Back to Research Vault

Louisiana Blues

Oil & Gas Producers - 24 May 2019

The enormous Lake Charles Chemical Project in the United States is almost five years in the making, over budget and behind schedule. Revised estimates mean the final cost of close to $13 billion, assuming this is the final cost, would be 45% higher than in 2014 when the project was approved. Sasol’s share price has taken a tumble, down 18% to R352 since before the latest cost revision was announced early on 22 May. Since the 52-week high of R585 the stock is down 40%. Sasol is at its weakest level in five years. Whilst sentiment and confidence have been dented, we nonetheless see opportunity in the weakness as fundamentally the Group remains in good shape. We see only a modest impact to earnings whilst debt to equity will be temporarily elevated to above 50% before dropping; interest on the project is capitalised. The oil price has lately been in Sasol’s favour. Fair value of R450 has been maintained for some time, we see little need to make a change as it is predicted on a through the cycle view and assuming more conservative oil prices. Our recent view, shared in “Pain at the pump, gain on the share” dated 8 April, is unaltered.

Trader: R15.00

Add to cart