Extract from Portfolio Manager Commentaries – Sept 2022

Barloworld has taken a different approach to Mondi with their intention to hold onto their Russian business instead of selling it. Before the invasion, Barloworld’s Russian business made up 32% of its fair value, which contrasts heavily with the 40% YTD decline in its share price. The majority of the business is performing very well as evidenced by their recent 11-month trading update coming in ahead of expectations in the key divisions. This is in stark contrast to how the market is taking a view on the business's prospects. Barloworld has a large yellow equipment business in South Africa where new and aftermarket sales stand to grow strongly in line with their record order book. Importantly, management are on the front foot and returning capital to shareholders through dividends and buybacks. Valuing Russia at zero, we see 25% upside for Barloworld with up to 85% if the Russian business can return to its former glory: an attractive payoff profile.

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