Barloworld (BAW) is an industrial processing, distribution, and services company with two primary areas of focus: Industrial Equipment & Services and Consumer Industries (food and ingredient solutions).
The company is a market leader, with internationally recognised brands including Caterpillar and Hyster. The group's recent restructure (including the unbundling of Zeda) supported not only the strategic divestment of non-core assets but also an ability to shore up the balance sheet which should help the group navigate the current uncertain macro terrain. We expect an uptick in fixed investment expenditure, which has been underwhelming in the public and private sectors, will be beneficial to the Equipment business.
The share price is currently testing its 78.6% Fibonacci retracement level (see the reference to some of the important Fibonacci retracement levels chart). When a share is testing this level, it is approaching a critical level of support (if retracing from a recent high) or resistance (if retracing from a recent low).
The share is approaching a major support level (indicated by the grey trendline) and testing its 200-week simple moving average, providing further indications of a potential trend reversal. We expect the current support level will hold.
Fading downside price momentum according to the to the Moving Average Convergence Divergence (MACD) histogram supports our stance.
We will also suggest a medium capital at risk allocation to this trade. Increase exposure for a break above R89.00.
Share Information
| Share code | BAW |
|---|---|
| Industry | General Industrials |
| Market capatalisation (ZAR) | 16.19 billion |
| One year total return | 8.20% |
| Return year-to-date | 11.04% |
| Current price(ZAR) | 85.38 |
| 52 weeek high(ZAR) | 98.00 |
| 52 week low(ZAR) | 63.56 |
| Financial year end | September |
| Closing paragraph | The share remains just below its 200-day simple moving average, above which the long-term trend will be classified as bullish. |
Historic performance
| FY22 | FY23E | FY24E | FY25E | |
|---|---|---|---|---|
| Headline Earnings per Share (ZAR) | 7.78 | 9.76 | 11.11 | 11.99 |
| Growth (%) | - | 25.44 | 13.91 | 7.87 |
| Dividend Per Share (ZAR) | 4.60 | 3.96 | 4.55 | 4.51 |
| Growth (%) | - | -13.83 | 14.73 | -0.77 |
| Forward PE (times) | - | 8.75 | 7.68 | 7.12 |
| Forward Dividend Yield (%) | - | 4.64 | 5.33 | 5.29 |
| Closing paragraph | Strong growth is expected in the short-term, from a low base, although this is expected to normalise over the forecast horizon. | |||
Buy or Sell Rationale
Technical Analysis :
Long term fundamental view:
| Share Name and position |
SLM - BUY (Continue to Hold) |
TFG - BUY (Continue to Hold) |
VOD - BUY (Continue to Hold) |
|---|---|---|---|
| Entry | 59.10 | 83.54 | 126.50 |
| Current | 54.73 | 88.46 | 124.14 |
| Movement | -7.4% | 5.9% | -1.9% |
| Summary text |
Remains just above key support and above its 200-day simple moving average. Fading downside price momentum supports the bullish trend.
Our take profit target remains at R76.00, with a stop-loss at R52.00. Time exit: 31 May 2024. |
The price is in an oversold scenario with a steep bearish trend. Still trading below its 200-day simple moving average but decreasing downside price momentum is supportive.
Our take profit target is set at R132.00, with a trailing stop-loss at R70.00. Time exit: 8 July 2024. |
The price is hovering near a significant support level and testing its 200-day simple moving average. Fading upside momentum is a concern.
Take profit target set at R144, with a trailing stop-loss at R120. Time exit: 1 May 2023. |
| Share Name and position |
LHC - BUY (Continue to hold) |
MTN - BUY (Continue to hold) |
OMU - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 19.30 | 132.49 | 11.67 |
| Current | 18.74 | 125.63 | 11.04 |
| Movement | -0.1% | -0.3% | -0.3% |
| Summary text |
The price is still near a major support level and just above its 200-day simple moving average. Fading downside momentum supports the bullish trend.
Take profit target set at R22.20, with a trailing stop-loss at R18.05. Time exit: 26 June 2023. |
The price is starting wave 3 of a 5-wave analysis. Remains below its 200-day simple moving average. Downside momentum is a concern.
Take profit target set at R190.00, with a trailing stop-loss at R113.00. Time exit: 6 November 2023. |
The price is counter-testing a bearish trend and remains just above its 200-day simple moving average. Fading upside price momentum is a concern.
Take profit target is R16.00, with a stop-loss at R10.00. Time exit: 17 November 2023. |
