Shaw Comm: Hold Canadian Cable

The Cable Division (77% of 2008 revenue) comprises Shaw Communications Inc. (SJR - Analyst Report) cable television, Internet, digital phone and Shaw Business Solutions. Shaw is the largest cable television provider in Western Canada with 2.2 million cable television customers in five provinces (British Columbia, Alberta, Saskatchewan, Manitoba and northwestern Ontario).

We assumed coverage of Shaw Communications in February 2007. We think SJR can grow EPS at a CAGR [compound annual growth rate] of at least 15-17% over the next five years, driven by the acquisition of cable systems, the rollout of digital telephony and the country's fastest Internet service, coupled with continuing share buybacks. Moreover, continued share buybacks, funded by free cash flow and the increased dividend, will boost total shareholder return.

However, a mature market for high-speed Internet service and the uncertainty surrounding the sustainability of the positive trends in the Star Choice business, contribute to a high risk/reward ratio in the stock at its current high valuation multiples.

Read the full analyst report on SJR