A sure way NOT to participate in throwing away your assets

At 2:15pm yesterday, a part-owner of the company sold their Sasol shares for just R24 each. At that price this shareholder valued the entire oil-from-coal and chemicals business as worth less than $1bn. Such is the insanity of a time where, as David Shapiro told us on Rational Radio this week, people are “throwing away their assets.”

For context on that $926m valuation: in the financial year to end June 2019 Sasol’s free cash flow was $1.2bn and pretax profit $550m. I’m deliberately using US dollars to be conservative – in truth, the plunging Rand is a very useful shield for a business where the lion’s share of its $12bn in revenue is based on the Rand price of oil.

Some sanity did return to the marketplace as Sasol’s price recovered to R34 a share at yesterday’s close. But only a little, because that is almost the same as the company’s per share earnings in the 2017 financial year.

Mr Market’s deep depression flows from a continued slide in the oil price, which hit $25 a barrel – a level at which Sasol’s CEO says said this week the company would still generate a profit. The shares, however, are now being priced for an even lower oil price.

Given the Coronavirus panic, further oil weakness is possible. But it is also unsustainable. Around half the US’s oil consumption is from shale gas which costs an average of $60 a barrel to produce. Like any other commodity, the cure for a low oil price is a low oil price. Appreciate this and you won’t join the asset chucking madness.

To receive Biznews founder Alec Hogg’s Daily Insider every weekday at 6am in your inbox click here. You can also sign up to the Weekender for a wrap of the best content Biznews has to offer, for a leisurely Saturday read.

GoHighLevel
gohighlevel gohighlevel login gohighlevel pricing gohighlevel crm gohighlevel api gohighlevel support gohighlevel review gohighlevel logo what is gohighlevel gohighlevel affiliate gohighlevel integrations gohighlevel features gohighlevel app gohighlevel reviews gohighlevel training gohighlevel snapshots gohighlevel zapier app gohighlevel gohighlevel alternatives Agency Arcade, About Us - Agency Arcade, Contact Us - Agency Arcade, Our Services - Agency Arcade gohighlevel pricegohighlevel pricing guidegohighlevel api gohighlevel officialgohighlevel plansgohighlevel Funnelsgohighlevel Free Trialgohighlevel SAASgohighlevel Websitesgohighlevel Experts