South Bow Corp (NYSE: SOBO)

Sector: Energy Industry: Oil & Gas Midstream CIK: 0002019061
Market Cap 6.07 Bn
P/B 2.31
P/E 17.90
P/S 3.03
ROIC (Qtr) 7.41
Div Yield % 5.14
Rev 1y % (Qtr) -13.67
Total Debt (Qtr) 5.75 Bn
Debt/Equity (Qtr) 2.19

About

Price action

Investment thesis

Bull case

  • Robust free cash flow of 351.92M exceeds capital expenditure of 148.56M by 2.37x, indicating strong organic growth funding capability.
  • Strong free cash flow of 351.92M provides 21.46x coverage of acquisition spending 16.40M, indicating disciplined M&A strategy.
  • Robust tangible asset base of 11.46B provides 18.64x coverage of working capital 615M, indicating strong operational backing.
  • Cash reserves of 501M provide ample 30.55x coverage of acquisition spending 16.40M, enabling strategic growth opportunities.
  • Tangible assets of 11.46B provide robust 56.19x coverage of other current liabilities 204M, indicating strong asset backing.

Bear case

  • Operating cash flow of 500.48M barely covers its investment activities of (130.92M), with a coverage ratio of -3.82, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • High receivables of 1.09B relative to inventory of 127M (8.58 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.
  • Operating earnings of 762.24M show weak coverage of depreciation charges of 255M, with a 2.99 ratio indicating high capital intensity and potential reinvestment needs.
  • High depreciation of 255M relative to operating cash flow of 500.48M, which is 0.51x suggests significant maintenance capital requirements affecting free cash flow.
  • Tax assets of 16M provide limited offset against tax liabilities of 1.21B, which is 0.01x, indicating potential future cash flow pressure from tax obligations.

Segments Breakdown of Revenue (2024)

Segments Breakdown of Revenue (2024)

Peer comparison

Companies in the Oil & Gas Midstream
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 ENB Enbridge Inc 110.33 Bn 27.13 2.37 75.15 Bn
2 EPD Enterprise Products Partners L.P. 76.10 Bn 12.98 1.39 33.58 Bn
3 KMI Kinder Morgan, Inc. 68.80 Bn 28.77 4.49 32.58 Bn
4 TRP Tc Energy Corp 62.22 Bn 25.32 5.86 44.47 Bn
5 WMB Williams Companies, Inc. 50.26 Bn -71.19 6.88 27.99 Bn
6 TRGP Targa Resources Corp. 36.23 Bn -86.30 4.92 17.43 Bn
7 OKE Oneok Inc /New/ 35.88 Bn 31.48 3.74 33.73 Bn
8 CQP Cheniere Energy Partners, L.P. 30.34 Bn 27.99 4.44 14.76 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.98 3.64
EV to Cash from Ops. EV/CFO 22.35 35.75
EV to Debt EV to Debt 1.95 -70.28
EV to EBIT EV/EBIT 14.68 14.85
EV to EBITDA EV/EBITDA 11.76 22.44
EV to Free Cash Flow [EV/FCF] EV/FCF 31.79 114.09
EV to Market Cap EV to Market Cap 1.85 2.72
EV to Revenue EV/Rev 5.58 7.62
Price to Book Value [P/B] P/B 2.31 20.25
Price to Earnings [P/E] P/E 17.89 54.32
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 0.00 -3.70
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 71.27
Dividend per Basic Share Div per Share (Qtr) 1.50 1.48
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 88.76 33.30
Interest Coverage Int. cover (Qtr) 2.26 5.27
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -40.42 -7.43
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -90.07 16,427.94
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 -0.84
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -11.85 -1.47
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -9.83 -3.58
EBIT Growth (1y) % EBIT 1y % (Qtr) -15.50 -8.36
EBT Growth (1y) % EBT 1y % (Qtr) -13.47 -232.78
EPS Growth (1y) % EPS 1y % (Qtr) 0.00 -43.63
FCF Growth (1y) % FCF 1y % (Qtr) -50.02 -0.90
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -10.63 -0.09
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.17 0.77
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.21
Cash Ratio Cash Ratio (Qtr) 0.29 0.80
Current Ratio Curr Ratio (Qtr) 1.36 1.65
Debt to Equity Ratio Debt/Equity (Qtr) 2.19 1.12
Interest Cover Ratio Int Coverage (Qtr) 2.26 5.27
Times Interest Earned Times Interest Earned (Qtr) 2.26 5.27
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 50.70 35.59
EBIT Margin % EBIT Margin % (Qtr) 38.02 27.76
EBT Margin % EBT Margin % (Qtr) 21.17 17.49
Gross Margin % Gross Margin % (Qtr) 47.70 48.68
Net Profit Margin % Net Margin % (Qtr) 16.90 15.46