- Higher and lower earnings: We have adjusted our HEPS estimates to reflect the closing exchange rates
and oil prices at FY20 balance sheet date.
We now expect earnings of R5.80/share in FY20 compared to a loss of R6.86/share previously. Our FY21
estimates have been lowered from R23.20/share to R19.80/share.
- Stronger rand and higher ethane:
The rand
ended stronger than our expectations on the balance sheet date, reducing mark
to market hedge losses in FY20 but also reducing gains in FY21. Higher ethane prices also see
lower losses in FY20 and smaller gains in FY21.
- CARES Act windfall: The CARES Act in the US provides relief following
the outbreak of the Corona virus.
Companies are allowed to carry back operating losses incurred from 2018-2020. There is also relief on interest expenses and
tax credits against payroll. Sasol could
get tax refunds in excess of $160mn as a result.
- Carbon tax: The South African Government postponed the
payment of carbon tax to October and although Sasol would have provided for the
tax there should be a cash benefit at the end of FY20.
- Large impairments looming: If Sasol receives binding offers that are
below book value for assets it could trigger large impairments. We estimate an impairment at the LCCP could
exceed $2bn.
- More cash required: At current oil
and chemical prices, including recent disposals, we estimate that Sasol would
need an additional $612mn in order to comply with debt covenants in December
while around $1.6bn is required to comply with the June 2020 covenant.
- More needed to secure the balance sheet: Selling assets just
to comply with covenants does not destress the balance sheet and the balance
sheet will remain at risk. Sasol has
indicated that it needs to reduce its debt by $6bn in order to restore the
balance sheet and asset disposals of an $3.6bn is required to achieve the
target.
- Share price: We value the Sasol share at R158/share, excluding the impacts of
assets sales or a rights issue. We remain
a neutral rating.
Download
