BROKERS’ NOTES: Buy Coronation, sell Sasol

Willem Oldewage, senior analyst: Nitrogen Fund Managers

Buy: Coronation

Coronation (CML) presents a strong buy opportunity based on its robust financial performance and strategic positioning. Coronation’s management has demonstrated a consistent track record of delivering value to shareholders through its disciplined investment approach and efficient cost management. The firm has managed to maintain a healthy dividend yield, which underscores its commitment to returning capital to investors. Furthermore, Coronation recently received a favourable ruling from the Constitutional Court regarding a tax matter, which is expected to positively affect its operations and financial outlook, along with a chance of a special dividend to shareholders due to a provision raised by Coronation in the event of the company not receiving a favourable ruling. Coronation’s diverse portfolio and strong presence in both local and international markets provide a solid foundation for sustained growth.

Sell: Sasol

Sasol (SOL) has several concerning factors that overshadow its potential growth prospects. Despite its attempts to navigate the challenging energy market, Sasol has faced significant operational and financial headwinds, including volatile oil and chemical prices, project overruns and substantial debt levels. Additionally, Sasol is spending an unsustainable amount on ESG projects that so far offer no return to shareholders. It is particularly concerning that the company is struggling to generate meaningful cash flows with the current oil and rand/dollar exchange rate. The recent strategic shifts and asset disposals have not fully alleviated these pressures, casting doubt on the company’s ability to generate sustainable long-term value. Frequent churn in top management and the global transition towards cleaner energy sources pose further risks to Sasol’s traditional business model.