Stifel Analyst Says XMSR/SIRI Merger Increasingly Likely

November 7, 2006, www.antandsons.com

XM Satellite, Sirius Radio Buyout Increasingly Likely

Adding to the recent upswing in XM Satellite Radio Inc. (NASDAQ: XMSR) following a narrower third-quarter loss Monday and guidance of a potential fourth quarter profit, are comments from Stifel Nicolaus Analyst Kit Spring. In a research note, the analyst said that "Despite the fact we have reset our terminal 2011 EBITDA down by about 12%, we are maintaining our target by rolling the target year forward to 2007. Our $16 is based on a 4-year DCF which assumes 17MM subscribers, a 9x multiple of EBITDA, $435 EV per sub, discounted at a 10.5% WACC. An easier way to derive our target is: $930MM of free cash flow in 2011, or $2.58 per share, times a 10x multiple (looks conservative to us) equals a $26 stock price, which would equal $16 discounted back to year-end 2007 at a 13% equity discount rate. We see significant upside potential to our target if Sirius (NASDAQ: SIRI) makes a merger bid for XMSR, a scenario which we see as increasingly likely." XM shares are adding to yesterday's gains, up $.30, or 2.28% to $13.47 on volume of 8.2 million shares as the tide of ...read more: here

11/07/2006 03:23:00 PM

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