Our opinion on the current state of BARWORLD(BAW)Barloworld (BAW) is an international supplier of heavy earth-moving equipment and vehicles to the mining, agriculture, infrastructure, power, automotive, and logistics sectors. Its best-known brands include Caterpillar, Avis, Massey-Ferguson, and Challenger. It operates in 24 countries, especially in Southern Africa, Russia, and other emerging markets. Its wide diversity of operations and geographical activities give it some insulation against recession.
BAW has sold its Spanish and Portuguese operations for about R2.5bn, which it is now looking to invest in Mongolia with the acquisition of the US-owned Wagner Asia Group. The Ukraine crisis is making it more difficult for Barloworld to get payments from customers in Russia and has pushed up the cost of some commodity prices, but the company says it has sufficient funds to manage the situation. This has seen its share price fall quite sharply.
In its results for the six months to 31st March 2024, the company reported revenue down 8% and headline earnings per share (HEPS) down 8%. The company's net asset value (NAV) increased by 9% to 9111c per share. The company said, "The group’s revenue of R19.2 billion decreased by 8% compared to the prior period, driven by a 24% decrease in revenue in VT, a 10% decrease in Equipment southern Africa and a 3% decrease in Ingrain. This decline was, however, offset by a 43% revenue increase in Barloworld Mongolia."
Technically, the share fell heavily in March 2020 in response to COVID-19 and then moved sideways in an extended "island formation." There has been an upside breakout from the island, and it has also broken up through its long-term downward trendline. On 9th April 2024, the share gave a strong on-balance-volume (OBV) buy signal and it has been rising ever since. We believe it is still good value at current levels. Obviously, developments in Ukraine and Russia will have a major impact on this share.
On 26th May 2022, the company announced that it will be buying back 10% of its issued shares. On a P:E of 7.96, this share looks cheap to us.