Brookfield Infrastructure Partners L.P. BIP's acquisition of Enbridge Inc (USA) ENB's Canadian natural gas gathering and processing business is likely underappreciated by the market, according to Credit Suisse.
The Analyst
Credit Suisse's Andrew Kuske upgraded Brookfield Infrastructure from Neutral to Outperform with a price target lifted from $44 to $46.
The Thesis
The Brookfield deal, valued at the U.S. dollar equivalent of $3.3 billion, is a "rather typical deal" at first glance, Kuske said in the upgrade note. (See his track record here.)
The analyst gave the following reasons why the deal is anything but typical:
- The G&P business was never the right fit for Enbridge, and Brookfield Infrastructure can run it "more aggressively" from an operational point of view.
- The acquired business includes 3.3 Bcf/d of capacity in 19 natural gas processing plants and liquid handling facilities, along with 3,550 km of natural gas gathering pipelines.
- Brookfield is likely to close on the provincially regulated assets this year, while the federally regulated assets are likely to close in mid-2019.
- The deal includes a $500-million equity commitment in Enbridge's Western Canadian natural gas business, giving Brookfield a 30-percent stake in the business.
Brookfield boasts an "enviable amount" of organic growth from its existing base and M&A optionality, which warrants a bullish stance on the stock, Kuske said.
Price Action
Shares of Brookfield Infrastructure were trading higher by 5.7 percent at $40.92 at the time of publication Thursday.
Related Links:
Brookfield Infrastructure: An Underappreciated Stock, With Robust Growth And Numerous Catalysts
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