On Wednesday, CIBC began coverage of South Bow Corp (SOBO:CN) shares, issuing a Neutral rating and setting a price target of C$31.00. The coverage comes as South Bow Corp, a company operating the Liquids Pipeline business previously part of TC Energy (NYSE:TRP), offers investors a chance to invest in a company focused exclusively on liquid infrastructure.
South Bow Corp's shares present a balance between risks and rewards, according to the initiating analyst. The risks of high leverage and a concentrated reliance on the Keystone pipeline system are considered to be balanced by the company's higher-than-average dividend yield. This is despite the company's high payout ratio.
The analyst pointed out that South Bow's business is highly contracted, which along with limited growth catalysts in the near term, is expected to lead to a relatively stable EBITDA through to the year 2025. The C$31.00 price target is based on a projected 2025 enterprise value to EBITDA (EV/EBITDA) multiple. This target was converted from a US$23.00 valuation.
The initiation of coverage on South Bow Corp reflects a measured perspective on the company's financial outlook. The company's focus on liquid infrastructure and its associated financial metrics provide the basis for the Neutral rating and the C$31.00 price target.
Investors can consider this latest assessment from CIBC as they weigh their options with South Bow Corp, which now stands as an independent entity following its spin-off from TC Energy. The company's stock performance and investor returns will continue to be watched closely as it navigates the market with its specialized focus on the Liquids Pipeline business.
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