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The funds most exposed to Sasol

Counting the cost of the problems at Lake Charles.

Shares in Sasol dropped sharply on Friday after the company announced that it would delay the release of its annual results by a month. This is because its auditors need to consider an independent report the board had commissioned on its Lake Charles Chemicals Project.

This is the latest in a string of bad news related to the project. In May Sasol provided an update on Lake Charles in which it revised its cost estimate for the project up by $1 billion.

Having originally estimated that the project would cost $8.9 billion, the final cost is now expected to be in the range of $12.6 billion to $12.9 billion.

At current exchange rates, that equates to around R190bn, which is more than Sasol’s total market capitalisation.

The ongoing concerns around Lake Charles have put severe pressure on Sasol’s share price. The company’s stock is now trading at levels below those of five and even 10 years ago.

This has had a significant impact on South African investors, since Sasol is one of the most widely held companies in local portfolios. A Moneyweb analysis conducted just under a year ago showed that Sasol was the third most popular counter in South African unit trusts after Naspers and British American Tobacco.

Read: The JSE’s most popular stocks

Sasol is also a large component of many JSE indices. Although the slide in its share price has reduced its market capitalisation, it is still one of the 10 largest companies in the FTSE/JSE All Share Index, and the third largest stock in the FTSE/JSE Resources 10 Index.

Many local funds are therefore heavily exposed to the counter. This is particularly the case for commodity funds, but as the list below shows, many general equity funds also give it a high weighting in their portfolios:

Funds most exposed to Sasol
Fund Weighting
Coronation Resources Fund 12.65%
Satrix Resi ETF 12.43%
Nedgroup Investments Mining & Resources Fund 12.38%
Old Mutual Mining & Resources Fund 9.69%
SIM Resources Fund 9.53%
NewFunds Shari’ah Top 40 ETF 8.66%
NewFunds S&P GIVI SA Resource 15 ETF 7.49%
Investec Commodity Fund 7.33%
Integrity Equity Prescient Fund 7.16%
Momentum Resources Fund 7.02%
Alexander Forbes Investments Equity FoF 6.62%
Allan Gray SA Equity Fund 6.52%
Sanlam Private Wealth Equity Fund 6.43%
Laurium Equity Prescient Fund 6.26%
Satrix RAFI 40 ETF 6.12%
Satrix RAFI 40 Index Fund 6.1%
Old Mutual RAFI 40 Index Fund 5.97%
Nedgroup Investments Value Fund 5.96%
Aluwani Equity Fund 5.96%
Mazi Asset Management Prime Equity Fund 5.79%

Source: Morningstar

Data from Morningstar shows that a large number of international funds also have exposure to Sasol. Although some of this data is dated and therefore not completely accurate, it does show how widely recognised the company is.

Read: Sasol met with fund managers as Lake Charles costs climbed

It appears in portfolios domiciled in Namibia, Japan, Taiwan, Ireland, the US, Netherlands, the Isle of Man, Germany, the UK, Australia, Luxembourg, France, Switzerland, Denmark, Norway, Canada, Liechtenstein, Mauritius, Finland, New Zealand, Austria, Sweden, Belgium and Jersey.

A rough three months

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I’m glad I pulled out when the first signs were there about Louisiana……..being late& out of schedule

Ahhh Allan Gray again. But then they will tell us they are deep value investors investing for the long term. No wonder their returns have lagged so badly…

If you look at Sasol’s SENS, Allan Gray bought an additional portion in Sasol last week. It is probably one of the most attractively priced shares out there at the moment. The share is priced for absolute disaster, and I don’t think that is truly the reality.

You right, buying now is definitely worth the underlying risk as it is priced in. Problem is AG average price is way above these levels. If you start counting the RANDS lost to shares like Sasol and BAT, AG has probably been the worst Rand loss manager for the past 3 years….. great marketing though.

Hi! No it is definitely not marketing. I bought the share in the last week and I really feel positive about it, despite the history. Not saying it is going to go all the way back up again, but I have a strong conviction it was hammered too much because of the management failures.

Allan Gray… Something tells me they love throwing their clients money away (After they have taken their management fee first).

Hi Brian. I am no fan of active managers. I think everybody should strive to manage their own money, because there is so much to gain from being able to do that. I am not saying Allan Gray is being irresponsible, just that active managers is not the way to go in my opinion. Out of all the active managers we have easy access to, they are probably the most credible though (in my opinion).

No wonder their long-term returns and overall track record are superb.

Bought at 241, watching my profit right now. Probably my best buy of 2019

Let’s check when the shares were purchased and at what price?

Strange situation. See below from the Lake Charles website.

“LCM has executed an agreement with Fluor Corporation to provide a fixed-price and date-certain contract to build its petcoke refinery. This contract puts Fluor in charge of building, starting and commissioning the facility to ensure it is ready for commercial operations.”

Shareholders have been ripped off by Fluor again. They seem to be doing this all over the world and that can only mean one thing.

Senior management complicity from both sides. How else are increases in cost and time approved when you have a deal?

Patrick. If you follow the Fluor trail you will get to the bottom of real problem.

looks like the guys who planned the lake Charles project sourced the guys who planed Khusile and Medupi

If I had known the ANC was involved in Sasol it would be a permanent short in my portfolio.

So, does this imply that the Inzalo BEE partners are going to get a margin call? Or, did the “ordinary” Sasol shareholders finance the premium of a Call option that was donated to the BEE partners? Some call this “empowerment” but then they should change the description of the word “theft” in the dictionary to include empowerment.

The BEE partners expropriate a portion of the upside, but they do not share in the downside. The downside is for the “ordinary” shareholders. This is how parasitic socialist regimes destroy the capitalist system they are so entirely dependent upon.

“the final cost is now expected to be in the range of $12.6 billion to $12.9 billion”

Is that supposed to sound better than “we still don’t know within 4.6 billion rand what it’s going to cost” ?

Cheetah, please don’t take my advise. But, I did do some research here. In my opinion (and possibly I am wrong), but if a bomb physically drops on Lake Charles tomorrow and if everything is gone there, the share is still a fair buy. The other reason why I bought is because I don’t think management is brilliant, but they aren’t fraudulent either. They were negligent here and deserve a kick in the bum for sure. The above is why I bought. If people reading this site buys or not, is not going to move the needle at all on the share price. A lot of people have taken hits on shares lately, and I recommend you look at this opportunity, because it may score you some positive return points. Again, do your own research and don’t take my advice.

Remember the negative news is heavily priced into the share price (and possibly way too much). Don’t worry about what Lake Charles costed up to now. Sasol still holds their investment grade credit rating, despite Lake Charles. Worry about the share price today and look forward from here. If you still don’t conclude it is a buy, please let me know!

I don’t understand why a “fixed price contract” has cone up in price and a “date-certain contract” now has an uncertain date.

Allan Gray Equity fund has not beaten the inflation rate over 5 years, or its benchmark. Why do investment advisors still keep pouring money into this fund?

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