Conclusion: Tesla has so much potential to be a true game changer in the automobile industry as it Increases production and its customer base. It has and should continue to receive awards galore from numerous auto and consumer publications. Finally, it offers a very attractive product that aims to change the fundamental nature of how we power vehicles.
Sasol Limited (NYSE:SSL)
Electric vehicles have been part of the alternative auto development craze for many years and most of the public is well aware of their existence. But the next technology I am about to review is not as widely known and yet could have far more potential, especially in commercial transportation. This is due to the copious amounts of natural gas at cheap prices and the existence of clean diesel technology.
Sasol is a truly integrated energy company with interests in oil, gas, coal, and pipelines. Just the fundamentals alone are enough for me to recommend this company to the long term dividend investor. However, I believe there is great promise in one of Sasol’s technologies that has been largely ignored by the investment community. I am writing of course about the Gas to Liquids (GTL) technology.
GTL technology is fairly complicated so I’ll thank Sasol for the following brief description taken from their GTL Technology web page:
Stage 1: Reforming natural gas with oxygen and steam over a nickel catalyst to form Syngas.
Stage 2: Converting Syngas into long-chain waxy hydrocarbons in a Sasol Slurry Phase Distillate Fischer-Tropsch (FT) reactor.
Stage 3: Selectively cracking the waxy hydrocarbons to produce GTL diesel, GTL kerosene, GTL Naphtha and LNG.
Sasol claims this process enjoys significant cost advantages which of course helps margins. These cost efficiencies continue to improve over time. With plans to develop this technology on a much larger global scale we could see GTL beginning to power local diesel vehicles in the coming years. This could mean decreasing prices for diesel fuel over the long run.
On the domestic front Sasol is looking into establishing GTL plants in North America. Specifically, Louisiana, which could mean hundreds of well paying positions here at home. Alberta, Canada is also on a short list of other potential sites for GTL plants.
Even without the prospect of revolutionizing how natural gas is utilized Sasol presents a great value investment with a solid yield of around 4.5%. A P/E of 9.5 and a Forward P/E of 8.3 are just the starting point for financial highlights. How does a year over year revenue increase of 14.5% sound? Now put a 13.92% profit margin and a 22.43% operating margin into the mix and things look pretty good.
Conclusion: Though I am not yet putting this on my buy list, though I am tempted, I will be observing Sasol very closely for signs of increasing profitability due to GTL. Once large scale increases are reflected in two consecutive quarterly reports then I would be more confident about buying in for potential long term gains. Therefore, Sasol is going on my watch list for now with the expectation for a buy rating in the future.
