Brookfield Infrastructure Partners L.P. (TSX: BIP.UN) is a Bermuda exempted limited partnership that owns and operates quality, long-life assets that generate stable cash flows, by barriers to entry or other characteristics tend to appreciate over time. It focuses on acquiring infrastructure assets that have low maintenance capital costs and high barriers to entry.  

Key Highlights:

• Increased revenue: During Q1FY22, the company witnessed an increase in the total revenue to

USD 3,411 million as compared to the total revenue of USD 2,683 million in Q1FY21. The utility segment reported sales of USD 1,212 million in the same period (Q1FY22) against the USD 1,091 million in Q1FY21. The mainstream segment reported sales of USD 902 million in Q1FY22, higher than USD 375 million in Q1FY21.

• Industry beating profitability margins: In Q1FY22, the company witnessed an increase in the revenues and managed its expenses which resulted in attaining higher profit margins as compared to the industry median, which is represented below.

Source: Refinitiv, Analysis by Kalkine Group

• Consistent dividend distribution: The company recently approved a 6% increase in its dividend to CAD 0.54 per share and the annualized dividend of CAD 2.16 per share for FY22. Below is the pictorial presentation of  dividend distribution over the past 10 years.

Source: Company presentation

Risks associated with investment

The company is majorly exposed to the changing technology, renewing contracts, client retention power, rising cost of operations, shortage of labor, currency volatility, etc to name a few. 

Financial overview of Q1FY22 (Expressed in millions of USD)

Source: Company Filing

• The group reported an increase in the total revenue to USD 3,411 million during Q1FY22, against USD 2,683 million during Q1FY21. The significant increase in revenue is contributed by the utility segment which reported sales of USD 1,212 million in Q1FY22 vs USD 1,091 million in Q1FY21.
• The direct operating costs rose to USD 2,506 million in Q1FY22 vs USD 1,815 million in Q1FY21. The general and administrative expenses also increased to USD 784 million in the same period (Q1FY22) vs USD 773 in Q1FY21.
• The group reported a decline the net income to USD 294 million during Q1FY22 as compared to USD 413 million in Q1FY21.

Valuation Methodology (Illustrative): Price to Book-value based

Analysis by Kalkine Group

Stock Recommendation:

The Adjusted EBITDA of the company rose to USD 705 million during Q1FY22 against USD 628 million in Q1FY21, and the revenue grew significantly to USD 3,411 million in the same period (Q1FY22) against the total revenue to USD 2,683 million in Q1FY21. The funds from operation also increased to USD 493 million in Q1FY22 against the USD 431 million in Q1 FY21. The group is optimistic about the growth opportunities, and recently raised CAD 600 million of debt and the proceeds will be used to fund the various projects in pipelines and to meet working capital needs.  On the valuation front, the stock is measured on the Price / Book-value based multiple and we have considered WEC Energy Group Inc., CMS Energy Corp., etc as the peer group for the comparison.

Therefore, based on the above rationale and valuation, we recommend a “Hold” rating on the stock of BPI.UN at the last closing price of CAD 78.56 on May 20, 2022. Additionally, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

One-Year Technical Price Chart (as of May 20, 2022). Analysis by Kalkine Group

Note: The reference data has been partly sourced from REFINITV

Disclaimer

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