Our opinion on the current state of MUSTEK(MST)Mustek (MST) is South Africa’s largest assembler of personal computers under its *Mercer* brand and also imports various computer products, including Samsung, Acer, and Microsoft. Historically, the company has traded well below its net asset value (NAV).
The company has been exploring growth opportunities in the fibre-to-the-home market and has seen strong sales in cables supporting this sector. CEO David Kan has expressed optimism about the potential exponential growth in this area. Additionally, Mustek is positioned to benefit from increased demand for remote education and work-from-home technologies post-COVID-19.
However, in its results for the year to 30th June 2024, Mustek reported revenue down 16% and headline earnings per share (HEPS) down 82.1%. The company attributed this decline to weak corporate and government spending and the sudden end of the *green energy boom*, which had previously driven strong sales. Mustek found itself with surplus stock in an environment of high interest rates and declining demand for alternative energy products.
In a trading statement for the six months to 31st December 2024, the company estimated that HEPS would fall by between 70% and 80%, citing *"the adverse impacts of the prevailing local and economic challenges."*
Despite these negative results, the share appears undervalued. It has recently broken above its 200-day moving average, which could signal the beginning of a recovery. If economic conditions improve and corporate/government spending resumes, Mustek may see better performance in the medium to long term.
