Better exercise caution with Sasol
An investment in Sasol demands views on two notoriously volatile variables: the dollar oil price and the rand-dollar exchange rate
Underpinned by a resurgent crude oil price, Sasol’s share price has rebounded by a third over the past 12 months. Signalling that it expects more of the same to come, the market is rating Sasol on a 17 p:e. This speaks of optimism for a company that traded on an average p:e of just 12 over the past five years and that is set to report a 1%-11% fall in core headline earnings in its year to June. But it would not be the first time investor optimism towards Sasol has been misplaced. An investment in Sasol demands views on two notoriously volatile variables: the dollar oil price and the rand-dollar exchange rate. Adding to the challenge is the need to take a view on the potential of Sasol’s $11.13bn debt-funded Lake Charles Chemicals Project (LCCP), now nearing completion. The oil price has led forecasters on a bewildering quest over the past four years, the price of Brent crude having peaked amid widespread optimism at $115 a barrel in June 2014 before diving to $27/bbl just 18 months ...
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