Here's a good article summarizing the current situation.
I think market has overreacted badly on this one. Sasol is still a huge company generating between 150 and 200 Billion of revenue each year. The EBITDA is forecasted to be at between 30 and 40 billion rands. Current market value lies at 36 billion rands.
For me sasol is heavy undervalued at the moment. There will be a nice increase in volumes once sasol is back into the JSE top 40. In my opinion there was a huge oversupply of shares due to it falling out of numerous indexes and as all shares falling badly it needs to find enough buyers.
Keep an eye out for this one guys. Again just my own opinion.
Don't think that the market has overreacted. Sasol's handling of Lake Charles has been nothing short of diabolical which has both destroyed value and increased debt to unsustainable levels. There lack of a hedging strategy has also put them at the mercy of a weak rand and a $35 dollar oil price. If you think ASC's paltry R3Bil debt is bad, Sasol's is currently sitting at an eye watering R164 Billion rand with no demand, higher debt repayments as a result of credit downgrades and despite Opec artificially increases oil prices. Dont take my word for it. This is what Opec says:
"The Organization of the Petroleum Exporting Countries now expects global demand to contract by 6.9 million barrels per day, or 6.9%, in 2020, it said in a monthly report. Last month, OPEC expected a small increase in demand of 60,000 bpd.
“Downward risks remain significant, suggesting the possibility of further adjustments, especially in the second quarter,” OPEC said of the demand forecast.
“The oil market is currently undergoing historic shock that is abrupt, extreme and at global scale.”"
If we look at a U shaped post COVID economic recovery pattern, economists predict that it will take 6-18 months for the economy to recover. With oil prices dropping and a 6-18 month economic recovery path, a Sasol share rights issue is inevitable which will further decrease the share price. You have to be extremely brave with cash to burn to long this one. Fortune favors the brave however..
Edited by Spell Jammer, 17 April 2020 - 12:14 PM.