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The BIP From BAM Means Cheap Infrastructure

When financial uncertainty looms, hard assets offer both comfort and value. Investors are wise to mimic the shift in consumer priorities from the things one wishes to have to the things one needs, as evidenced by recent returns throughout the commodities complex. One company that really knows assets and how to profit from them is Brookfield Asset Management (NYSE: BAM  ) . The company's latest spinoff, Brookfield Infrastructure Partners (NYSE: BIP  ) , provides investors with an intriguing vehicle for exposure to a particular niche of commodity-related, recession-resistant assets: infrastructure. Assets consist of power transmission lines in Canada, Brazil, and Chile; plus substantial timber holdings in the Pacific Northwest.

Brookfield Infrastructure announced pro forma operating cash flow (Adjusted Net Operating Income) of $22.7 million, or $0.59 per unit, bolstered by $2.8 million in non-recurring revenue. At nearly twice the ANOI reported for the same period in 2007, the company appears to be weathering the financial storm quite well thus far.

Not surprisingly, BIP's timber unit has experienced some weakness lately amid depressed demand for lumber in the U.S. It's all thanks to the same housing crisis that has punished shares of its corporate cousin Brookfield Homes (NYSE: BHS  ) . The company is adapting, though, taking advantage of the location of its lands in the Pacific Northwest to direct sales to the hungry Asian market. Meanwhile, BIP's transmission lines have generated some electric returns, thanks to favorable currency exchange rates and price increases.

Because of the prevailing economic climate, BIP is trading below its IPO price, and it continues to trade at a significant discount to the company's pro forma book value. If you seek hard assets as a store of value, then BIP might be a blip on your radar.

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  • Report this Comment On October 06, 2008, at 7:52 PM, westwn wrote:

    BIP BAM Brookfield via Island Timberlands LP, has announced they will log bordering a Class A provincial park MacMillan Park, commonly known as Cathedral Grove, a 500 to 800 year old forest land - our watershed. on Vancouver Island, British Columbia Canada.

    Logging in this area has been proven to cause huge blow downs to the forest and park (25+ hectares blow downs in 1997 and severe damage in 2006 storms all documented to be directly related to previous logging ajacent to park) . Damage here is as bad as Stanley Park damage yet even with this history, BIP/BAM Island Timberlands are still going in to greedily get what they want which will cause further impact on this old growth park. BIP/BAM logging Cathedral Grove will damage our Class A Ancient Growth provincial park and damage our officially designated watershed. Be an aware investor pick stocks that are socially and environmentally responsible companies. Google Cathedral Grove logging or Timberlands or Brookfield to be more aware.

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