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South Bow Initiated at Outperform, $60 Price Target at Raymond James
South Bow Corp. (SOBO.TO, SOBO) was rated Outperform with a $60 price target in new coverage at Raymond James.Analyst Michael Barth said the Calgary-based energy infrastructure company, which owns and operates the Keystone Pipeline System, controls "an irreplaceable long-duration asset that underpins predictable cash flows for decades.""Keystone is young as far as Canadian long-haul pipelines go, and is still largely operating under the initial multi-decade take-or-pay contract structure," Barth said in a note to clients."Those take-or-pay contracts cover >90% of total capacity, and are supported by high quality counterparties, which gives us high visibility to a stable FCF stream to support deleveraging and/or new growth," the analyst said."We don't necessarily buy into the idea that significant toll upside exists as those initial take-or-pay contracts roll off in the early-2030s, but we do expect that supply/demand for egress from the WCSB will remain sufficiently tight that recontracting of capacity should be a layup."
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