Our opinion on the current state of MST

Mustek, South Africa's leading assembler of personal computers under the Mercer brand, along with importing a range of computer products from renowned brands like Samsung, Acer, and Microsoft, trades significantly below its net asset value (NAV). The company is starting to see benefits from its fiber-to-the-home initiatives, driving additional hardware sales. CEO David Kan has expressed optimism about the burgeoning fiber-to-the-home market's potential for exponential growth, possibly up to 500% in cable sales. This optimism extends to potential gains from the surge in remote education and work-from-home trends post-COVID-19, positioning Mustek favorably to leverage its product offerings in these emerging markets.

In July 2021, Mustek assessed the damage from unrest and looting, estimating losses not to exceed R20 million, indicating the company's resilience amidst external challenges. For the fiscal year ending June 30, 2023, Mustek reported a 13.7% increase in revenue and a 5% increase in HEPS, with NAV per share also rising by 13.8% to 2724.36c, underscoring its robust performance and strategic positioning as an end-to-end ICT and sustainable technology solutions provider.

However, a trading statement for the six months ending December 31, 2023, indicated a projected decline in HEPS of between 55% and 65%, reflecting the adverse impacts of local and economic challenges on the Group's performance. Despite this downturn, with a P:E of 2.99 and a dividend yield of 5.49%, Mustek's shares appear undervalued. Investors are cautioned to look for a breakout above the 200-day moving average before considering an investment, to gauge the potential for a recovery in share price and company performance amidst the prevailing economic headwinds.