Brookfield Infrastructure Partners (NYSE:BIP)

If you are looking for diversification into infrastructure, it is hard to beat the management team from Brookfield.

TMFSmashy

Spin-off

Second chance to benefit from a classical spin-off-situation: These price means a nice discount.

BIP owns timber and transmission lines in Canada, the US, and Chile. These are stable businesses with steady growth potential. Book value is $22 per share and at $15.50, you are getting a 30% discount, i.e, the shares trade for 0.7x book value.

Leverage will increase as the company builds out its transmission lines in Chile, and there will be an equity deal when market conditions improve, but these are not new factors. The parent company still owns 40% plus has committed additional $200 million in equity financing, so it has an interest in seeing it succeed. Plus, there is $270 million in after-tax proceeds coming in via the sale of the Brazilian transmission business (TBE). This is carried on the books at $195 million (pre-tax), so that's an automatic boost of $75 million to book value. On that basis, the shares trade at 0.6x book value. BUY!!

BIP is high return business with above average growth prospects currently priced as if it is a low return business with none.

Reason's for this mis-pricing consist of...

A convoluted financial structure. BIP's complex organization generates financial statements that muddy the cash flow characteristics of its underlying assets.

Broader market turmult.

The large sell-offs (for uneconomic reasons) that usually accompany spinoffs.

Operating cash flow is currently depressed due to lower earnings from U.S. timber operations and non-recurring charges. BIP should recover to the company's normalized rate over the next few years.

This series of fortunate events above has provided investors the opportunity to aquire best in class infrastructure assets at a ridicuously cheap price. Brookfield currently yields close to 6% and trades for a 20% discount to it's pro forma book value. A financial business with the ability to produce sustainable above average returns on invested capital with the ability to grow at mid to high single digit rates like Brookfield should warrant a premium to book at minimum.

For an enterprise of this quality to trade at such a large discount to book is absurd and unsustainable. Remember, infrastructure assets are highly attractive cash producing assets that carry high barriers to entry (for regulatory and capital reasons), sizable operating margins, possess considerable pricing power, and generate consistent long-term cash flows.

At today's price I believe the downside is very little, but the upside is 30%+ over the next 2 years as post spinoff selling abates and BIP proves its assets are superior, grows it transmission business and finds accretive acquisitions to diversify its portfolio, as it has historically done at BAM.

Upcoming catalysts with potential to unlike significant shareholder value consist of...
.
Stronger analyst coverage, allowing for greater investor awareness
A deal announced by BIP to diversify operations and prove the business model
Increase in the dividend
Any improvement in timber ops
Winning new business in Transelec or Ontario transmission ops

I would definitely buy this stock if I had a dollar to spare.

more global infrastructure. Seems safe for a spin off.

Owns and operates electricity transmission systems and timberlands in North and South America, including 8,279 kilometers of transmission lines in Chile, 2,100 kilometers of transmission lines in Brazil, and 550 kilometers of 44 to 230 kilovolts transmission lines in Canada. All these areas have excellent prospects for growth.

The "kicker" if you will is that Brookfield Infrastructure also owns approximately 634,000 acres of freehold timberlands located on Vancouver Island; and 588,000 acres of freehold timberlands in Oregon and Washington. These timberlands are an early cycle play when the residential and commercial construction markets get going again. Worth 1/3 down if you can get some under $20...

I like their core assets which produce stable, sustainable cash flows. They own high-quality timberlands and have adjusted to the housing market decline in the US by exporting timber to Asia where demand is high. Their transmission lines also present long-life stable cash flows. My reason for investment really has a lot to do with the future of the company. Management invests for the long-term and have an excellent track record. Bruce Flatt, CEO of Brookfield asset Management, has a large role in their investment decisions. They practice some of the same disciplined investing that I practice, and I'm sure Flatt is much more capable and will be much more successful than the smaller infrastructure outfits. If Brookfield continues their run of buying great assets, in irreplacable locations, with barriers to entry, at opportune times, when the price is right, the current share price will prove to be a bargain 5+ years out.

Since I'm a big fan of global infrastructure plays and a big fan of BAM, this spin-off is a no-brainer and my friends tell me I'm especially well-suited for no-brainers.

Infrastructure is not going away any time soon. Demand for Electricity and Wood will always be there.

A spinoff from BAM (Brookfield Asset Managment), which has been a good growth stock. BIP is a partnership, however, so it is most suited for taxable brokerage accounts rather than IRAs. BIP plans to pay a dividend starting in March 2008.

BAM declared that their quarterly dividend would be $0.265, the first dividend will be prorated since the IPO was mid-quarter.

It is a reasonable dividend-paying stock and not necessarily a growth stock (BMO rates it market-perform at a target of $23 which is an increase of 35% over its current stock price). The electric transmission facilities BIP owns should support the dividend and probably some dividend hikes in the future.

aggressive marketing

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Buy. Buy. Buy.

Spin-off opportunity. This stock is following the classic sell-off that often accompanies spin-offs; recipients don't know what they've just received and sell it off.

The stock holds great, long-life, inflation-proof assets managed by one of the world's best management teams.

Spinoff

Spinoff

Great infrastucture stock that will flourish through growth & acqusition.