From Sasol's press release on 2/28: "Sasol has decided to delay the final investment decision on its large-scale, gas-to-liquids (GTL) plant in Louisiana. Sasol is proceeding with the construction of the ethane cracker and derivatives."
Who else is currently building a new ethane cracker?
SSL is probably a buy right here, assuming oil prices stabilize. Probably good for a bounce into mid-January. Then I would re-assess.
Sasol's profits are heavily geared to A) the price of Brent crude, and, B) the Rand/$ ratio. In past years, Sasol hedged versus the price of oil, but this past year, they may have skipped it, unfortunately. But they should benefit from the decline of the Rand -- costs are in Rands, but revenues are in $$$$.
So far, they have committed to the ethane cracker, but not the GTL plant. If oil stays down at $60, I doubt they will start the GTL -- depends on the ratio of oil price to natural gas price. In any event, most of the GTL product, which is diesel, will stay in the USA, because it will be in great demand because it is virtually sulfur free.
See Trading Statement in Yahoo news. Sasol benefits very strongly when South African currency, the Rand, crashes, which has happened lately. Essentially, Sasol's revenues are in $$$, and costs are in Rands, so the profit margin widens when Rand goes down. The effect is even favorable for US$ ADR holders.
Citi initiates at BUY. Sets TP @ $11.
TravelCenters of America (TA)
The Truck Stops Here; Initiating Coverage with a Buy Rating
*** Initiating With a Buy Rating and $11 Target Price — We are initiating coverage of
TravelCenters of America with a Buy rating and $11 target price, which represents a
~17% ETR. TA is a well-established player within the travel center industry with
best-in-class facilities, both strong internal and external growth opportunities, and a
seasoned management team.
*** TA Has Significant Competitive Advantages — The company has significant
competitive advantages, including larger facilities than competitors (on avg about 25
acres w/ ~200 parking spaces vs. ~100 for its 2 largest competitors) in good
locations (primarily at US Interstate exits). The company also provides a value
proposition for customers (rather than competing solely on price). For example,
given their large size, their locations are a one-stop location for truckers and
customers to find parking, eat, buy merchandise, receive repairs, and even shower.
Agree. Typical reaction to a share offering. I doubled up. Prematurely, perhaps, but the reaction looked extreme and the stock looked oversold. We'll see.
Sasol sold its interest in an Iranian petrochemical plant. Clearly, they are trying to wipe the slate clean, so they can get approvals for huge projects in Louisiana.
S&P Stock in the News
May 30, 2013
MEMC Electronic Materials
S&P MAINTAINS STRONG BUY RECOMMENDATION ON SHARES OF
MEMC ELECTRONIC MATERIALS
Recent Price : $8.11
We keep our '13 operating EPS estimate at $0.20 but raise '14's by $0.18 to $0.65 and '15's by
$0.20 to $0.77. We up our 12-month target price by $6 to $13, shifting to a blend of our
peer-premium P/E and price-to-sales analysis. Our higher estimate revisions illustrate our greater
conviction that WFR will generate significant revenue/earnings from its solar systems pipeline. We
believe that WFR will be able to generate a healthy sustainable gross margin of at least 20% from
this business. We also remain optimistic of share gain and profitability in its semiconductor
MEMC Electronic Materials Inc. (WFR)
Reiterate Buy After Analyst Meeting – Raising 2014/15 Outlook
n 2013 Analyst Meeting Was Constructive – Reiterate Buy Rating; Raising 2014/15
Estimates. Key items of discussion at the analyst meeting included: (1) the outlook for
SunEdison, (2) the growth trajectory for Semi Materials, (3) project level development
spending for solar, (4) the formation of a project financing arm – SunEdison Capital, (5)
the potential for a $25mm share buyback in 2013, (6) additional revenue sources
including Services and 3rd party strategic poly sales and, (7) MEMC’s official name
change to SunEdison – effective 3/31/2013 pending approval. Overall, despite the
weaker Q1 outlook for solar installations, which is mainly attributed to timing issues
related to project development spending in 2012, we left the meeting more constructive
around the forward growth trajectory for solar which should come to fruition in 2H13
with a major step up in 2014 and beyond. The outlook for Semi Materials was inline
with our expectations. We maintain our Buy rating post analyst meeting and would use
yesterday’s sell-off as tactical entry point into the shares.
The interim of R5.70 is the same as last year. What changed is the currency exchange rate, now around R9.20/US$. A year ago it was about 7.92 per $. Ironically, Sasol's profit, other things being equal, goes up if the SA Rand goes down, since its fuel prices in South Africa are pegged to the price of Brent crude in $. Also, its chemical exports are price in $.
"" If I take shares instead of cash, no taxes.""
Sasol, like many foreign companies, pays dividends twice a year. Sasol pays an interim dividend in April and a final in October. The final is usually larger than the interim.
The dividends are paid in cash, not stock, and the cash goes into your account at the prevailing Rand/US$ rate. The dividends are taxable to US tax payers, even if the dividends are used to buy new stock. The dividends currently qualify for the low 15% rate on dividends.
However, the South Africans recently imposed a 15% withholding tax on dividends paid to non-South African holders. (Most other foreign countries also have a w/h tax.) This reduces the net amount of the dividend. If you have your shares in a taxable account, you are taxed on the gross amount of the dividend. You can get a credit for the foreign tax paid by filing Form 1116 with your return. If your shares are in an IRA, you get no credit and the effective yield is reduced by 15%. (FWIW, I usually file electronically, using TurboTax.)
If you sell the stock, the usual US capital gains rules apply.
I don't know how Yahoo comes up with 6.2% ($2.68) as the yield. The Sasol website shows the ADR payout as $2.14 for the past 12 months. Even Yahoo shows it as only $2.19.
[Go to Historical Prices and click on Divdends Only.]
A Citigroup report projects the dividend for fiscal 2013 to be R19, which translates to $2.12 at the current rate ($1=8.925 SARand). (The Rand has been weak lately -- some capital flight on account of mine strikes, political weakness, etc.) Based on Friday's close this puts the yield at 5.0%, or 4.25% after w/h tax.