Wednesday, May 18, 2016

LSB Industries - Agricultural & Industrial Chemicals

This is a special situation / turnaround story that appears to have resolved itself.

Management's guidance for 2017 is as follows:

but depends on 95% on-stream rates across its four facilities. I prefer to assume a 90%  figure for the Cherokee and Pryor facilities, a $475 medium term average selling price for Ammonia, and $3 cost of gas. 

Note that facility turnarounds are scheduled for even years so that the 2017 figures slightly overstate earnings power.
The end game appears to be to transform LXU into an MLP.  In the interim, however, using 5.5x EBITDA which is both the average historical multiple and the forward multiple at which CF Industries is trading would imply LXU is worth  ~$40/share as a C Corp (on 29.7 million shares) and ~$54/unit as an MLP.

Disclosure: I own some shares in LXU