Brookfield Infrastructure Has Some Contrarian Appeal

Canada’s Brookfield Infrastructure (BIP) had a rough 2018, with the shares underperforming the S&P 500 by around 14%. Rising interest rates aren’t particularly helpful for a business that uses a lot of debt financing, but I suspect other issues like weak currency in Brazil, rising global protectionism, and some sizable deals in nontraditional areas could have played a role. Whatever the case, Brookfield Infrastructure heads into 2019 with a higher-than-normal dividend yield, cash to deploy, and a refreshed portfolio of assets that should start contributing to distributable cash flow fairly soon.

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Brookfield Infrastructure Has Some Contrarian Appeal

Brookfield Infrastructure Gets Moving On New Investments

It was only a couple of weeks ago that I wrote about Brookfield Infrastructure (BIP) looking to deploy significant amounts of capital into new cash-generating assets, and the company has moved quickly to do just that. In just that short span of time, Brookfield has participated in two deals with a combined headline value of $4.5 billion, with both deals looking pretty typically “Brookfield-esque” in terms of structure and long-term opportunity.

As is typically the case, Brookfield Infrastructure management provided minimal financial information, and that certainly complicates the modelling process. Even so, I believe these deals add about 1% to the company’s long-term AFFO growth rate and about $2.50/share to the long-term discounted fair value. While Brookfield is usually careful not to bite off more than it can chew, I’d note that the company’s ongoing use of equity and debt to acquire minority stakes leaves open the possibility of more acquisitions in the not-too-distant future.

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Brookfield Infrastructure Gets Moving On New Investments

Brookfield Infrastructure's Ample Liquidity Should Fuel Years Of Healthy Distribution Growth

Between a weak share price performance since the start of the year, ample liquidity, and a rich set of investment options around the world, I think this is an interesting time to look at Brookfield Infrastructure Partners L.P. (BIP). Management is methodical about allocating capital; they know what they want, and they know where their sweet spots are. With that, there aren't too many transactions in the company's history that have gone seriously sour and the company has a good track record when it comes to building value and boosting its distributions.

Investors should note that Brookfield Infrastructure is structured as a partnership and investors will get a K-1. The company offers a fair bit of easy-to-interpret information on its website, but I'd advise readers to do a little extra research to make sure they understand the tax ramifications. In any case, I think these units are worth the trouble - in addition to a yield that's close to 5%, I believe a deep pipeline of ongoing investment opportunities will support long-term distributable cash flow growth in the high single-digits to low double-digits.

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Brookfield Infrastructure's Ample Liquidity Should Fuel Years Of Healthy Distribution Growth

Seeking Alpha: Brookfield Asset Management Offers Well-Diversified Growth Leveraging Third-Party Capital

Back in June, I thought that Brookfield Asset Management (NYSE:BAM) was well-placed to continue growing its lucrative fee-generating asset management. That process continues to benefit the company, but the market hasn't rewarded the company for that progress. While BAM is an uncommonly complex investment, I believe that complexity is at least somewhat offset by the company's demonstrated ability to successfully deploy capital into a wide range of markets where it can earn solid economic returns. In my view, Brookfield Infrastructure Partners (NYSE:BIP) and Brookfield Property Partners (NYSE:BPY) are more appealing total return candidates today, but they're also riskier.

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Brookfield Asset Management Offers Well-Diversified Growth Leveraging Third-Party Capital

Seeking Alpha: Brookfield Infrastructure Looks Undervalued As Long-Term Bargains Emerge

Back in June of 2015, I wrote that analysis and sentiment around Brookfield Infrastructure Partners (NYSE:BIP) had a tendency of falling into the "prisoner of the moment" trap, and I think that remains the case today. The decline in value of these units hasn't been as bad as some (like Macquarie Infrastructure (NYSE:MIC), DP World, and COSCO Pacific), but it does seem as though the market is concerned about the company's modest exposure to energy and its more substantial exposure to commodity-sensitive economies like Brazil and Australia.

I certainly do think that BIP's affection for Australia and Brazil is a risk given the commodity sensitivity, but it's hard to argue with management's basic thesis that Brazilian assets are trading well below their probable long-term value. I would expect more capital recycling efforts to avoid raising capital at a discount to fair value, but BIP management is looking at a big buffet of options, and assets in stressed emerging markets or North American energy infrastructure may be too good to pass up. I've trimmed my long-term growth estimate a bit given the weakness in commodity-driven economies, but I believe a long-term growth rate of 6% in distributable cash flow can support a fair value above $49 today.

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Brookfield Infrastructure Looks Undervalued As Long-Term Bargains Emerge

Seeking Alpha: Fortress T & I : One Of The Newest Infrastructure Options

Infrastructure investing is a reasonably hot space now, and one of the end results is more investment options for the regular investor. Fortress Transportation and Infrastructure (NYSE:FTAI) isn't a brand new company, and the investment team behind is most definitely not new to infrastructure investing, but it is a newer kid on the block, and its recent IPO gives the company more financial ammunition to build its investment portfolio.

Relative to Brookfield Infrastructure (NYSE:BIP) and Macquarie Infrastructure (NYSE:MIC), I think there's more risk here. The larger pool of uncommitted capital makes it quite a bit harder to model future revenues and cash flows, and the company's involvement in offshore energy and crude terminaling seems to me to carry more market and execution risk. That said, a mid-to-high teens return on investments (at the lower end of management's target) would work back to a fair value of around $21 today with a mid-single-digit yield in the same ballpark as BIP and MIC.

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Fortress T & I : One Of The Newest Infrastructure Options

Seeking Alpha: Brookfield Asset Management's Fee Growth Bodes Well For The Future

If you want to torture yourself, try to build a detailed valuation model for Brookfield Asset Management (NYSE:BAM). I don't think there's much doubt that this firm is a premier fund manager in the world of real estate, power, infrastructure, and similar assets, but the process of estimating the cashflows from the publicly-traded LPs, the internally-managed funds, the directly-held assets, and the value of the private equity funds is challenging to say the least.

On a very simplistic level, I don't think it's entirely unreasonable to look at Brookfield Property Partners L.P. (NYSE:BPY), Brookfield Renewable Energy Partners L.P. (NYSE:BEP), and Brookfield Infrastructure Partners L.P. (NYSE:BIP), conclude that they are undervalued, and lean in the direction of assuming that Brookfield Asset Management is likewise undervalued. Going further and making some estimates and assumptions regarding the value of the asset management operations and unlisted assets, I believe that to be the case and that Brookfield is undervalued. What's more, I think the company is closing in on a point where its asset management operations are really about to take off and transform the perception of the company away from being a holding company and toward being an asset manager.

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Brookfield Asset Management's Fee Growth Bodes Well For The Future

Seeking Alpha: Brookfield Infrastructure Looking At A World Of Possibilities

Infrastructure specialist Brookfield Infrastructure (NYSE:BIP) may not have the gaudiest recent track record - the shares are up almost 6% over the past year, and up about 8% since my last article - but the company has a good track record of efficiently generating cash flows from its investments and passing them along to investors as dividends. What's more, with many governments and emerging market corporations experiencing meaningful credit stress, Brookfield is looking to leverage its position as a high-quality buyer with a low cost of capital to add significant assets to the portfolio.

Modeling Brookfield Infrastructure is always going to require some guesswork about the amount of capital the company will deploy into acquisitions and growth, as well as the cost and form of that capital (including equity raises). That said, I believe management will succeed in generating a long term per-share distributable cash flow growth rate in the mid-single digits to high single digits. Discounted back, that suggests a fair value in the high $40's to low $50's and argues for serious consideration of these shares.

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Brookfield Infrastructure Looking At A World Of Possibilities

Seeking Alpha: Amidst Some Market Concerns, Brookfield Infrastructure Keeps On Keeping On

If you've been waiting for a better price on Brookfield Infrastructure Partners LP (NYSE:BIP), you really haven't missed much. Between some lackluster reported results in the second quarter and more general concerns that BIP is facing a much more competitive bidding environment for assets, the shares haven't really gone anywhere this year - up about 2% on a year-to-date basis (excluding distributions) and up a similar amount from my last piece.

I still like Brookfield Infrastructure as a well-run long-term play on global infrastructure assets that range from coal terminals to railroads to electrical transmission to ports and toll roads. I can understand why the Street may worry that management's commitment to 8%-11% annual FFO growth will push them to overpay for assets, but I think that underrates their capabilities when it comes to recycling capital as well as the inherent advantages of being able to look at (and acquire) a wide range of asset types.

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Amidst Some Market Concerns, Brookfield Infrastructure Keeps On Keeping On

Seeking Alpha: Brookfield Asset Management Offers Steady Alternative Asset Exposure

Investors will find no shortage of papers and studies highlighting the return and diversification advantages of so-called "alternative investments", but actually finding investment vehicles that are accessible to retail investors is not as easy. Brookfield Asset Management (BAM) offers a good option in that regard; BAM's operations are spread across publicly-traded LPs in commercial real estate, renewable energy, and infrastructure assets, as well as alternative asset management and private equity fund operations.

Brookfield is a slow-and-steady sort of investment option, with both net asset value accretion potential and a decent dividend. It's not an especially cheap stock today, but the shares do usually offer 10% pullbacks every so often.

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Brookfield Asset Management Offers Steady Alternative Asset Exposure

Seeking Alpha: Patience Will Pay With Brookfield Infrastructure

Brookfield Infrastructure Partners L.P. (BIP) is not for the investor looking for the quick three-bagger, nor the investor who wants a lot of flashy activity. What Brookfield Infrastructure is about is the patient allocation and investment of capital into protected businesses at prices that allow for superior long-term returns. There's a very large global base of potential assets out there, and I would look for 8% to 10% long-term annual returns from this level.

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Patience Will Pay With Brookfield Infrastructure

Investopedia: Brookfield Infrastructure An Interesting Play On Long-Term Assets

A few weeks ago, I ran through some of the merits of Brookfield Asset Management (NYSE:BAM) - a relatively unusual investment vehicle that gives investors exposure to a wide range of investment assets, such as commercial real estate and infrastructure assets. Now it's time to consider one of the major holdings of BAM - Brookfield Infrastructure Partners (NYSE:BIP).

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http://stocks.investopedia.com/stock-analysis/2012/Brookfield-Infastructure-An-Interesting-Play-On-Long-Term-Assets-BIP-PCL-BAM-BHP0531.aspx

Investopedia: Macquarie Infrastructure Looks Like A Tricky Play

Savvy investors know to love those toll-booth companies out there--companies that own hard-to-replicate assets that produce quality cash flow streams and require little short-term strategic support. These companies can take many forms, from timberland owners like Weyerhaeuser (NYSE:WY) to petroleum transport and storage companies like Enbridge Energy Partners (NYSE:EEP) to diversified investment holding companies like Brookfield Infrastructure (NYSE:BIP).

Macquarie Infrastructure Company LLC (NYSE:MIC) is a company worth exploring within that same theme. While there are cyclical and long-term structural issues with some of the company's operating assets, results have been getting better and the company's dividend paying ability seems to be getting stronger.

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http://stocks.investopedia.com/stock-analysis/2012/Macquarie-Infrastructure-Looks-Like-A-Tricky-Play-MIC-EEP-BIP-KMP0530.aspx

Investopedia: Can BAM Add Some Punch To Your Portfolio?

Large asset management companies can be tricky companies to monitor and evaluate. Oftentimes, success is predicated more on identifying top managers like Henry Kravis and George Roberts at Kohlberg Kravis Roberts (NYSE:KKR) or Warren Buffett at Berkshire Hathaway (NYSE:BRK.A, BRK.B) and letting them do their thing - trusting that superior management and investment identification will produce and accumulate value over time.

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http://stocks.investopedia.com/stock-analysis/2012/Can-BAM-Add-Some-Punch-To-Your-Portfolio-BAM-KKR-CG-BIP0516.aspx