Stifel Launches EchoStar Holding with Buy Rating

Stifel Nicolaus analyst Kit Spring Thursday morning launched coverage of Dish Network (DISH) spinoff EchoStar Holding (SATS) with a Buy rating and $39 price target, based on a relatively modest multiple of 1x 2007 revenues.

Spring notes that the company gets about 86% of revenue from set-top boxes, with 14% from fixed satellite services; about 86% of revenue comes from its former parent company DISH.

Spring says spin-offs have historically outperformed the market, and says he see that potential for SATS.

His case for SATS includes the following factors:

• It has among the best high def DVRs on the market “with an opportunity to further differentiate its set-top boxes with “place-shifting” technology gained through the acquisition of Sling Media.
• Opportunity to gain market or license technology globally.
• The company has about $13 a share in net cash and will generate about $100 million in free cash in 2008. Spring notes that the stock trades 12% below its $36 book value. And just 0.7x 2007 enterprise value/revenue.
• CEO Charlie Ergen is “a good manager.” Spring notes that DISH shares have produced a 26% compounded return since its IPO.

Spring says the current valuation suggests the company gains little or no additional share in set-top boxes. EchoStar “trades dramatically below public comparables and takeover multiples (2.5-4x EV/Revs,” he writes.Spring adds that investors may be missign about $3 a share of “hidden” assets, in the form of NOLs, non-consolidated investments and Sling Media.

EchoStar Thursday is down $1.11 at $31.09.