There must be some Mustek: Why aren’t punters buying it?
Technology company advised that earnings would be about 30% higher, but the market still doesn’t rate it
It was nice to see Mustek showing a bit of spark. The JSE technology counter has been tagged with a trailing earnings multiple of less than seven times. This is the kind of rating usually associated with ex-growth smokestack industry stocks, where the main attraction to investors is the deep value proposition.On Thursday Mustek issued an upbeat trading statement that suggested punters had been far too pessimistic in their growth assessments. Mustek advised that headline earnings for the year to end June would be between 23% and 33% higher in the range of 100c/share to 108c/share.
Although the market responded enthusiastically to the trading update, the share still trades at a desultory level with the forward earnings multiple still under seven times.
It seems reasonable to expect a dividend payout at financial year end. Although it is Mustek’s habit to state its net asset value (NAV) in trading statements, the 15% to 16% increase in this figure to between R13.44/share and R13.56/share is certainly eye-catching.
If intangible assets and goodwill (as reflected in the interim report) are stripped out then it seems safe to pencil in a tangible NAV of around R11.50/share.
Clearly the recent share buy-back – when seven million shares were repurchased at an average price of around 500c/share – was a very smart ploy. No doubt share buy-backs will continue at current share price levels – although there must be a temptation to take Mustek (with a market capitalisation of less than R500m) private.