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Strategies & Market Trends : Bosco & Crossy's stock picks,talk area
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To: Paul Senior who wrote (34851)11/10/2009 5:02:50 AM
From: Crossy  Read Replies (1) of 37387
 
Paul,
LXU - it is damned cheap, price/sales at 0.36, EV/R at 0.42.

It is not only a major manufacturer of heat exchangers, they are the market leader in GEOTHERMAL heat pumps and heat exchanger solutions. Their other "half" is intersting, too: NITRATE FERTILIZER. Low NG cost should improve margins here and indeed, pricing of Nitrate fertilizer held up way better than Potash. What is more, while farmers can forego potash usage for some time at the expense of yield, they cannot stop using nitrogen fertilizer. Intensive farming environments have to use nitrogen fertilizer multiple times a year !

LXU remained profitable all the way during the recession, despite the fact that the current quarterly contained a $7m special charge - they are finally re-opening the previously mothballed Pryor Nitrate plant (they acquired the plant for peanuts out of a bankruptcy case around the turn of the century). There are harmless convertible debentures issued years ago by LXU with a fixed strike price of $24

Yes, I think LXU is a great value play in the current environment. When the Pryor plant opens soon, it will add yet another $100m to the top line annually (and $7-20m to annual EBITDA depending on pricing of NG and nitrogene fertilizer)

To value the heat exchanging business standalone, one only needs to look at Waterfurnace (WFI.TO) that commands a PSR in excess of 2 ! (They are another top notch player in geothermal heat pumps and heat exchanging solutions)

take care,
CROSSY
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