Sasol Research Report - Risks
This report reflects the research and analysis I've performed on this company. It is provided for informational purposes only and does not constitute personalized financial advice nor an endorsement or solicitation to purchase stock in this or any other company. Please do your own due diligence or hire a financial advisor before making any investment decisions.- Download this report in PDF format
- Sasol ADR (SSL:US) Research Report pdf (right-click and "Save target as...")
- SSL:US ADR research report posted: 2007, July 18
- Risk Detail
- Possible Upside
- Valuation and Assessment
- Industry-Wide Risks
- Oil prices may drop, reducing the viability for alternative energies.
- Labor, production and other input costs may go up, cutting into margins.
- A new technology might make Fischer-Tropsch obsolete.
- Company-Specific Risks
- Part of the fall-out of the apartheid system is the BEE program (Black Economic Empowerment). While I am all for economic equality, reading the annual reports feels more like a socio-political report than a business financial one. Imposed quotas and decisions based on anything other than optimum returns on investment are dangerous to capital.
- The Tribunal (their government) nixed a proposed merger with the leading gasoline retailer in South Africa, citing competitive issues. In addition, Sasol is the ONLY South African company being considered for subjection to a profit windfall tax. While these moves may be good for the South African society (highly debatable – tying up Sasol’s ability to compete against the Exxons, Chevrons and DuPonts of the world doesn’t seem smart), they are definitely bad for our portfolio.
- The AIDS epidemic that is gripping the African continent. How this epidemic will affect Sasol’s ability to retain organizational knowledge and productivity is a little-asked question in the mainstream but one that worries me a bit. Especially under a BEE program, will the disease negatively impact to retain qualified workers? At the very least, it must affect productivity to some extent (however heartless that sounds).
- The rand could strengthen against other currencies, raising domestic labor costs while making exports cheaper.
Author Disclosure: Author has no position in this stock.
Part of the 
network.
Copyright © 2007 www.enlightened-american.com. All rights reserved.