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Some investors in Sasol (ISIN: ZAE000006896) have sold their shares this February to take profits they have made so far. Subsequently, the share price of the South African chemicals and energy company is down 6.4% to ZAR 330.89 (EUR 19.17).
But fundamentally, the situation on the international oil markets should continue to support Sasol’s share. The price of West Texas Intermediate (WTI) crude - the reference for those markets – has risen by 54% in the last twelve months. Experts also believe that WTI crude could rise to as much as USD 100 per barrel in the next couple of months. Unfortunately, Sasol has not fully taken advantage of the rally in oil. Last week, the firm announced that it had to cut production due to problems in its South African supply chain.
Sasol also said it expects to report higher operating profit (EBITDA) for the half year ended 31 December 2021. Its EBITDA should come in at between ZAR 30.9 billion and ZAR 32.7 billion (EUR 1.74 billion to EUR 1.84 billion) compared with ZAR 18.6 billion (EUR 1.05 billion) for the year earlier period. It also expects its earnings per share (EPS) to range between ZAR 22.81 (EUR 1.28) and ZAR 25.15 (EUR 1.42). This compares with ZAR 23.41 (EUR 1.32) for the year ago period. The market was, however, expecting even better results, which is why the share was sold off. Sasol will report its results for the half year on 21 February. That said, we need to put Sasol’s performance in context. Since the beginning of January, the stock has gained almost 30%, and its fundamentals are looking good.
Investors seem to be withdrawing from Seplat Company (ISIN: NGSEPLAT0008), whose stock is listed on CBOE Europe. This marks a surprising reversal of fortune. As 2022 began, the stock gained 24.4%, which is impressive considering that international markets have been moving sideways. As a specialist in the exploration of oil and gas in Nigeria, Seplat is also in the right business. Just consider the recent surge in oil and gas prices. West Texas Intermediate (WTI) crude is, for example, up 21.3% to USD 90.39 per barrel (159 litres) since the beginning of the year.
But in the last week, Seplat’s shares have lost momentum, shedding more than 6% of their value. We attribute this to an M&A project Seplat’s management is pushing: The oil and gas explorer has bid for an unknown stake held by Anglo-Dutch oil giant Shell in a venture that operates oil fields in Nigeria. It seems that investors are worried that Seplat could pay too much for the stake.
Seplat’s portfolio already consists of seven oil and gas blocks in the energy-rich Niger Delta region. These include oil mining leases (OML) 4, 38 and 41; OML 53, OML 55, OML 40; OPL 283 (Pillar); and Ubima.
BUA Foods (ISIN: NGBUAFOODS04) has had an excellent debut on the Lagos Stock Exchange (LSE). Since going public on 5 January, the share price has rocketed, gaining 33% to NGN 60.40 (EUR 0.1353). Of course, there is no way of telling where things go from here for BUA Foods. But it is a very good sign that its share price has risen in the first weeks following an IPO. BUA Foods’ performance reflects that its founder Abdul Samad Rabiu was not too greedy and, hence, did not overprice the transaction.
Moreover, with a current market cap of EUR 2.4 billion, Rabiu has brought BUA Foods to the ranks of African stocks with the highest valuations. According to our calculations, BUA Foods is among the top ten stocks listed in Africa. This puts it on par with Nestlé Nigeria (ISIN: NGNESTLE0006), which is valued at EUR 2.4 billion, and above Senegalese telecom operator Sonatel (ISIN: SN0000000019), which is valued at EUR 2.1 billion. BUA Foods is still below the telecom towers operator IHS Towers (ISIN: KYG4701H1092), which has a market cap of EUR 3.3 billion.
BUA Foods produces sugar, flour, pasta, edible oils and rice. The company operates two automated sugar refineries, one near Lagos and the other in Port Harcourt. All told, BUA has about 70,000 hectares of land in Kwara State and Kogi State which it aims to use for local sugar cane plantations.
But its activities do not end there. BUA Foods runs both a flour mill and a pasta plant in Port Harcourt. It also has two oil mills in its portfolio, one in Kano and the other in Lagos. These mills transform crude palm oil into products such as palm olein, stearin, distilled fatty acid and soaps. Finally, the company plans to open Nigeria’s largest rice milling facility in Kano. That mill would serve a country with more than 180 million inhabitants.
By its own lofty claims, Jumia Technologies (ISIN: US48138M1053) wanted to “revolutionise” e-commerce in Africa. The company with headquarters in Berlin and a listing on the New York Stock Exchange (NYSE) was started by the German internet group Rocket Internet. Jumia once claimed that it would be the "Amazon of Africa.” But it seems that Jumia has underestimated the competition in Africa, where e-commerce is rapidly becoming more widespread.
A word about Rocket Internet: Founded by the brothers Marc, Oliver and Alexander Samwer in 2007, Rocket specialises in investing in internet start-ups. It acquired the reputation of a “copycat,” as it financed companies that mirrored business models already successful in the US. One example is Lazada, whose business model is similar to Amazon’s.
In 2019, Rocket Internet sold its holding in Jumia. This turned out to be fortuitous, as Jumia shares have tanked. The stock has lost 85% in the past twelve months to trade at USD 9.64 (EUR 8.39) a share. One big reason: In 2021, the company has turned an estimated loss of EUR 200 million on sales of EUR 150 million. It is never a good sign for investors if the losses of a company they are invested in exceed sales.