Definitive Analysis
Definitive Analysis

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South Bow Corporation (SOBO)

Company Dividend Discount ModelIndustry: Oil & Gas MidstreamSector: Energy

Valuation Snapshot

Stable Growth$12.83 - $19.23$15.87
Multi-Stage$25.82 - $28.35$27.06
Blended Fair Value$21.46
Current Price$28.29
Upside-24.13%
DecisionDon't Buy

Dividend History & Growth Metrics (10Y)

Metric5Y CAGR10Y CAGR20242023
DPS0.00%0.00%0.000.000.000.000.000.000.000.000.000.00
YoY Growth--0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%
Dividend Yield--0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%

Stable Growth Model (Adjusted)

(USD in Millions except Per Share Data)
Net Income To Common (M)321.44
(-) Cash Dividends Paid (M)222.93
(=) Cash Retained (M)98.50
MetricLOWBASEHIGH
Required Retention Ratio20.0%12.5%7.5%
(=) Cash Required (M)64.2940.1824.11
Cash Retained (M)98.5098.5098.50
(-) Cash Required (M)-64.29-40.18-24.11
(=) Excess Retained (M)34.2258.3274.40
(/) Shares Outstanding (M)208.68208.68208.68
(=) Excess Retained per Share0.160.280.36
LTM Dividend per Share1.071.071.07
(+) Excess Retained per Share0.160.280.36
(=) Adjusted Dividend1.231.351.42
WACC / Discount Rate7.41%7.41%7.41%
Growth Rate-2.00%-1.00%0.00%
Fair Value$12.83$15.87$19.23
Upside / Downside-54.63%-43.91%-32.03%

Multi-Stage Model: Projections

(USD in Millions)
MetricTTMDec-27Dec-28Dec-29Dec-30Dec-31Terminal
Net Income (M)321.44318.22315.04311.89308.77305.68314.85
Payout Ratio69.36%73.48%77.61%81.74%85.87%90.00%92.50%
Projected Dividends (M)222.93233.84244.51254.95265.15275.12291.24

Multi-Stage Valuation

MetricLOWBASEHIGH
WACC / Discount Rate7.41%7.41%7.41%
Growth Rate-2.00%-1.00%0.00%
Year 1 PV (M)215.51217.71219.91
Year 2 PV (M)207.68211.94216.25
Year 3 PV (M)199.57205.74212.04
Year 4 PV (M)191.28199.21207.38
Year 5 PV (M)182.92192.44202.36
PV of Terminal Value (M)4,391.394,620.064,858.16
Equity Value (M)5,388.365,647.115,916.10
Shares Outstanding (M)208.68208.68208.68
Fair Value$25.82$27.06$28.35
Upside / Downside-8.72%-4.34%0.21%

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