Research Reports

Louisiana Blues

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

Politics-proofing your portfolio - Part 2

Prior to 8 May, we observed that the general and provincial elections could be a harbinger of continued socio-economic decay or possible hesitant recuperation. Or worse. Hesitant recuperation my get a chance following the outcome, with the ANC retaining a diminished majority. Nevertheless, it is prudent to keep hedging your bets and have a good proportion of SA politics-proof stocks

Insight: R45.00

On the pricey side

BHP continues to focus on maximising cash flow and keeping capital discipline, which will be positive for long term shareholders. Strong iron ore prices, helped by supply disruption, are supportive of earnings. The share has had positive momentum year-to-date but has retreated from recent elevated levels on the Australian Securities Exchange, and consequently the JSE. The share price remains stretched relative to our DCF fair value and we continue to recommend traders taking short positions or selling rallies.

Trader: R15.00

Politics-proofing your portfolio - Part 1

The general and provincial elections on 8 May could be a harbinger of continued socio-economic decay or possible hesitant recuperation. Or worse. Regardless of the outcome, it is prudent to keep hedging your bets and have a good proportion of SA politics-proof stocks

Insight: R45.00

Deferred compensation

The subject of the deferred shares is contentious but there is merit in the proposed transaction to acquire and cancel Shoprite deferred shares together with an issue to new ordinary shares

Searchlight: R30.00

The mechanics of the Oceana unbundling

Tiger Brands shareholders will own Oceana shares directly

Searchlight: R30.00

Pain at the pump, gain on the share

Recent oil price trends are positive for earnings – and shareholders

Searchlight: R30.00