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SIRIUS XM CANADA HOLDINGS INC. Author: Mrs Jamila Awad Date: April 7, 2014 Author: Mrs Jamila Awad...
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SIRIUS XM CANADA HOLDINGS INC. Author : Mrs Jamila Awad Date : April 7, 2014
Transcript of SIRIUS XM CANADA HOLDINGS INC. Author: Mrs Jamila Awad Date: April 7, 2014 Author: Mrs Jamila Awad...
SIRIUS XM CANADA HOLDINGS INC.
Author: Mrs Jamila Awad
Date: April 7, 2014
SIRIUS XM CANADA TABLE OF CONTENTS
1. DESCRIPTION2. STOCK PRICE HISTORY3. FINANCIAL ANALYSIS4. VALUATION METHODOLOGY5. DUPONT ROE ANALYSIS6. FINANCIAL ANALYSIS RELOOK7. INDUSTRY OVERVIEW8. SECTOR OVERVIEW9. COMPANY PRESENTATION10.COMPETITIVE LANDSCAPE11.STOCK PRICE HISTORY RELOOK12.COMPETITOR COMPARISON13.SWOT ANALYSIS14.INVESTMENT RISKS & CONCLUSION
SIRIUS XM CANADA DESCRIPTION• An audio broadcast entertainment provider with over 120 satellite radio
channels connected to service vehicle merchants, aviation, marine, home devices and on-the-go gadgets.
• The mainstream contents marketed are music, news, talk, entertainment and sports. Sirius XM also delivers a panoply of live professional sports leagues such as NHL, NFL, Nascar, Formula 1, Indycar, NBA, PGA Tour, College FB and FIS Skiing.
• The radio service provider is user-friendly programmed on a variety of devices
such as Android-powered mobile widgets, Apple and BlackBerry. Its radio products are available at more than 3,000 retail locations nationwide.
• Customers are encouraged to navigate online resources for more information about Sirius XM at www.sirius.ca and www.xmradio.ca.
Ticker: XSR Recommendation: HOLD
Price: $ 8.26 (as of March 20, 2014) 12M Price Target: $8.77-9.98 RECOMMENDATION: HOLD
SIRIUS XM CANADA STOCK PRICE HISTORY
Jun1
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oct-1
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Dec11
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Apr12
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XSR Price
PRICE
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I: The merger of XM Canada with Sirius Satellite to create Sirius XM Canada with stock price of CAD $2.80 on June 2011.
II: Total number of sub-scribers reached 2.2 million with a stock price jump from CAD $4.4 (October 2012) to CAD $6.22 (November 2012).
III: Total number of sub-scribers attained 2.4 million with stock price of CAD $8.8 in October 2013.
Ticker: XSR Recommendation: HOLD Price: $ 8.26 (as of March 20, 2014) 12M Price Target: $8.77-9.98
RECOMMENDATION: HOLD
SIRIUS XM CANADA FINANCIAL ANALYSIS
Year Growth Rate EPS (CAD $)
2013 11.28% 0.10
2014E 5.64% 0.08
2015E 6.77% 0.06
2016E 7.44% 0.05
Ticker: XSR Recommendation: HOLD Price: $ 8.26 (as of March 20, 2014) 12M Price Target: $8.77-9.98
RECOMMENDATION: HOLD
• WACC Analysis: 6.74% discount rate, beta = 0.949, cost equity = 9.09%, cost debt = 8.0%.
• Relative P/E valuation: XSR traded between 23-124x P/LTM EPS since 2011 with mean 46x, P=$8.77.
• DCF procedure: 6.14% implied growth rate, 8.7x terminal value EV/EBITDA, EBITDA margin 12-months moving average ranging between the interval 16.916 and 21.981, P=$9.98.
SIRIUS XM CANADA VALUATION METHODOLOGY
Ticker: XSR Recommendation: HOLD Price: $ 8.26 (as of March 20, 2014) 12M Price Target: $8.77-9.98
RECOMMENDATION: HOLD
SIRIUS XM CANADA DUPONT ROE ANALYSIS
Ticker: XSR Recommendation: HOLD Price: $ 8.26 (as of March 20, 2014) 12M Price Target: $8.77-9.98
RECOMMENDATION: HOLD
2010 2011 2012 2013 2014E 2015E 2016E-0.40%-0.30%-0.20%-0.10%0.00%0.10%0.20%
FIGURE II: SIRIUS XM CANADA DUPONT ROE HISTORY
DATE
ROE
2010 2011 2012 2013 2014E 2015E 2016EDupont ROE -31,44% 12,67% -1,61% 4,22% 4,30% 4,28% 4,21%
Profit margin -0,31442 0,126691 -0,0161 0,042196 0,042977 0,042764 0,042088
Asset turnover 2,133764 0,34661 0,637686 0,762025 0,762025 0,765811 0,778124
Financial leverage 0,468655 2,885089 1,568171 1,312292 1,312292 1,305805 1,285142
SIRIUS XM CANADA INDUSTRY OVERVIEW
Ticker: XSR Recommendation: HOLD Price: $ 8.26 (as of March 20, 2014) 12M Price Target: $8.77-9.98
RECOMMENDATION: HOLD
2010
2011
2012
2013
2014E
2015E
2016E
-0.20%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
1.80%
Series1
Series2
:GDP
DATE
FIGURE III: GROWTH RATE HISTORY & EXPECTATIONS
GROWTH
: XSR
•Canada GDP growth rate to remain modest at a range between 0.72-0.81% for the forthcoming three years.
•We anticipate XSR to enhance revenues with modest growth rates ranging from 5.64-7.74% in the upcoming three years.
•XSR’S growth pitfalls: potential decline in demand for satellite radio receivers in automobiles, hefty operational expenses , free charge internet-based radio, CRTC licence terms, the potential clientele saturation in the radio satellite domain in Maple soil.
SIRIUS XM SECTOR OVERVIEW
ECONOMIC SECTOR MODEL Type of investments, asset depreciation, customer relations, human resources.
BELIEFS SECTOR
FACTORS THAT MAY DOUBT THE BELIEF Decrease of GDP(Luxurious product), product substitutes.
SIRIUS XM CANADA PRESENTATION
ACTIVITIES Satellite radio ,Internet radio, Manufacturing satellite receivers for home, car, etc.PARTNERSHIP Car manufacturer, Great major League is Sport (NBA, etc…)COMPETITION Monopoly for satellite radio, Competitor in not regulated Internet radio (AOL, Yahoo, P).CUSTOMER RELATIONSHIP Luxury clientele, 2.4 millions of faithful customers (Corporate, Some categories of professionals, Individuals etc…)
SIRIUS XM CANADA COMPETITIVE LANDSCAPE
Ticker: XSR Recommendation: HOLD Price: $ 8.26 (as of March 20, 2014) 12M Price Target: $8.77-9.98
RECOMMENDATION: HOLD
•We expect AOL, P and YHOO stocks to significantly increase in value in the forthcoming years due to cost-savvy infrastructures and an array of broadcasting features accessible to a diverse clientele.
•We forecast XSR to pursue a modest stock price upside within the range established in the financial analysis segment.
Jun11
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: XSR
: AOL
: P
DATE
FIGURE IV: STOCK PRICE HISTORY FOR XSR AND ITS COMPETITORS.
PRICE
: P
: YHOO
SIRIUS XM CANADA COMPETITOR COMPARISON
Ticker: XSR Recommendation: HOLD Price: $ 8.26 (as of March 20, 2014) 12M Price Target: $8.77-9.98
RECOMMENDATION: HOLD
Ratio or parameter Sirius XM AOL Inc. Pandora Media Yahoo!Inc.Market Value-Monthly ($) 490.486 2825.413 3216.357 27206.617Sales-Net 12MM ($) 281.28 2210.8 527.959 4823.151Gross Profit Margin 12MM (%) 21.981 33.572 36.188 82.262EBITDA Margin-12MM (%) 22.591 17.369 -7.519 29.558
EPS Basic Exc Extra Itm 12MM ($) 0.12 1.36 -0.29 3.56Price/Earnings - Daily 55 21.844 -63.448 7.348Price/Sales per Share Daily 2.89 1.281 6.803 5.557Beta 0.453 0.865 0.924 0.842
We envisage Sirius XM Canada to ameliorate its operational costs, reduce its debt exposure, enhance profitability from new market segments, and
thus increase retained earnings to be distributed to shareholders.
SIRIUS XM CANADA SWOT ANALYSIS
Ticker: XSR Recommendation: HOLD Price: $ 8.26 (as of March 20, 2014) 12M Price Target: $8.77-9.98
RECOMMENDATION: HOLD
STRENGTHS WEAKNESSES
Implemented technological infrastructure in Canada.
Established brand name. Products offered at 3,000 retail locations.
Hefty operational costs and expensive regulation compliance with CRTC.
Complex to implement new technology. Weak wealth shareholder growth.
OPPORTUNITIES THREATS
Continued operational expansion in new market segments.
Enhance customer service with new technology, product & service range.
Increase penetration rate with OEM partners.
Easy and cost-savvy alternatives to switch to other music/radio mediums such as internet-based search engines.
CRTC ruling agency does not regulate competitors offering alternative internet radio services.
Technological shifts often induced by competitors and U.S.A. companies.
SIRIUS XM CANADA INVESTMENT RISKS & CONCLUSION
Ticker: XSR Recommendation: HOLD Price: $ 8.26 (as of March 20, 2014) 12M Price Target: $8.77-9.98
RECOMMENDATION: HOLD
•Slow growth in new business segments.•Increasing competition from Yahoo!Inc., AOL Inc., Pandora Media, and lastly terrestrial radio alternatives.•Potential pitfalls in Sirius XM Canada’s plan to cement a competitive advantage by introducing a new technology.•Continued challenges with the CRTC.•Failure to increase shareholder’s value.
