THE CONTRIBUTION OF REAL OPTIONS TO THE SHARE PRICE OF SASOL LTD
Date
2011-10-07
Authors
John, Medard Ivan Gopalan
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Abstract
Brown (1997: ix) stated: “Fundamental changes were under way in the world of
business… The accelerating pace of change is real… With this shift, we are
finding many of our background assumptions and time honoured business
models inadequate to help us understand what is going on, let alone how to
compete”. The purpose of the research was to test real options’ theory in the
South African oil and gas sector of the market. The largest listed company by
market capitalization in this sector was Sasol.
The methodology used to conduct the study consisted of three phases. A
detailed review of literature, a case study of Sasol’s GTL operation in Qatar and
a survey of all South African market analysts that tracked Sasol’s share price
was undertaken.
The findings of this report supported the propositions offered by the research that
the market value of Sasol did not reflect any embedded real options’, Sasol’s
shares were not fully valued, market analysts did not understand the concept of
real options’, there was a real option within the Qatari GTL division of Sasol and
the GTL industry was embedded with real options’.
This report showed that South African market analysts did not use real options’
and that acceptance by market analysts will serve as a catalyst for more
widespread corporate use within South Africa.
Description
MBA thesis - WBS
Keywords
Sasol Ltd, Price options, Share prices