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Scotiabank has initiated coverage on South Bow Corp (SOBO: CN), assigning a Sector Perform rating and setting a one-year price target of C$32.00 per share.
South Bow Corp, which recently began trading on October 2, 2024, after separating from TC Energy (NYSE:TRP) Corporation (TRP-T), is a company primarily engaged in the liquids (crude oil) infrastructure sector. The firm's key holding is a full ownership interest in the Keystone Pipeline System.
According to Scotiabank, South Bow Corp's robust asset base, which is highly contracted and utilized, is expected to yield stable EBITDA and cash flows. The C$32.00 target price reflects a valuation of 9.7 times the enterprise value to estimated 2026 EBITDA (EV/2026E EBITDA). This target suggests a potential for share price appreciation from the current trading levels, which stand at 9.1 times EV/2026E EBITDA.
The analyst from Scotiabank believes that the stock has some room for growth, indicated by the 8.3% dividend yield implied by the target price. However, the analyst also anticipates that the share price may experience some weakness initially following its spin-off from the parent company, TC Energy.
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