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Sasol Broad Based Offer could be a disaster

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The funded option seems to have a lot of uncertainties and debt attached to it as well. 10 years is quite a long time, now with current oil prices pushing sasol shares up, don't you think alternative sources of fuel and other innovations including electrical cars could bring the sasol shares to come down quite significantly and then the dividends will clearly not be enought to pay all this debt. What will happen to all those people who will not be able to afford to subsidize those dividends, their investment could the greatest loss in history and they will be locked in for 10 years, it's like the titanic sinking whilst your watching it on board. I need sound advice on this issue, should one rather go the cash option?
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To be honest, got the pack and have read the initial part and i'm still confused as to the benefits of this 10 year period. Do you pay off the shares? What's the implied interest rates. I need to calculate how much i stand to make in 10 years given different levers. At this moment i still am not sure if it's even worth waiting for that long. Will read the 160 page pack tonight...
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Super Contributor
Dont you only pay 10% upfront? The shares will be paid off in around 4 yrs you can potentially turn R8m into R100m. Best deal ever if your BEE...
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what price are they offering the share at?
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Occasional Contributor
The shares will be offered at R366.00.
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Super Contributor
Simple query... I intend buying 1000 shares on the funded scheme. What is my cash outflow for this investment today and what(if any) will be my further cash outflows(out of my own pocket) for the next 10 years. Please let me know if you can find this answer amongst the 162 pages.
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Frequent Contributor
Samir, new to forum (been trading since two years ag and have wanted to air my views on forum on several occassions but have held back until now). My understanding is as follows: Cash outlay today (pg 3 of prospectus)for 1,000 shares via funded invitation - R34,770 My understanding is that you do not have to put in equity over the 10 years and that the balance owed on your subscription will be funded by the special dividends received on the fund. At the end of 10 years somes shares will be sold to pay off the balance owed and the remaining shares will be available to trade in the JSE (pg 7) Others: it is a limited trading instrument so your cash will be locked in for the 10 years. You will be allowed to trade after 2 years (cash invitation) and 3 years (funded invitation) but only to other BEE entities. My calculations indicate that for the funded invitation, you looking at an IRR of 38 - 45% depending on what your view on the Sasol share price will be after the 10 years. Even if Sasol share price stays at around the R500/level you still looking at an IRR of around 25 -30% - question is what instrument will give you that return? As for the long-term view on Sasol, well share price has a long-term outlook built into it and Sasol's endeavours in GTL/CTL as an alternative to crude certainly has won support and favour with investors. Needless to say, I will be subscribing for a few thousand shares via the funded invitation for my wife and children - cash invitation requires too much equity upfront and is a limited trading investment after the 2 year period. p.s. I work for Sasol but views reflected above are purely my own.
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Super Contributor
Thanks for that, don't wait another 2 years. welcome.
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Occasional Contributor
WHERE CAN I OBTAIN THE SHARE SCHEME PROSPECTUS .. WHRE DID U GET IT ? THNX
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Sasol has a call centre for the Inzalo share scheme, phone 0800 000 222. Maybe they can help you with info or even mail you a copy of the prospectus...
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Super Contributor
most post offices should have prospectus-if not they can direct you to closest.As I understand it there is a 17% discount on offer for preference shares if you go funded and ordinary shares if you go ordinary/cash.If you like sasol then this is a reasonable offer but it's not a give away.I am positive but you need to say goodbye to your money for 10 years although on cash option divs do come your way-on the funded offer a smaller amount comes your way after 3 years I think.
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Super Contributor
most post offices should have prospectus-if not they can direct you to closest.As I understand it there is a 17% discount on offer for preference shares if you go funded and ordinary shares if you go ordinary/cash.If you like sasol then this is a reasonable offer but it's not a give away.I am positive but you need to say goodbye to your money for 10 years although on cash option divs do come your way-on the funded offer a smaller amount comes your way after 3 years I think.
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You may also collect them at a Sasol or Exel service station and at Sasol's reception.
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Super Contributor
Thx Og. Seems pretty good. I did my IRR calculations- came out with similar ranges. Did you consider the pref div flow as follows: (Yr 1-3:R16),(Yr 4-6:R22),(Yr 7-10:R28) Total: R226 over 10 years. Has anyone done TA on SOL? If the TA says that there is a chance that SOL can drop below the R366 level in the next month, then the cash option is not worth it?
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Frequent Contributor
Yes, Samir used the preference share dividend as you stated - with a 5% dividend payout from Year 3 onwards. To me the cash invitation option is not lucrative - yes you will be receive 100% dividend payout and yes you will be able to trade after 2 years (vis a vis 3 years with the funded option) BUT your initial capital outlay will be more substantial R366/share versus ±R36.60/share AND you will have to trade within a limited market (i.e. low liquidity) within the first 10 years. I have not done a TA on Sasol but the >R100/share discount offer is lucrative. I also agree that you need to consider the money that you invest as being unavailable over the 10 year period.
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Super Contributor
Og, correct me if I am wrong.... On the pref div.... I stated R16 for year 1 to 3, but in actual fact you receive NIL. Then, in years 4-10, you actually receive only 5% of the amounts I listed in my previous post. I agree that the cash invitation option is not lucrative as the funded option gives you great gearing. Today's pullback on SOL is the kind of stuff that makes me consider whether it can actually pull back below R366 anytime real soon. Mind you, if it drops below R366 this month, then I would obviously go in on the funded option.
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Frequent Contributor
Oops did I say Year 3 - meant Year 4. One other thing I am not too sure about and could not pick up in prospectus was whether the balance owed in funded option will accrue interest charges - I used your figure of 11% in your previous posting in my calculations. I have already opted for the funded option - less exposure reasonable enough (I hope) returns.
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Super Contributor
The 11% interest charge is based on current int rate environment. Will it remain at that level or will it be linked to prime/repo movements? I will probably apply for the funded option. Will apply for helluva lot extra in anticipation of an over-subscription.
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