BROOKFIELD UNIT COULD SEE DISTRIBUTION UP 12% IN 2017

The combination of recent acquisitions and other deals for Brookfield Infrastructure Partners LP should lead to a 12-per-cent distribution increase early in 2017, according to RBC Capital Markets. The owner and operator of utilities, transport, communications and other infrastructure businesses recently issued US$ 750 million to help fund the purchase of part of Petrobras’ natural gas transmission unit. This follows other deals including its part of a deal to buy Australian port and rail operator Asciano Ltd., and a Peruvian toll road portfolio. RBC analyst Robert Kwan, who rates BIP at outperform with a price target of US$39 per share, told clients that these transactions should generate strong cash flow growth. Kwan expects the 12-per-cent distribution hike in February. “We believe the going-in funds from operations yields map to an attractive ‘ mid-teens’ figure and we like the potential for upside as the returns could be enhanced through leverage or through the realization of a re-rating in asset valuation as we see improving investor sentiment for Brazil,” the analyst said in a research note. He also noted BIP appears to be in a good position if interest rates continue to rise. That’s because approximately 70 per cent of the firm’s EBITDA is indexed to inflation, with assets backed by long- dated debt that is primarily held at fixed rates. Kwan pointed out that roughly 50 per cent of BIP’s EBITDA is linked to GDP growth through assets like toll roads and container ports.