Sirius XM Canada Holdings Equity Valuation
Jamila Awad
Sirius XM Canada Holdings Equity Valuation
Author
Jamila Awad
Rights Reserved
JAW Group
Date
March 20, 2014
Paper: “Sirius XM Canada Holdings Equity Valuation” (2014)
Author: Jamila Awad
Date: March 20, 2014
Rights Reserved: JAW Group
JAW Group, 3440 Durocher # 1109
Montreal, Quebec, H2X 2E2, Canada
Mobile: (1) 514 799-4565
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Sirius XM Canada Holdings Equity Valuation
Jamila Awad
SIRIUS XM CANADA HOLDINGS INC (TSX: XSR)
Average daily volume
Beta
Trailing annual dividend
yield
Shares outstanding
(in millions)
Market capitalization
(in CAD millions $)
Book value per share
(in CAD $)
0
oct-13
Jun13
Apr13
Feb13
Dec12
oct-12
XSR Price
Aug13
52 week price range
(in CAD $)
III
II
10
Aug12
SIRIUS XM CANADA PROFILE
RECOMMENDATION: HOLD
SIRIUS XM CANADA STOCK PRICE
HISTORY
PRICE
Jun12
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 subscribers 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 subscribers
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
Jun11
Aug11
oct-11
Dec11
Feb12
Apr12
SIRIUS XM CANADA STOCK HISTORY
DATE
5.97-10.50
267,908
0.949
4,60%
123.454881
1920.07
1.97
Debt to total capital
73.31%
Return on equity
4.22%
SIRIUS XM CANADA VALUATION
Description of Sirius XM Canada Holdings Inc: Sirius XM
Canada portrays 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.
We estimate a twelve months price target of
$8.77-9.98 per share with XSR distributing
Domestic Growth History: The merger of XM Canada with Sirius
$0.08 of EPS in 2014E, $0.06 in 2015E, and
finally, $0.05 of EPS in 2016E on a basic
Satellite to create Sirius XM Canada was launched in 2011 with hefty
basis. We anticipate a steady revenue growth
losses that were scheduled to be absorbed in a consecutive seven-year
rate from increasing channeling broadcast
contract. Sirius XM has restructured its operations and finances to cut
and new subscribers of 5.64% in 2014E,
losses however the society is confined to pay millions to the CRTC in
6.77% in 2015E, and lastly, 7.44% in 2016E.
order to stay aligned with Canadian broadcasting regulations. In 2011,
We also expect the SG&A expenses
revenues grew 17.9% however operational and debt costs significantly
estimated at 34.85% of sales in 2013, the
reduced distributed basic EPS equal to $0.19. In year-end 2013, the total
long-term debt bearing interest of 8%, and
number of subscribers is announced to be 2.4 million. Ergo, we anticipate
finally, the interest expense to slightly
a low domestic growth rate with arduous opportunities in attracting new
increase in the forthcoming three years.
subscribers and retaining current clientele satisfaction. In fact, internetAlthough, the numbers of subscribers grew in
the past years, Sirius XM Canada is still
Paper: “Sirius XM Canada Holdings Equity Valuation” (2014)
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experiencing challenges due to free-internet
Author: Jamila Awad
JAW Group, 3440 Durocher # 1109
based entertainment
opportunities
Date: March
20, 2014 and hefty
Montreal, Quebec, H2X 2E2, Canada
CRTC regulation charges. Thus, we therefore
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recommend a hold position on XSR
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following XSR’s valuation.
Sirius XM Canada Holdings Equity Valuation
Jamila Awad
based free entertainment access remains a pitfall to Sirius XM Canada.
However, Sirius XM’s flexible customized radio satellite services and a
cemented radio infrastructure in Canada depict appealing features to
encourage future potential subscribers to retain Sirius XM’s services.
Headquarters
4th Floor, 135 Liberty Street
TORONTO, ON, Canada M6K 1A7
International Growth History: The merger of XM
Satellite Radio Holdings and Sirius Satellite Radio Inc. was
approved by the Federal Communications Commission
following a mutual settlement to clear a U.S. $19.7 million
fine to remedy rule violations. The Canadian entity Sirius
XM focuses on Maple soil subscribers and promotes its
services to maximize opportunities that arise to enhance
benefit for its shareholders and customers. The initial Sirius
XM subscriber membership in Canada was estimated to be
at 750,000 and grew steadily to attain 2.4 million in Q1
2014. The U.S. parents subscriber pool is estimated to be
over 8 million customers in 2011. Hence, we expect Sirius
XM to direct its operations and potential growth in Maple
soil without infringing its U.S. parents unless the
designated entities agree to heighten synergies with an
operational cross-border legal bonded agreement.
FINANCIAL ANALYSIS AND VALUATION
Earnings: We expect Sirius XM Canada to pursue marketing strategies in order to snatch new
subscribers. We also envisage the company to enlarge current channeling features to gain a
competitive advantage compared to peer firms in the satellite radio sector. We forecast a steady
revenue growth rate from increasing channeling broadcast and new subscribers of 5.64% in
2014E, 6.77% in 2015E, and lastly 7.44% in 2016E. We do not apprehend the society to improve
its SG&A expenses estimated at 34.85% of sales in 2013, its long-term debt bearing interest of
8%, and finally its interest expense in the forthcoming three years. We foretell that the company
will comply with CRTC’s rigid regulations as well as for the enterprise to pursue increasing its
debt payments. In line, we anticipate XSR to distribute approximately $0.08 of EPS in 2014E,
$0.06 in 2015E, and finally $0.05 of EPS in 2016E on a basic basis. Please refer to appendix 1
for income statement details about expected forecasts.
Paper: “Sirius XM Canada Holdings Equity Valuation” (2014)
Author: Jamila Awad
Date: March 20, 2014
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Sirius XM Canada Holdings Equity Valuation
Jamila Awad
TABLE 1: SIRIUS XM VALUATION ESTIMATES
Year
Revenue Growth
EBITDA
(in CAD $)
EBIT
(in CAD $)
EPS ($)
2013
11.28%
66,250,155
30,674,559
0.10
2014E
5.64%
60,805,652
23,173,328
0.08
2015E
6.77%
60,019,553
20,330,500
0.06
2016E
7.44%
61,854,456
20,108,674
0.05
Price Target: We forecast a short-term (8-12 months) price target for Sirius XM Canada
between $8.77-9.98 per share, implying 6-21% upside. Our valuation is based upon both intrinsic
DCF and multiples methods. The 52-week price range history for XSR is 5.97-10.50 thus
anticipated price targets are located in these boundaries. Please refer to appendixes 6 and 7 for
elaborated details about the techniques inferred.
Valuation Methodology: The proposed valuation methodology is based upon a relative P/E
valuation and DCF procedure, assuming a 6.74% discount rate via WACC analysis, a 8.7x
terminal value EV/EBITDA, and 6.14% implied growth rate. Sirius XM Canada holds an
increasing EBITDA margin 12-months moving average ranging between the interval 16.916 and
21.981.
Rationale for Multiples-Based Valuation: XSR has traded between 23-124x P/LTM EPS since
2011, with an average of 46x. We envisage Sirius XM Canada to remain toward the high-end of
this range due to: 1) XSR growth rate and upcoming new channeling features as well as a new
array of broadcasts, 2) A debt reduction plan following a redemption notice issued on January
2014 to pay holders of 8.0% convertible unsecured subordinated debentures on February 18,
2014, and lastly, 3) To increase revenues and cash flow from operations on year-over-year basis.
Please refer to appendix 7 for details about the technique used.
Cash Flow: We apprehend XSR’s management to pursue efforts in establishing grounds as
Canada’s largest subscription-based media business, and thus improve cash flow from operations
that increased 3.2% on a year-over-year basis in 2013 following XSR’s financial disclaimer. We
also anticipate XSR to maintain its marketing costs per gross addition reduction plan and to
redistribute cash into investing as well as financing activities. We expect the company to
continue distributing dividend payments to class A and B shareholders. Finally, we foresee XSR
to deliver strong cash positions, enhance liquidity and flexibility to initiate new growth
opportunities. Please refer to appendix 4 for more details about cash flow statements.
Balance Sheet and Capital Structure: We forecast XSR to reduce its current debt exposure,
and thus eventually shift the current capital structure established at 73% Debt / 27% Equity. A
debt reduction plan with a first quarter 2014 redemption notice was announced by the company.
The capital structure analysis enabled to conclude that although the enterprise is exposed to
Paper: “Sirius XM Canada Holdings Equity Valuation” (2014)
Author: Jamila Awad
Date: March 20, 2014
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Sirius XM Canada Holdings Equity Valuation
Jamila Awad
interest rate and foreign-exchange rate risk, XSR is actively managing its debt risk profile. Please
refer to appendixes 2 and 3 for elaborated data about balance sheet items and capital structure
figures.
We foresee sound FCF generation from stronger liquidity retention induced by cash flow from
operations, and steady amortization as well as depreciation schedules on tangibles and goodwill.
We envisage the firm to enhance its credit stature by capitalizing on strong sales in new vehicle
segments, heightening their penetration rate with OEM partners, and lastly, expanding their preowned vehicle program. We apprehend current balance sheet items to remain steady except for
deviations in marketing and debt charges. We finally anticipate XSR to pursue its dividend
policy whereas during the first quarter of 2014, XSR declared a cash dividend of $0.1050 per
Class A Subordinate Voting Share and $0.0350 per Class B Voting Share.
FIGURE I: SIRIUS XM CANADA DEBT PROFILE
Debt Profile: Sirius XM Canada and its
affiliations have manageable debt obligations,
120000000
and maintain reasonable cash balances on
100000000
hand to honor future obligations. We however
80000000
sustain our position that XSR is prone to
1: Senior notes = 86.73%
60000000
interest rate and foreign-exchange rate risk
2: Convertible notes = 13.27%
40000000
exposures due to its significant debt profile.
20000000
The company holds outstanding unsecured
Debt
0
senior with a principal of $130,771,000 (as of
category
1
2
August 31, 2013) notes due in 2018 bearing a
9.75% interest-rate. The redemption option is determined to be an embedded derivative which
considers the fair value recorded in the consolidated statement of operations and comprehensive
income. XSR also holds a balance of $20,000,000 (as of August 31, 2013) outstanding unsecured
subordinated convertible notes with the election to receive interest payments in form of class A
Subordinate Voting Shares whereas the cash conversion price is $5.92 per share. During 2012,
the firm settled all outstanding U.S. currency denominated senior notes due in 2012. Please refer
to appendix 9 for more details.
Debt in CAD $
140000000
Paper: “Sirius XM Canada Holdings Equity Valuation” (2014)
Author: Jamila Awad
Date: March 20, 2014
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Sirius XM Canada Holdings Equity Valuation
ROE
FIGURE II: SIRIUS XM CANADA
DUPONT ROE HISTORY
20.00%
10.00%
0.00%
-10.00%
-20.00%
-30.00%
-40.00%
DATE
Jamila Awad
Dupont ROE Analysis: The key message to XSR’s
management following the Dupont ROE analysis is
to improve profit margin and to continue reducing
financial leverage. The ROE was negative in 2011
(ranging around -9.34%) whereas the company had
to absord hefty debt payments and other operational
expenses. The ROE then bounced to 12.67% and
then shifted downwards to -1.61% in 2012. Finally,
we expect ROE to remain steady at a constant rate
around the ROE 2013 rate settled at 4.22% for the
forthcoming three years. XSR management
expressed commitment to enhance revenues and net
income from operations. It also wishes to diminish
its debt exposure and grasp the momentum in their
business by expanding operations in new segments.
Please refer to appendix 8.
BUSINESS DESCRIPTION
Company Summary: Sirius XM Canada (TSX: XSR) depicts a leading audio entertainment
service provider. It broadcasts more than 120 satellite radio channels in an array of contents such
as news, talk, premier sports, entertainment and commercial-free music. It also delivers live
major sports brands such as NHL, NFL, Nascar, Formula 1, Indycar, NBA, PGA Tour, College
FB and FIS Skiing. XSR’s programming is accessible on a panoply of devices such as preinstalled and after-market radios in cars, trucks and boats, smartphones and mobile devices, and
lastly consumer electronics products for households as well as commercial properties. Sirius XM
Canada holds partnership agreements with major automakers and its radio products are available
at more than 3,000 retail locations nationwide. Subscribers and the general public can easily
navigate user-friendly websites to learn more about Sirius XM Canada at www.sirius.ca and
www.xmradio.ca.
Business Goals: XSR aims to seek new opportunities to maintain growth in revenues by
capitalizing on strong sales in new segments and retaining current subscribers, increasing
penetration rate with OEM partners, enlarging current pre-owned vehicle program, and lastly
heightening customer satisfaction with new technologies. In light, subscriber inscription grew
following XSR’s inception from 750,000 in 2011 to 2.4 million in Q1 2014 with approximately
1.8 million self-paying subscribers in year-end 2013.
Management Team: The company holds a competent management team that comprehends the
business and its industry, implements a proactive administration behavior to expand operations
as well as targets potential new ventures, and lastly, earns credentials with its competitors, its
current customer infrastructure, future subscribers and with the CRTC regulatory agency.
Furthermore, the chairman and the president, respectively John Bitove and Mark Redmond, have
Paper: “Sirius XM Canada Holdings Equity Valuation” (2014)
Author: Jamila Awad
Date: March 20, 2014
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Sirius XM Canada Holdings Equity Valuation
Jamila Awad
demonstrated persuasive strength in shouldering Sirius XM Canada from its inception following
the merger of XM Canada with Sirius Satellite as well as to settle negotiations with the CRTC.



Executive Chairman of the Board: John Bitove’s Canadian Satellite Radio Holdings
Inc. which is the licensee of the former XM Radio Canada holds a significant and
effective control over XSR. Mr Bitove armors an impressive background in the satellite
radio industry and played a dominant role in cementing Sirius XM Canada current
infrastructure to make it a leading player in the field.
President, Chief Executive Officer: Mark Redmond leads the company’s operations
from its headquarters in Toronto. Prior to overseeing XSR, he was CEO and President of
Sirius Canada. He gained notable experience in the field while occupying the Senior Vice
President position in special projects with Sirius Satellite Radio in the U.S.A.. He also
pocketed extensive knowledge in the domain during his 17 years with Thomson.
Chief Financial Officer: Michael Washinushi joined XM Canada in 2005. He then was
named CFO at Sirius XM Canada to conduct financial reporting, sustain sound corporate
governance, and lastly, maintain harmonious investor relations. Mr Washinushi holds
over 15 years of experience in financial management in an array of industries. He
completed a bachelor's degree from York University.
INDUSTRY OVERVIEW AND COMPETITIVE POSITIONNING
FIGURE III: GROWTH RATE
HISTORY & EXPECTATIONS
GROWTH
180.00%
160.00%
140.00%
120.00%
Series1 :GDP
100.00%
80.00%
Series2 : XSR
60.00%
40.00%
20.00%
0.00%
-20.00%
DATE
Paper: “Sirius XM Canada Holdings Equity Valuation” (2014)
Author: Jamila Awad
Date: March 20, 2014
Anticipated Economy Growth: We expect future
Canada GDP growth rate to remain modest at a range
between 0.72-0.81% for the forthcoming three years.
Canada GDP growth rate has been slightly inferior to
the expected increase rate partly due to the past
global financial crisis turmoil and the lagging
economic expansion. Sirius XM Canada experienced
a strong growth downturn in 2011 followed by a
growth bounce, and finally, growth stability in 2013.
We foresee XSR to enhance revenues with modest
growth rates ranging from 5.64-7.74% in the
upcoming three years however the significant debt
structure, the potential clientele saturation in the radio
satellite domain in Maple soil, and finally, the hefty
operational charges reduce potential enhanced
profitability. The after math of the past financial
crisis induced a steady decline in the demand for
satellite radio receivers in automobiles.
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Sirius XM Canada Holdings Equity Valuation
Jamila Awad
Radio Satellite Industry: Canadian entrepreneurs in the radio satellite industry expressed
concern about expensive startup and operational expenses to pursue operations in the domain.
Precisely, Canadian and their U.S. counterparts invest massively in cementing satellite
infrastructures to enhance business feasibility. The need for terrestrial repeaters to heighten the
signal on the ground portrays a source of conflict with terrestrial radio broadcasters. In Canada,
radio satellite service subscribers are found in the automotive car market segment. In fact, XSR
hold agreements with vehicle makers and market their products at more than 3,000 retail
locations nationwide. The reduced demand for vehicle purchases impacts XSR due to an
automatic decrease in potential subscriber clientele in automobile radio satellite.
Regulatory Framework in the Industry: The CRTC depicts the regulatory agency that
oversees the broadcasting and telecommunications sector in Canada. Sirius and XM complied
with CRTC’s conditions of licence to enable the merger and launch Sirius XM Canada. Both
firms also requested the CRTC to review obligatory contributions to Canadian talent
development (CTD) calculation methods. In 2007, the commission declined to amend their
conditions stipulating that the enquiry would result in a reduction to CTD contributions. In 2008,
the CRTC elected not to regulate internet radio broadcasters. This decision directly impacted
satellite radio service companies who face substantial charges in hardware and need to
continuously reinvest in new technology. In 2009, the Commission announced its decision not to
regulate new media such as personal media gadgets and internet music devices.
Competition to Satellite Radio: The satellite radio industry bourgeoned in the first decade of
the new millennium. The necessity to ameliorate a competitive position of satellite radio against
other audio entertainment vehicles forced the merger of the two previously stated companies to
launch XSR. Precisely, an omnipresent threat in the stated industry remains internet radio service
providers with free of charge global distribution and live streaming. In addition, other audio
technology mediums such as iPods, cellular phone radio, personal media gadgets and internet
music devices enhance competition in the radio industry.
The CRTC estimates that 93% of households across Canada hold residential broadband internet
access. The Canadian population opting for high-quality broadcasting content on new media
platforms and on the internet is increasing. Furthermore, Canadians are investing more time in
accessing broadcasting content through the internet and other mobile widgets.
Since XSR’s inception, the company has faced substantial net losses on a yearly basis and is still
absorbing large deficits carried over before the merger. Sirius XM Canada was considered a
major player in the Digital Audio Broadcasting (DAB) provider backed by Astral Media.
However, a total of 93 DAB services on-air in cities across Canada were active in 2011. The
DAB effort in Maple soil slowly began to fragment with two key DAB backers sold to other
media conglomerates. The U.S.A. complies with a different system of broadcast which impacts
its Canadian neighbor. In light, the broadcasters in Canada and the CRTC are therefore facing a
complex situation and need spectrum that is currently occupied by dormant DAB transmitters.
Paper: “Sirius XM Canada Holdings Equity Valuation” (2014)
Author: Jamila Awad
Date: March 20, 2014
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Sirius XM Canada Holdings Equity Valuation
Jamila Awad
The U.S.A. is also facing fierce competition to its own satellite radio services while other
developed countries moved to DAB radio broadcasting. In the U.S.A., the In-Band-On-Channel
(IBOC) digital radio system shares frequency bands with existing AM and FM transmitters. The
IBOC system is not suitable for Maple soil. Lastly, the CRTC plays a significant role in
regulating competition in the satellite radio industry and other broadcast vehicles.
Competitive Landscape: The retained major peer competitors in the radio industry are AOL
Inc., Pandora Media, and lastly, Yahoo! Inc..



AOL Inc.: AOL portrays a multinational mass media corporation that renders an array of
offerings with a global audience. The company offers online content, products and
services that are marketed to advertisers, publishers and consumers. It depicts a name of
reference in media advertising, mobile and video broadcasting. It is therefore considered
a major player in the internet radio service domain.
Pandora Media: Pandora Media depicts an internet radio service provider attracting
clientele with free music and comedy access. It also provides personalized stations to
subscribers with over 200 million registered users. It retains its subscribers by integrating
an algorithm that predicts a listener’s music preferences and introduces an array of
potential song plays. It generates revenue from audio and video advertising as well as
other connected device platform advertising.
Yahoo! Inc.: Yahoo! portrays a multinational internet corporation offering a multilingual interface to Web portal and search engines. It is a leading navigational guide to
advertising, broadcasting and entertainment. It provides services to businesses and
consumers. It is considered a global reference music engine search vehicle.
PRICE ($)
40
FIGURE IV: STOCK PRICE HISTORY FOR
XSR AND ITS COMPETITORS.
30
Series1 : XSR
20
Series2 : AOL
10
Series3 : P
oct-13
Jun13
Aug13
Feb13
Series4 : YHOO
Apr13
Jun11
Aug11
oct-11
Dec11
Feb12
Apr12
Jun12
Aug12
oct-12
Dec12
0
DATE
Paper: “Sirius XM Canada Holdings Equity Valuation” (2014)
Author: Jamila Awad
Date: March 20, 2014
XSR and its Competitors Stock Price
History: XSR and its competitors
stocks have significantly appreciated in
value from June 2011 until October
2013. We forecast XSR to pursue a
modest stock price upside within the
range established in the financial
analysis segment. We however expect
XSR’s competitors 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. Please refer to
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appendix
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Sirius XM Canada Holdings Equity Valuation
Jamila Awad
XSR Stock Price: XSR’s stock price traded at $2.80 (June 2011) and experienced a significant
upside to reach $8.80 (October 2013) although the company absorbed significant financial losses
and costly infrastructure as well as marketing expenses.
AOL Stock Price: AOL stock price transacted at $19.86 (June 2011), then faced price
fluctuations ranging from $12 to $25.04, and finally, maintained a steady increase in value to
close at $36.24 (October 2013).
Pandora Media Stock Price: P’s stock price traded at $18.91 (June 2011), then experienced
price fluctuations ranging from $8.42 to $15.8, and finally, sustained a stock price appreciation
to attain $25.13 (October 2013).
Yahoo Stock Price: Yahoo’s stock price transacted at $15.04 (June 2011), then faced negligible
price shifts, and lastly, demonstrated a steady value increase to reach $32.94 (October 2013).
Financial Analysis Competitor Comparison: The financial analysis comparison for XSR and
its competitors delivers a general picture of the main financial characteristics.
TABLE 2: SIRIUS XM CANADA & ITS COMPETITORS COMPARISON
Ratio or parameter
Sirius XM AOL Inc. Pandora Media Yahoo!Inc.
Market Value-Monthly ($)
490.486 2825.413
3216.357
27206.617
Sales-Net 12MM ($)
281.28
2210.8
527.959
4823.151
Gross Profit Margin 12MM (%)
21.981
33.572
36.188
82.262
EBITDA Margin-12MM (%)
22.591
17.369
-7.519
29.558
EPS Basic Exc Extra Itm 12MM ($)
0.12
1.36
-0.29
3.56
Price/Earnings - Daily
55
21.844
-63.448
7.348
Price/Sales per Share Daily
2.89
1.281
6.803
5.557
Beta
0.453
0.865
0.924
0.842
(figures in millions $ as of June 2013)
Sirius XM Canada holds a significant market value however focuses only on radio satellite
services compared to retained competitors who offer an array of services and generate revenue
from advertising. XSR’s sales gradually increased from 2011 to 2013 but still face financial
challenges due to carried over financial losses and hefty operational expenses. XSR’s gross profit
margin is 21.981% (June 2013) which depicts a figure much inferior comparatively to its
competitors. XSR’s EBITDA margin is 22.591%, thus between AOL Inc. and Yahoo!Inc’s
figures. SXR’s EPS stated at 0.12$ per basic share is quite inferior compared to AOL Inc and
Paper: “Sirius XM Canada Holdings Equity Valuation” (2014)
Author: Jamila Awad
Date: March 20, 2014
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Sirius XM Canada Holdings Equity Valuation
Jamila Awad
Yahoo!Inc however significant compared to Pandora Media that holds a negative EPS for the
stated period.
XSR’s P/E multiple is noted at 55x (June 2013), thus a very high multiple compared to
multinational service providers AOL Inc. and Yahoo!Inc.. Sirius XM Canada’ P/E multiple
significantly increased reaching 73x (October 2013) and continued to heighten until first quarter
of 2014 due to a steady appreciation in share value for the examined period. Investors seek low
P/E multiple, thus we anticipate XSR to enhance retained earnings and generate wealth for its
investors. Pandora Media experienced a financial trend divergent from AOL Inc. and Yahoo!Inc.
however the company holds over 200 million subscribers and a cost-savvy operational
infrastructure. The P/S multiples for XSR is 2.89x (June 2013), thus ranges between AOL Inc.
and Pandora Media.
Sirius XM Canada’s beta coefficient is stated at 0.453 (June 2013), thus the sensitivity to the
stock against the market is quite low however the risk parameter significantly increased to attain
0.949 (March 2014) following our financial analysis. The expected beta coefficient range for its
competitors is around 0.842 to 0.924. XSR’s stock price appreciation between 2011 and 2014 as
well as challenges in heightening retained earnings partially explains the risk profile jump.
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.
COMPANY STRATEGY
Company Objective: XSR seeks to expand business operations by establishing themselves as
Canada’s largest subscriber media provider and grasp opportunities by capitalizing sales on new
market segments to enhance shareholder value as well as heighten Canadian radio satellite
broadcasting experience.
Paper: “Sirius XM Canada Holdings Equity Valuation” (2014)
Author: Jamila Awad
Date: March 20, 2014
Rights Reserved: JAW Group
JAW Group, 3440 Durocher # 1109
Montreal, Quebec, H2X 2E2, Canada
Mobile: (1) 514 799-4565
E-mail: info.jawgroup@gmail.com
Sirius XM Canada Holdings Equity Valuation
Jamila Awad
TABLE 3: SIRIUS XM CANADA SWOT ANALYSIS
STRENGTHS



Implemented technological
infrastructure in Canada.
Established brand name.
Products offered at 3,000 retail
locations.
WEAKNESSES



OPPORTUNITIES



Continued operational expansion in
new market segments.
Enhance customer service with new
technologies.
Increase penetration rate with OEM
partners.
Hefty operational costs and expensive
regulation compliance with the CRTC.
Complex to implement new
technology.
Weak wealth shareholder growth.
THREATS



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.
Competition and Advantage: Competition in the industry is fierce and increasing as a result of
interesting new features in customized radio services as well as a significant presence of
alternative radio service providers in Canada and in the U.S.A.
We forecast Sirius XM Canada to offer a broader assortment of products and services to
subscribers while delivering customer satisfaction, attracting new subscribers, and retaining
growth opportunities in new market segments. Please refer to appendix 14 for elaborated
information about XSR’s investment risks.
Catalysts: We anticipate the following catalysts to occur in order to implement our investment
view and recommendation.


Modest economic growth in Canada with lagging automobile sales requesting for
integrated radio satellite. Steady GDP in the forthcoming three years leading to moderate
increased media broadcast industry activity.
Successful XSR debt reduction, cost-savvy operational restructuration, and lastly,
expansion in new market segments.
Paper: “Sirius XM Canada Holdings Equity Valuation” (2014)
Author: Jamila Awad
Date: March 20, 2014
Rights Reserved: JAW Group
JAW Group, 3440 Durocher # 1109
Montreal, Quebec, H2X 2E2, Canada
Mobile: (1) 514 799-4565
E-mail: info.jawgroup@gmail.com
Sirius XM Canada Holdings Equity Valuation




Jamila Awad
Sirius XM Canada to pursue negotiations with the CRTC regulation agency to facilitate
licence terms.
The CRTC to monitor new radio providers and amend current licence terms in order to
safeguard a transparent competitive playground in media broadcast.
XSR to pursue technological achievement while seeking economies of scale.
XSR to enhance shareholder value with increasing retained earnings to be distributed to
shareholders as well as to pursue dividend policy.
--------------------------------------------------------------------------------------------------------------------Disclosures:
Banking Ratings: Banking Institutions rate entities as either BUY, HOLD or SELL. A BUY
rating is rendered when a security is expected to generate absolute returns of 15% or greater over
the next twelve months period, and advises that investors take a position above the security’s
weight in the S&P 500, TSX 60 or any other reference index. A SELL rating is delivered when
the security is expected to generate negative returns over the next twelve months. Lastly, a
HOLD rating implies flat or negligible returns over the next twelve month period.
Disclaimer: The information set forth herein has been obtained or derived from sources
generally available to the public and believe by the author(s) to be reliable, but the author does
not hold any representation or warranty, express or implied, as to its accuracy and completeness.
Paper: “Sirius XM Canada Holdings Equity Valuation” (2014)
Author: Jamila Awad
Date: March 20, 2014
Rights Reserved: JAW Group
JAW Group, 3440 Durocher # 1109
Montreal, Quebec, H2X 2E2, Canada
Mobile: (1) 514 799-4565
E-mail: info.jawgroup@gmail.com