4Q23/FY23 in-line with consensus but missed guidance; Growth outlook reiterated
- 4Q23/FY23 FFO in-line with consensus; FY23 FFO saw +7% growth, missing management’s 10% growth target
- Reiterate long term >10% FFO per unit growth target; 2024 to see better outlook
- Positive catalysts include M&As, share buyback and more. Maintain BUY with unchanged TP of US$30.
4Q23/FY23 in-line with consensus but missed guidance; FY24F DPU within expectations. 4Q23 Funds from operations (FFO) came in at US$255m (+1% qoq, +13% yoy), with FFO per unit of US$0.38 (+1% qoq, +11% yoy), in-line with consensus expectations. In 4Q23, Hydro segment (contributes c.50% of group FFO) underperformed due to cyclicality factors, though offset by stronger performance witnessed in (i) Wind and (ii) Storage & Other segment (c.25% of group FFO each). On a FY23 basis, FFO per unit of US$1.67 represents a 7% yoy growth, in-line with expectations but lagged behind management’s FY23 target of 10% FFO per unit growth target due to later than expected transactions closing during 4Q23. 4Q23 DPU declared at US$0.355 (FY24F annualised DPU of US$1.42, up 5% yoy) was in-line with expectations, which implies a 5.5% dividend yield.
Reiterate long-term >10% FFO growth target; Maintain BUY. BEP continues to reiterate its FFO per unit growth target of 10% and 5-9% DPU growth going forward, with FY24F expected to see a better year with FFO contribution from its recent M&A activities (e.g., Westington, X-Elio, Deriva Energy etc) and sequential operational improvements (especially hydro segment) as its fleet reverts to long-term average generation. Recycling proceeds from mature assets into new growth opportunities remains one of the most value accretive levers within its business, with BEP having ample dry powder at US$4.1bn of available liquidity (up from US$3.7bn in 2022) and BEP guiding for continued focus on both organic/inorganic growth transactions. Operationally, BEP has also guided for growth opportunities in power contracts with large corporate offtakers, especially datacentres offtakers, with power generation contracted to corporate customers expected to double by 2028 to 44TW (forming 45% of contracted volumes). Other positive catalysts include further M&A, share buyback programme (max purchase of 10% of total outstanding shares between Dec 2023 – 2024) and more. Interest rate cuts in 2HFY24F is also a catalyst for the utilities/renewable sector. We maintain BUY with unchanged TP of US$30 as we remain optimistic on BEP’s long term outlook as one of the best-in-class global renewable energy plays.