SA’s favorite integrated energy and chemicals company, Sasol Limited (JSE: SOL), needs no introduction but made headlines again for all the wrong reasons.
Investors showed their concerns on Tuesday after Sasol unveiled plans to raise close to R14 billion in convertible bonds to fill up capital reserves and refinance debt. The news saw the share price decrease over 8%, the worst single-day drop in two years. The transaction, which could see Sasol issue $750 million worth of bonds with an annual coupon of 4-5 %, which can be converted into shares in 2027, still needs to be approved by shareholders.
Technicals
The share price has been trending lower since reaching a high point in May this year, but the bearish sentiment could remain as investors try to digest the recent fundamental information. Sasol’s share price has been consolidated above a support area and, if broken, could possibly be a short opportunity for market participants.
Fundamentals
It has been a busy week for the Petrochemical company, which saw an upgrade from the S&P Global Rating agency BB+ with a stable outlook. The rating agency commended Sasol for the successful disposal of assets and for using the proceeds to reduce its debt. Higher commodity prices helped generate better cash flow to improve operating efficiency, which brought the Oil price back into focus.
Oil prices have been trending lower in the second half of the year as governments across the globe find alternative sources of oil to mitigate the decreased supply from Russia. Supply cuts have also been topical, which has seen India’s Oil Minister, Hardeep Singh Puri, urge the OPEC+ alliance to consider the impact of their December fourth meeting decision on the rest of the world.
Summary
Long-term investors could be smiling from current price levels if the share price rebounds, but for short-term traders, a possible short scalp entry around the 28247c share level. A potential target point could be the 25000c support level with a personal risk mitigation rule-based or percentage-based approach but not higher than the consolidation level.
Sources: TriveSA, Sasol Limited, Reuters, BusinessDay
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