On Wednesday, BMO Capital maintained a Market Perform rating for TC Energy (NYSE:TRP:CN) (NYSE:TRP), with a price target of Cdn$55.00. The evaluation comes as TC Energy approaches a significant shareholder vote scheduled for June 4 regarding the proposed spin-off of its liquids infrastructure assets into a new entity, South Bow Corp. (SOBO).
The firm's analysis considered various factors, including valuation implications, asset quality, balance sheet leverage, and growth trajectories in the context of the upcoming spin-off. The report includes a detailed breakdown of the assets that will be transferred to South Bow Corp. as well as those that will remain under TC Energy.
The BMO Capital analyst posits that if South Bow Corp. trades at a multiple of 10 times its forward EBITDA following the spin-off, this would align with the sum-of-the-parts (SOTP) analysis for TC Energy and support the Cdn$55.00 price target. The Market Perform rating indicates that the stock is expected to perform in line with the broader market or its sector in the near future.
The shareholder vote will determine the approval for the spin-off, which is anticipated to have a significant impact on TC Energy's structure and financial strategy. The company's management and stakeholders are likely looking forward to the outcome of the vote to proceed with the strategic realignment of assets.
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