LXFR - Luxfer: Improved Outlook With Planned Divestiture

2024-03-06 12:25:35 ET

Summary

• Luxfer is planning to divest its Graphic Arts segment. Proceeds from this sale and improvements in continuing operations create a case for solid upside over the next 12 months.
• I estimate the Graphic Arts segment will be sold for $20mm. This additional cash, $0.88 of FCF/share in FY2024, and a 20x multiple lead me to a $14-15 price target range.
• Given the lack of attention on the stock due to its small size and minimal sell-side coverage, I think the eventual sale could act as a catalyst.

The strategic path for Luxfer Holdings PLC ( LXFR ) has shifted since I first wrote about the business. Management has decided to divest the competitively disadvantaged Graphic Arts segment while focusing on growth opportunities in the Gas Cylinders segment. Additionally, management has made known that they are open to selling either the Gas Cylinders segment or the Elektron segment as there is now strategic value for the two to be under the umbrella of one business....

For further details see: