Bear Sterns Outlook on XM
April 25, 2006
Bear Sterns has issued an outlook on XM satellite radio prior to their call scheduled for Thursday April 27, 2006.
Satellite Standard Group outlined our Q1 Confrence Call Outlook in a recent article
here .
BearSterns is looking at a few key metrics from XM in the call
1Q06 PREVIEWXM has already reported the key net sub add metric for the quarter at 568k, which was marginally lower than our revised 574k estimate. We are projecting total revenues of $200 mn (in line with previous estimates), EBITDA of $(70) mn (better than previous expectations primarily due to improved view on SAC and CPGA levels), and diluted EPS of $(0.52).
SSG notes that the Bear Sterns estimates fall in line fairly close with the streets averages.
O&A SHARING MAY BE POSITIVE IN OUR VIEW.One of the reasons for XM to enter into the agreement may be to stem the migration of undecided listeners to the Sirius platform especially since Stern's replacements on terrestrial radio haven't been as successful in attracting and retaining audience share. In addition, XM likely is getting share of ad revenues and CBS may be bearing some costs.
SSG notes that this subject will likely get some comment durring the call, and certainly will be one of the questions from an analyst. SSG wrote a piece about CBS and XM here
DEBT REFI STRETCHES MATURITIES. In aggregate, XM made an offer to tender up to $450 mn of debt and prepay $240 mn to GM, and raised $800 mn in debt and a $250 mn credit facility that have extended debt maturities till 2013/2014 from 2009/2010 as well as alleviated liquidity concerns.
SSG covered this issue in detail in this article. Now that the deal has been finalized before the call, look for XM to discuss it during the call.
GM PREPAYMENT SUGGESTS SUFFICIENT LIQUIDITYIn addition to reducing the total amount that XM is required to pay to GM, this transaction further substantiates that XM does not foresee liquidity issues as far as the current business plan is concerned.
INVESTMENT OIPINION Given the risk-reward at current levels, we think shares remain attractive for the patient investors. Note, however, that the stock remains catalyst-driven and the market will be looking for consistent execution on investor expectations for a sustained rally
SSG agrees with this sentiment. We commented on April 20th that XM needs to have a convincing call and illustrate that they have corrected spending issues. They also need to offer solid guidance that the street can embrace. In our opinion if XM hits the numbers that the street is looking for, the response to the call should be positive.
The link to this write up is http://tinyurl.com/kmnpo
4/25/2006 03:41:00 PM
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