SIRIUS XM CANADA
HOLDINGS INC.
Author:
Mrs Jamila Awad
Date:
April 7, 2014
SIRIUS XM CANADA TABLE OF CONTENTS
1. DESCRIPTION
2. STOCK PRICE HISTORY
3. FINANCIAL ANALYSIS
4. VALUATION METHODOLOGY
5. DUPONT ROE ANALYSIS
6. FINANCIAL ANALYSIS RELOOK
7. INDUSTRY OVERVIEW
8. SECTOR OVERVIEW
9. COMPANY PRESENTATION
10.COMPETITIVE LANDSCAPE
11.STOCK PRICE HISTORY RELOOK
12.COMPETITOR COMPARISON
13.SWOT ANALYSIS
14.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 onthe-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
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).
PRICE
III: Total number of
subscribers attained 2.4
million with stock price of CAD
$8.8 in October 2013.
10
5
oct-13
sept-13
Aug13
Jul13
Jun13
May13
Apr13
mars-13
Feb13
janv-13
Dec12
nov-12
oct-12
sept-12
Aug12
Jul12
Jun12
May12
XSR Price
Apr12
Jun11
Jul11
Aug11
sept-11
oct-11
nov-11
Dec11
janv-12
Feb12
mars-12
0
Ticker: XSR
Recommendation: HOLD
Price: $ 8.26 (as of March 20, 2014) 12M Price Target: $8.77-9.98
RECOMMENDATION: HOLD
DATE
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
SIRIUS XM CANADA VALUATION METHODOLOGY
• 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.
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
ROE
FIGURE II: SIRIUS XM CANADA DUPONT ROE HISTORY
0.20%
0.00%
-0.20%
2010
2011
2012
2013
-0.40%
2014E
2015E
2016E
DATE
Dupont ROE
2010
-31,44%
2011
12,67%
2012
-1,61%
2013
4,22%
2014E
4,30%
2015E
4,28%
2016E
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
Ticker: XSR
Recommendation: HOLD
Price: $ 8.26 (as of March 20, 2014) 12M Price Target: $8.77-9.98
RECOMMENDATION: HOLD
SIRIUS XM CANADA INDUSTRY OVERVIEW
•Canada GDP growth rate to remain
FIGURE III: GROWTH RATE HISTORY &
EXPECTATIONS
GROWTH
modest at a range between 0.72-0.81% for
the forthcoming three years.
1.80%
•We anticipate XSR to enhance revenues
1.60%
1.40%
1.20%
Series1 :GDP
1.00%
0.80%
Series2 : XSR
with modest growth rates ranging from 5.647.74% in the upcoming three years.
0.60%
0.40%
•XSR’S growth pitfalls: potential decline in
0.20%
0.00%
-0.20%
DATE
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.
Ticker: XSR
Recommendation: HOLD
Price: $ 8.26 (as of March 20, 2014) 12M Price Target: $8.77-9.98
RECOMMENDATION: HOLD
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
PRICE
40
FIGURE IV: STOCK PRICE HISTORY FOR
XSR AND ITS COMPETITORS.
Series1 : XSR
Series2 : AOL
oct-13
sept-…
Aug13
Jul13
Jun13
May13
Series4 : YHOO
Apr13
mars…
Feb13
janv-…
Dec12
nov-12
sept-…
oct-12
Series3 : P
Aug12
0
Jun11
Jul11
Aug11
sept-…
oct-11
nov-11
Dec11
janv-…
Feb12
mars…
Apr12
May12
Jun12
Jul12
20
DATE
•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.
Ticker: XSR
Recommendation: HOLD
Price: $ 8.26 (as of March 20, 2014) 12M Price Target: $8.77-9.98
RECOMMENDATION: HOLD
SIRIUS XM CANADA COMPETITOR COMPARISON
Ratio or parameter
Market Value-Monthly ($)
Sales-Net 12MM ($)
Gross Profit Margin 12MM (%)
EBITDA Margin-12MM (%)
EPS Basic Exc Extra Itm 12MM ($)
Price/Earnings - Daily
Price/Sales per Share Daily
Beta
Sirius XM
490.486
281.28
21.981
22.591
AOL Inc.
2825.413
2210.8
33.572
17.369
Pandora Media
3216.357
527.959
36.188
-7.519
Yahoo!Inc.
27206.617
4823.151
82.262
29.558
0.12
55
2.89
0.453
1.36
21.844
1.281
0.865
-0.29
-63.448
6.803
0.924
3.56
7.348
5.557
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.
Ticker: XSR
Recommendation: HOLD
Price: $ 8.26 (as of March 20, 2014) 12M Price Target: $8.77-9.98
RECOMMENDATION: HOLD
SIRIUS XM CANADA SWOT ANALYSIS
STRENGTHS






WEAKNESSES
Implemented technological infrastructure in
Canada.
Established brand name.
Products offered at 3,000 retail locations.
OPPORTUNITIES

Continued operational expansion in new
market segments.
Enhance customer service with new
technology, product & service range.
Increase penetration rate with OEM partners.





Hefty operational costs and expensive
regulation compliance with 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 internetbased 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.
Ticker: XSR
Recommendation: HOLD
Price: $ 8.26 (as of March 20, 2014) 12M Price Target: $8.77-9.98
RECOMMENDATION: HOLD
SIRIUS XM CANADA INVESTMENT RISKS & CONCLUSION
•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.
Ticker: XSR
Recommendation: HOLD
Price: $ 8.26 (as of March 20, 2014) 12M Price Target: $8.77-9.98
RECOMMENDATION: HOLD