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  1. #121
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    Default Re: Sasol shares, or not?!

    How exactly does one run a monopoly into the ground again?

    https://www.fin24.com/News/south-afr...-cash-20200315

    Oh wait, ESKOM and Telkom and PRASA and and and and
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    Default Re: Sasol shares, or not?!

    jelo.

    did you ever expect any other result. is there one thing out there that they have not destroyed or run like it should be run.
    Last edited by peter bee; 2020/03/15 at 12:44 PM.
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    Default Re: Sasol shares, or not?!

    And Sasol opening on R 27 today.

    Rather little news from them on how they plan to deal with it.
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    Default Re: Sasol shares, or not?!

    Spoke to a SASOL guy on Saturday. He said that they expect further drop.
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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by Henris View Post
    Spoke to a SASOL guy on Saturday. He said that they expect further drop.
    I guess beyond a certain point, recovery becomes impossible.
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    "...it is abundantly clear that you are an arrogant C-nut." - Estee. (I was overwhelmed. It was the nicest thing someone has said to me in a week!)

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    Default Re: Sasol shares, or not?!

    R 22 per share...
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    "A technician will let a system degenerate to the level of his understanding and maintain it there."

    "...it is abundantly clear that you are an arrogant C-nut." - Estee. (I was overwhelmed. It was the nicest thing someone has said to me in a week!)

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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by biltong View Post
    R 22 per share...
    Looks like all shares are in free fall at the moment.

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    Default Re: Sasol shares, or not?!

    i think the bee shares were given and sold at R15, so it could get there,
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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by biltong View Post
    R 22 per share...
    Who bought at ~R22 on 23 March
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    Last edited by PieterOos; 2020/04/07 at 02:30 PM.

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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by PieterOos View Post
    Who bought at ~R22 on 23 March
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    Default Re: Sasol shares, or not?!

    Many of us, did you not? Ai manjy moenie dat die slim mense op die forum jou lei nie!

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    Default Re: Sasol shares, or not?!

    No matter how bleak things look there is always opportunities. Just had a look at the pension value. Yesterday already the total value recovered 50% of the actual fall. After today it will look even better. Pitty for those who sold at the wrong time 2 weeks ago.

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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by Waals View Post
    Ai manjy moenie dat die slim mense op die forum jou lei nie!
    Met wie praat jy?

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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by ekkekan View Post
    No matter how bleak things look there is always opportunities. Just had a look at the pension value. Yesterday already the total value recovered 50% of the actual fall. After today it will look even better. Pitty for those who sold at the wrong time 2 weeks ago.
    Correct Ekkekan
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    Default Re: Sasol shares, or not?!

    [
    Last edited by Lofty; 2020/04/21 at 11:39 PM.
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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by PieterOos View Post
    Met wie praat jy?
    Hehehe - praat ons 2 dan maar.

    Wat vir my werk is om kleiner happe te vat te midde v d onsekerheid. Ek sien baie keer wil mens amper al jou geld in aandele of alles in kontant he. Ek is heel tevrede met die aankope soos Capitec die dag toe dit val tot R540 na my Baas my daarop gewys het. Dit het my vir 'n uur laat dink dit lyk na 'n geleentheid en ek het toe gekoop al het dit alreeds R40 gestyg. So het ek ook die laaste paar dae Anglo, BHP, Exxaro, Kumba,Bidvest gister gekoop en dit het vandag mooi geklim. Ja ek sien myself as 'n bestuurder van risiko rondom hierdie moeilike tye.

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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by Wilhelm_Bergbok View Post
    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:
    Attachment 561495

    , but so did issues shares and debt:
    Attachment 561497

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

    Attachment 561496


    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.
    I still believe that the failed Shoprite deal triggered the collapse as suddenly there wasn't a new acquisition to cook the books with.
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  24. #138
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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by Wilhelm_Bergbok View Post
    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:
    Attachment 561495

    , but so did issues shares and debt:
    Attachment 561497

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

    Attachment 561496


    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.
    Excellent post. I think its almost time to short Sasol. Their Debt is simply too high and revenue too low. They also were slapped with anti dumping duties of 419% on Acetone - so no more Acetone sales to the US.

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    Default Re: Sasol shares, or not?!

    So... Oil just went negative. Strange world

  27. #140
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    Default Re: Sasol shares, or not?!

    Quote Originally Posted by Wilhelm_Bergbok View Post
    So... Oil just went negative. Strange world
    Does that mean we get a refund when filling up

    -and, will the garage attendant give me a tip when I do so?
    "The problem with the world is that the intelligent people are full of doubts, while the stupid ones are full of confidence."

    - Charles Bukowski

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