Brookfield Infrastructure: An Underappreciated Stock, With Robust Growth And Numerous Catalysts

Brookfield Infrastructure Partners L.P. (NYSE: BIP) is an underappreciated stock with a strong growth story, at least according to analysts at BMO Capital Markets. The firm's Devin Dodge initiated coverage of Brookfield's stock with an Outperform rating and $48 price target.

One of the most compelling aspects of Brookfield's business is its combination of $2.5 billion in backlog and a series of recently completed acquisitions, Dodge commented in a note. These factors will help Brookfield's FFO/unit growth to exceed its own target of 10 percent over the next three years. On top of that, the company is pursuing various projects that could add an incremental $1.5 to $2.0 billion to its existing capital backlog over the next year.

The infrastructure company is also in the process of divesting up to $2 billion worth of mature assets over the next two years; This provides new opportunities for the company to optimize the capital structure of investments that could free up more capital, the analyst noted. This will also help increase the company's payout ratio (based on FFO) to increase at a compounded annual growth rate of 11 percent through 2019, which also happens to be above the company's own targeted growth range of 5 to 9 percent.

Brookfield's stock will be added to the S&P/TSX Composite index later this month and the stock is also a "strong candidate" to be added to the TSX 60 index in the future.

Bottom line, based on an encouraging outlook for FFO/unit and distribution growth, the stock's valuation at current levels is "attractive" and is in fact trading at a 3 percent discount to its historical average P/AFFO multiple with a yield of 4 percent.

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