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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by peter bee View Post
    a great tip for anybody, if you can't afford to lose the money you are going to invest or play with, don't try it. stay away.

    if you have spare cash, look for a solid blue chip company, something that has been around forever, they should be a safe bet, slow returns but safe. if you a gambling man, then anything you fancy that has lost money and you think will go back up, banks sell shares.
    Nothing wrong with a regular small investment in the banking share buying plans = cost averaging - don't try to time your buying just do it regularly.
    Maybe stick to ETF or index funds until you find your way.

    But then I am a longer term investor not a day trader ..... so take it from whence it comes.
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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by WAJ View Post
    Where can i go and buy some shares? Makro? game? online?

    I dont know anything about this stock market thingy
    In that case, you're best advised to stay far away from the stock market. Rather pay a good financial adviser than to waste money and pay expensive school fees.
    - Nothing comes at a higher price than that which is free.

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  4. #83
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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by Conrady View Post
    Hi guys,

    I've been following the current Sasol situation with interest. Apologies for a possibly uninformed question (having no experience in trading...); but at the current trend in the share price is it possible that a "large" company like Sasol will go under especially since it cant service its debt? I'm thinking worse case scenario Steinhoff...

    Some people are divided in terms of Sasol shares; are they currently going at a massive discount or don't touch. What's your opinion?

    Last I checked it was standing @ R36
    Note: My post kinda got out of hand - but enjoy the essay should you bother reading it...




    Nobody knows what is going to happen of course, and apologies if I dumb this down to much, but I will give it a go:
    My girlfriend always asks me about work so I will explain like I do to her, that has no finance knowledge.


    Something like Steinhoff is unlikely to be worth anything. Yes, it is a very big business with lots of stores all over the world, but the actual business is probably worth nothing (if you are a shareholder)
    They overpaid when buying up other companies all over the world and this was financed with debt. People over complicate things sometimes when trying to think about things, so I always try to dumb it down for myself.


    Think of Steinhoff like this:


    Suppose you have a shop that Sells mattresses. a Fairly simple business. They buy/manufacture, have some operating expenses like rent and salaries and then sell it. Easy Stuff.
    It is not possible to significantly increase the profitability. Yes you can try and sell more mattresses or cut costs, but it kind of is what it is.


    Suppose the company looks like this (very simplistically):


    Sales 100
    Cost of Good Sold -50
    Gross profit 50
    Other Costs -30
    Profit Before Tax 20
    Interest 0
    Tax -6
    Net Profit 14


    Let's say that the company reported R14 in earnings and also generated R14 in Cash. This is important! If Cash flows significantly differ from earnings, there is normally a problem.


    So the company kind of is what it is, there is not turnaround story. Can't grow revenues massively, can't increase prices. But it is kind of borderline surviving.
    In theory if you want to buy this business and want to make a 20% return on your investment you might buy this at a P/E of 5. eg 14x5 =R70.


    This business is worth about R70.


    Now for arguments sake - lets say there is a management team( Steinhoff boytjies) that are purely trying to grow the existing company for various selfish reasons. They are not really thinking too much about what that are buying, since they only want to report higher revenues and growth numbers. The bigger the company is that they run the more money they make in management fees and in Steinhoffs case, the more money they can steal by doing deals with themselves.


    Question: What would they pay for such a business if they don't actually care about the returns on the investment - you only want to look like you are growing?
    Answer: I don't know - but probably too much. Because All they are focused on is growing the revenue line.


    So they go to existing shareholders and the banks and they say: "We have this great opportunity to grow the company" the mattress market is exploding- we can make an absolute fortune! Give as some cash so we can buy mattress shops!"


    So they raise some equity and debt and they go and make an offer to buy our barely profitable mattress shop previously mentioned.
    Some of the cash goes to plugging some holes since they were cooking the books already and the rest is used to fund the acquisition.


    But instead of paying a 5 P/E, they pay a 20 P/E for the company they bought. So that would be 14*20=R280 that they paid.
    Now, we need to pay interest on this money that we borrowed. Let's say we pay 10% interest on our debt: 10% x R280 = R28


    So now the net effect of the company looks like this:


    Sales 100
    Cost of Good Sold -50
    Gross profit 50
    Other Costs -30
    Profit Before Tax 20
    Interest -28
    Tax 0
    Net Profit -8





    But oh no! Suddenly the net effect is that we are losing money! (Even though we have more stores, sell more stuff and have grown revenues - and this was not the only problem btw)
    What can we do now?


    Old Markus comes up with a brilliant plan:
    "Why don't we cook the books and just make it look like we were are making more money instead off less?"
    "Those stupid junior audit clerks won't know what is going on and will do what they are told anyway. We can just pay of the auditors. Also, we can just bully the analysts that ask difficult questions"


    "Great !" says his mates since they are also making absolute fortunes on the gravy train.


    Ok, so they solved the problem of not actually growing earnings by fraudulent accounting behavior... But that does not change the problem of the cash flows!
    Even if they lie about earnings, they are still losing cash after paying the interest on their fancy new mattress shop they bought.


    But Markus is a smart guy! He has a plan to get some cash !


    "Let's go back to the shareholders and the banks and tell them we want to buy even more businesses!"


    Rinse and repeat...
    The more cash they burn, the quicker and bigger acquisitions they need to do to hide past sins.
    Although the businesses grows in terms of stores and revenues and becomes a massive global conglomerate, the earnings were pure fiction and Steinhoff was basically a house of cards.


    I present to you the following:

    Revenue grew because they did acquisitions:
    Click image for larger version. 

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    , but so did issues shares and debt:
    Click image for larger version. 

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ID:	561497

    So earnings (falsely reported) grew, but there were not actual cash coming in (except for rights issues and new debt)

    Click image for larger version. 

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    So what is Steinhoff worth?
    Well: The debt they used to fund all these acquisitions are probably more than the worth of the businesses itself since they overpaid.
    So back to your question about actually failing: Very few businesses just go out of business completely and close the doors.


    For something like steinhoff the banks are actually still trying to figure out what is going on. The debt holders might be willing to take a haircut or at least get some interest payments in the meantime while people are trying to figure out if there are anything salvageable left. Basically a Zombie company, but everybody loose less at this stage by keeping it alive rather than just killing it off. It is likely though that the company is worth less than the liabilities so debt holders will have some losses, but shareholders are truly screwed. Considering that debt holders are in the red, shareholders are very very very unlikely to ever get a cent out of Steinhoff in terms of a dividend - which in theory is why you invest in any company.

    So here is the million dollar question: What is a company worth if it is loss making indefinitely and the debt exceeds the assets. I would argue nothing.


    Any shareholder in Steinhoff basically has potential upside should Steinhoff as a business ever recover.If it never recovers and just slowly fizzles to death through time and debt holders try to recover some of the money the lend steinhoff- it is exactly worth zero to shareholders and the share price should be zero.


    The shareprice is not zero though - so obviously some investors are of the opinion there is some hope. The fact that it dropped by 99.something % tells you though that the odds are very very small though.


    So when Steinhoff became cheap from it's highs (and retail investors use this argument frequently) people want to use the price drop as a justification for buying something.


    For Sasol it dropped from almost R600 to R400 to R300. Yes it dropped, but so what... Just because it cost R600 does not mean it has to ever get to R600 again. There is always a reason for a stock price to go down.


    It might be that Sasol is indeed worth R600 a share if the LCCP project is succesfull and oil is at a Long term sustainable price. We don't know to be honest. A share price is nothing more than a probability weighed average of various outcomes. As the probabilty of a bad outcome increases the price will fall and vice versa.


    I might write a Sasol story as I did for Steinhoff if anybody is interested, but shortly:


    Sasol went from R600 (oil is $100 a barrel and we are building this massive new business in the USA that will be a cashcow)
    to R300( Things are starting to look risky with this project being over budget and oil barely high enough to keep us alive while we wait for the new project to finish)
    to R30 (Oh @#[email protected] , oil has fallen through the floor, we are burning cash, we can't borrow more money and the banks are coming after us since they don't think we can survive Long term)


    Sasol is at the stage where if oil stays at $30 they will need to go back to shareholders and ask for money to pay back the banks and to keep it alive until the oil price recovers. Maybe the oil price stays where it is for the next 2 years and they need to ask shareholders again. Maybe oil never goes above $45 ish again in which case Sasol is not profitable and will never be able to repay their mountain of debt. And prob worth a whole lot less than R30.


    The sasol shareprice came under pressure and went from R600 to R300 due to this increased risk and how the market puts a value on each outcome and the likelihood of that outcome. At R270 I though "Ja it is risky, but if nothing serious happens they should be OK if the LCCP project is not further delayed and it is worth around R350". At R190 I cut my losses since the probability has increased to much for a bad outcome considering the news since my initial investment decision.


    I can't stress this enough. It does not matter where you bought something - there is no reason to assume it has to go back there. This is true for Steinhoff/MTN/Sasol. IF you do think something will make a comeback, what will make it happen?


    For Sasol to go back to R600 what needs to happen? Does oil need to go to $100 and the project be a complete success? how likely is that to happen?


    As a last note: Very few companies of a decent size just fold over and die. They will change owners or sell assets or renegotiate terms or do rights issues. But some of these zombie companies , although operating , have very little value for a shareholder since they will never get anything for owning the share.


    I should probably get back to work since the world is ending, but one last thing:

    Panic selling is one thing.. getting out of a position because it is not working is something different altogether. Is Sasol the same company it was 2 years ago than it is now during a global crisis and oil price war? Definitely not.

    Do you think Sasol is worth R600 with a Long term view when Corona has blown over and oil will go to $80 again. Do you give this a 10% chance of happening? R600 x 10% = R60
    Is is trading at half that. should be a bargain then.

    Nobody is smarter than the market though and the market is telling you sasol is in deep $%@

    Just my opinion btw, I was actually just thinking about it so thought I would share it.
    Last edited by Wilhelm_Bergbok; 2020/03/12 at 12:33 PM.

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  6. #84
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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by peter bee View Post
    a great tip for anybody, if you can't afford to lose the money you are going to invest or play with, don't try it. stay away.

    if you have spare cash, look for a solid blue chip company, something that has been around forever, they should be a safe bet, slow returns but safe. if you a gambling man, then anything you fancy that has lost money and you think will go back up, banks sell shares.
    Steinhoff and Sasol were both supposedly solid blue chip companies only a short time ago.
    - Nothing comes at a higher price than that which is free.

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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by WAJ View Post
    Where can i go and buy some shares? Makro? game? online?

    I dont know anything about this stock market thingy
    https://www.easyequities.co.za/

    Easy platform to buy.
    But if you do not know shares, rather buy ETFs. There is different classes so check it out(aggressive=long term plan)(moderate and low is to use as a type of normal savings plan)

    At least with ETFs you have a bundle of shares and not reliant on a single companies shares.
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    Default Re: Sasol shares, or not?!

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    Default Re: Sasol shares, or not?!

    Voor die olie crash, het ek gesÍ sasol is verby.
    Die average ou wat daar werk, het geen benul in watter moeilikheid sasol is. Die pasr hoer op, weet dit al n rukkie. Hulle is verby die punt van herstel gewees.

    En toe crash die olieprys. Dit help natuurlik niks, en versnel net die onvermydelikke...
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    Default Re: Sasol shares, or not?!

    Its a good day when I don`t have Sasol shares in my portfolio and the electricity, water and internet are working
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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by lesmarch View Post
    Its a good day when I don`t have Sasol shares in my portfolio and the electricity, water and internet are working
    It's a bad day if one don't buy when it is low.
    Last edited by Rebel 4x4; 2020/03/12 at 01:15 PM.
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    Default Re: Sasol shares, or not?!

    im still sitting with my R10 steinhoff shares so will rather keep quiet

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    Default Re: Sasol shares, or not?!

    did sasol not sell or give shares to bee workers a while ago, i am sure i remember something like that, could only be traded by them, what was the price at the time, the same as it was trading for or a lot less. i reckon if it was higher then it is now and i was looking into sasol i would take a dip and buy some shares. the unions and workers will strike go mad because they have lost money, the pic or government will bail them out till the making money .
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    Default Re: Sasol shares, or not?!

    What is an ETF? is it not maybe EFT?
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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by WAJ View Post
    What is an ETF? is it not maybe EFT?
    It's ETF = exchange traded fund.
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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by lesmarch View Post
    its a good day when i don`t have sasol shares in my portfolio and the electricity, water and internet are working
    yes !
    Answering the call of the wild is just so much beter than answering the telephone.
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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by biltong View Post
    No expert here, but to have a company like SASOL fail would be a real local disaster.

    Where I would certainly oppose any further lifelines to SAL for example, I would not feel the same if it had to be offered to SASOL.


    And the world markets are in a serious panic now.

    They are certainly in a very very difficult situation right now, but all might not be lost.

    The Saudis can't keep the oil price low indefinitely.
    You are basing your argument on touchy, feely sentiment,not good financially sound analysis,but I agree with you, oil will come back and sasol shareprice will rebound,so yes, a short term injection will help.

    It's time for a management change though, too arrogant, too many bonuses and too much dead wood onboard.....

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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by Rebel 4x4 View Post
    It's a bad day if one don't buy when it is low.
    NO, - beg to differ ..
    It is a bad day when you bought at whatever higher level , NOW trying to catch the proverbial knife.

    I am very aware of the mantra "buy low - sell high".
    Quite simplistic is it not ?


    There is 90% + time - a reason for it being low. (Admittedly a couple of very few exceptions).
    False news etc.
    Investigate and research that .. if no obvious reason then, well, maybe invest ... but again - each to their own.

    Personally - I will not again buy Sasol shares - Nor Steinhoff or a few others in the same vein.

    DONE.

    OK, I promise sincerely that I will not post "EISH" yet again, OK ?

    So I did not, did I ?

    Suffice to say that I WOULD - and maybe you should, consider being very conservative, financially speaking right now.

    I do realize that these comments have gone quite a bit beyond the OP question and could well be controversial.

    Apologies for that but many folk could get caught up in the hype (in either direction) and lose their perspective.
    Just trying to help here
    .

    AND, NO, I am NOT always right and I am NOT giving advice - Just get as much info, as you can BEFORE making rash decisions.

    At the end of the day it all depends on your personal financial situation and your own decisions.
    Answering the call of the wild is just so much beter than answering the telephone.
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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by Wilhelm_Bergbok View Post
    Old Markus comes up with a brilliant plan:
    "Why don't we cook the books and just make it look like we were are making more money instead off less?"
    "Those stupid junior audit clerks won't know what is going on and will do what they are told anyway. We can just pay of the auditors. Also, we can just bully the analysts that ask difficult questions"



    Thank you for a very informative and interesting post. The above part caught my eye. Having heard a few things, since even before steinhoff crashed, the above is extremely accurate.
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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by WAJ View Post
    What is an ETF? is it not maybe EFT?
    Its like a pizza slice and you are buying a slice.

    Instead of buying the individual ham(share in single company), pineapple(share in another company), cheese etc etc you buy a slice.

    So when the ham becomes cheap, the cheese should be expensive so your slice will not be that much cheaper or expensive as the individual bits.

    You get ETFs of the 10 big tech companies, 100 top performing companies, 10 largest ones on JSE etc etc.

    So for someone not knowing the details of share trading of Spar, or Pick and Pay you can buy a ETF that has all the big supermarkets in them.
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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by New View Post
    Thank you for a very informative and interesting post. The above part caught my eye. Having heard a few things, since even before steinhoff crashed, the above is extremely accurate.
    a significant portion of CEO/CFO's are CA's or have a very strong accounting/auditing background. Spending 3 years as an article clerk is the perfect training ground for learning how to fool auditors later in life.
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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by mullerza View Post
    a significant portion of CEO/CFO's are CA's or have a very strong accounting/auditing background. Spending 3 years as an article clerk is the perfect training ground for learning how to fool auditors later in life.

    I heard of clerks, and auditors, that were ridiculed and chased out of meetings by Markus. He made them out to be too dumb to understand their business model. This was years before the crash...
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