Units of Brookfield Infrastructure Partners (BIP +1.79%) had surged nearly 10% by 10:30 a.m. ET on Wednesday. Meanwhile, shares of its economically equivalent corporate twin, Brookfield Infrastructure Corporation (BIPC +0.00%), were up around 7%. The global infrastructure giant reported solid third-quarter results and agreed to a transformative deal to buy Cyxtera's data centers out of bankruptcy.
A strong quarter and another needle-moving deal
Brookfield Infrastructure grew its funds from operations (FFO) by 7% to $556 million in the third quarter. The main driver was organic growth. Brookfield was able to raise rates with inflation while also getting a boost from finishing $1 billion of capital projects in the quarter. These catalysts helped offset the impact of $2 billion of asset sales that closed during the second quarter.
NYSE: BIP
Key Data Points
Those sales were part of the company's active capital recycling strategy to sell mature assets and redeploy the proceeds into higher-return opportunities. Brookfield recently closed three deals and has another in the pipeline. The company noted that these deals will provide it "with some of the best risk-adjusted returns we have seen in the last decade."
The company closed its privatization transaction with global intermodal logistics company Triton at the end of September. In addition, Brookfield closed its investments in European data center platform Data4 in August and Compass Datacenters in October. These deals will provide a notable boost to its FFO starting in the fourth quarter.
Brookfield is further enhancing its data center platform by agreeing to a transformational transaction to buy a portfolio of seven data centers out of bankruptcy from Cyxtera, which it will combine with its existing Evoque data center platform. It's also buying the real estate of several sites from third-party landlords and renegotiating other leases. Brookfield will invest $1.3 billion into the deal, which should close early next year. The company noted that the transaction will deliver a step-change in cash flow for its Evoque platform.
A tantalizing investment opportunity
Units of Brookfield Infrastructure have gotten crushed this year. Even with today's rally, they're still 35% below their 52-week high. That has the company trading at a very attractive level. It currently sells for about 8 times FFO and a 6.3% dividend yield. With lots more growth ahead, Brookfield is a very compelling opportunity for those seeking a high-income yield and high total return potential.
