NSE & PA

Wall Street analysts have launched coverage of New Skies Satellites. The first investment house to offer coverage of the stock was Lehman Brothers, which gave New Skies an “overweight” rating July 12. This rating means the stock is expected to outperform the unweighted expected total return of the sector coverage universe throughout a 12- month investment horizon.

In its research report, analyst Vijay Jayant noted that, “In a low-return environment for both equity and debt securities, New Skies’ stock offers investors both an attractive dividend yield (currently 9.3 percent), which we think is secure over the medium term (unless a key satellite has an operational failure), and an attractively priced equity which can potentially be a key beneficiary in industry recovery as well as industry consolidation.”

Jayant added that New Skies enjoys stable revenues; a young, healthy satellite fleet; minimal analog-to-digital video migration risk; and is a potential acquisition target.

New Skies seemed to benefit from the positive coverage, as the stock, after hitting a two-week low of $19.61 July 7, closed up on consecutive trading day leading up to July 14, the last full trading day before this issue’s publication date. The company broke the $20 closing price mark July 12 and continued its upward trend, hitting historic closing highs on each of the trading days that followed.

(Lehman Brothers does maintain a business relationship with New Skies. Lehman Brothers or an affiliate managed or co-managed a public offering of securities for New Skies and received compensation for investment banking services from New Skies within the past 12 months. Lehman Brothers also trades regularly in the shares of New Skies, and during the past 12 months, New Skies has been an investment banking client of Lehman Brothers.)

The gains pushed New Skies’ stock price past Panamsat, even though the company hit a historic closing high of $20.77 July 6. Panamsat was not able to hold that price, dropping to $20.14 July 11 before recovering some of the loss and closing at $20.28 July 14. It appears Panamsat was unable to pick up any momentum from the performance of New Skies in the way New Skies’ growth paralleled Panamsat’s performance early on. The leveling off suggests that it is going to take a strong quarterly report to push Panamsat to the next level as investors have found their comfort zone.

XMSR

XM Satellite Radio remains in the headlines, this time with the acquisition of WCS Wireless, which was announced July 13. XM will pay 5.5 million shares of its common stock for WCS and will gain new spectrum in frequencies adjacent to the spectrum in which XM operates its satellite radio service. The new spectrum will allow XM to add multimedia subscription services such as video and data offerings to its portfolio, the company said.

The National Association of Broadcasters expressed its objection to XM’s move, calling the transaction a “part of a longstanding pattern of deception by the satelite radio indutry” in a July 14 letter to the U.S. House of Representatives. The association alleged that XM was seeking to offer more local content for its satellite radio service with the specturm it will acquire from WCS.

XM’s stock saw a slight shift downward following the announcement. On July 12, the stock closed at $36.04 and fell to $35.62 July 13 before recovering slightly to close at $35.87 July 14.