deal to sell the Mexican regulated natural gas transmission business for ~$125mm of net proceeds to BIP, crystallizing a 22% IRR and 2.2x MOC. BIP is seeing elevated demand for high-quality infrastructure assets and expects to execute $5bln-$6bln of asset sales over the next 2 years, at returns well above its 12%-15% target range, which should create very accretive capital recycling opportunities, as the LP reinvests the proceeds into assets with more attractive valuations/growth profiles. We believe that BIP's upcoming capital recycling could include selling partial stakes in some of its stabilized data center assets, which has the potential to reveal significant embedded gains.
BIP believes that we are in the early stages of an infrastructure super-cycle, driven by digitalization, decarbonization, and deglobalization. The LP's capex backlog is a record $8bln (20%+ of the existing asset base), with data comprising ~$6bln or 72%. BIP commissioned 70MW of data center capacity during Q3/24, bringing total installed capacity to >900MW. Larger-scale deal activity has reaccelerated and BIP's M&A pipeline is stronger than it has been in 2 years. Areas of focus include 1) AI infrastructure; 2) industrial carveouts; and 3) electric/gas utilities.
BIP yields ~5% and trades at 13.0x EV/2025E consensus EBITDA, which we see as compelling. Notably, ~50% of BIP's FFO is directly exposed to digitalization/ decarbonization and ~60% is directly/indirectly exposed to digitalization. BIP's 10-year trading range is 12.6x-16.7x EV/FTM EBITDA.
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