Tuesday, Credit Suisse downgraded Brookfield Infrastructure Partners L.P. (BIP) shares to Underperform from Neutral with a price target of $14.
Analyst Kuske noted that Brookfield Infrastructure, on September 2, announced the receipt of conditional approval to list on the Toronto Stock Exchange. Since that announcement, BIP's units appreciated roughly 14%.
Aside from some obvious market movements and the apparent ongoing attraction for selected yield related investments, the analyst does not believe there is any significant fundamental reason for BIP's surge in value. Given the recent unit appreciation along with the absolute and relative valuations, the analyst downgrade the stock from Neutral to Underperform.
The analyst said that BIP is rather unique in the capital markets; however, the units are trading at a distribution yield premium versus pipeline MLPs in the US and some infrastructure income funds in Canada. The analyst believes better absolute and relative risk-reward relationships exist with some higher yielding entities.
Although not perfectly related, BIP could be substituted for other Brookfield family members in the analyst's coverage universe. For instance, timber exposure could be maintained by Acadian Timber Income Fund and energy infrastructure via Brookfield Renewable Power Fund.
Given BIP's relatively unique beginning, the analyst believes the units are still undergoing a period of seasoning in terms of holders and proof of strategic execution. In time, BIP may successfully establish a core group of unitholders benefiting from a mix of organic and acquisition growth that could help generate ongoing distribution increases.
Currently, BIP is down $0.68 or 4.00% and trading at $16.33.
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