Sasol Limited (SOL)
Our latest INVSTR insight comes from an aspiring CA and new EasyEquities investor that lives in Kuilsriver, Cape Town called Luke Van Rensburg. Luke has been an EasyEquities investor for close to a year now and he really enjoys investment research and like Luke said, “bring on Sasol 2.0.”
INVSTR investment approach
I enjoy the research aspect of it. Investment research also allows me to understand how various companies operate in different sectors, which aligns with me because learning is a passion of mine. I have read a few books on Warren Buffet and his investment philosophy, and I have read 'The Intelligent Investor' which follows Ben Graham's principles on value investing. So, I try and apply those principles when I research a company.
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Looking back at Sasol
With a share price of above R300 near the beginning of last year, this then dropped to almost R20, within the space of three months (more than 90% loss).
SASOL seems to have left that in the rearview mirror, somewhat throwing the mirror away in its entirety, with its share price now at about R200 - an increase of more than 750% The company has risen from the ashes, seemingly stronger than before.
With its market cap now at R128.17 billion, bring in SASOL 2.0.
SASOL, which was drowning in debt, has made significant progress in reducing its debt burden. The company had debt 4x EBITDA, and now it cut that to less than 3xEBITDA (Money Web).
This can be attributed to the successful turnaround strategy which SASOL had put into place after seeing everything go wrong for the company- most notably Lake Charles Chemical Project (LCCP) becoming a cost trap and the falling oil prices due to the COVID-19 Pandemic.
Thanks to the turnaround strategy which included selling assets such as a 50% stake in the LCCP, selling its Air-Secunda plant to Air Liquide as well as agreeing to sell its stake in the Gas-Fired Power Plant which operates in Mozambique to name a few, the company is now in a better position to manage their debt and saw interim results earnings increase by more than 100% to R15.3 billion from R4.5 billion compared to the prior period at that stage.
AND for those of us investors who are interested in more than just capital appreciation, there may be dividends in the future, with the CFO saying, “dividends may come to pass within the next 12-18 months if all goes well” (Independent Online).
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SASOL has proven that they cannot be written off easily, with top management showing its dedication to turn the company around, improving the balance sheet and generating revenue.
The company's realigned focus, determination, and successes as of late have put it on track to achieve favorable prospects in the long term. This may be a giant’s back which investors should consider jumping on perhaps sooner rather than later.
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Luke Van Rensburg
Sources: Luke Van Rensburg, Independent Online, Moneyweb
The contents of this blog post are for information purposes only. This is the genuine opinion and actual experience of the user sharing their story and is not financial advice. The user doesn’t have any financial interest or relationship to us other than being a client. Any opinions, news, research, reports, analyses, prices, or other information contained within this research is provided by Luke Van Rensburg as general market commentary, and does not constitute investment advice for the purposes of the Financial Advisory and Intermediary Services Act, 2002. First World Trader (Pty) Ltd t/a EasyEquities (“EasyEquities”) does not warrant the correctness, accuracy, timeliness, reliability or completeness of any information (i) contained within this research and (ii) received from third party data providers. You must rely solely upon your own judgment in all aspects of your investment and/or trading decisions and all investments and/or trades are made at your own risk. EasyEquities (including any of their employees) will not accept any liability for any direct or indirect loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on the market commentary. The content contained within is subject to change at any time without notice