{"id":539955,"date":"2024-06-07T12:03:54","date_gmt":"2024-06-07T10:03:54","guid":{"rendered":"https:\/\/mybroadband.co.za\/news\/?p=539955"},"modified":"2024-06-07T12:09:47","modified_gmt":"2024-06-07T10:09:47","slug":"musteks-growth-strategy","status":"publish","type":"post","link":"https:\/\/mybroadband.co.za\/news\/hardware\/539955-musteks-growth-strategy.html","title":{"rendered":"Mustek’s growth strategy"},"content":{"rendered":"

Mustek is looking at various opportunities to grow organically and through acquisitions, group financial director Shabana Aboo Baker Ebrahim has told MyBroadband.<\/p>\n

\u201cMustek has been executing on a strategy to strengthen our balance sheet by reducing working capital and debt,\u201d Ebrahim said.<\/p>\n

\u201cWhile progress has been made, the current economic climate and slowdown in the sustainable energy market has impacted these initiatives.\u201d<\/p>\n

Ebrahim was responding to questions about their strategy after Umthombo Wealth\u2019s chief investment officer, Alex Duys, said Mustek was an attractive investment<\/a> at its current share price.<\/p>\n

The company recently released a rough set of results, sending its share price to lows last seen before the pandemic.<\/p>\n

Founded in 1987, Mustek has grown into one of South Africa\u2019s largest assemblers and distributors of personal computers and complementary ICT products.<\/p>\n

The company\u2019s portfolio includes many top-tier ICT brands, including Acer, Asus, Samsung, Lenovo, Brother, Microsoft, and Huawei.<\/p>\n

Mustek enjoyed strong growth during the 2020\u20132021 lockdown, and its share price followed suit, increasing from R5.73 in July 2020 to R17.34 in August.<\/p>\n

However, its most recent results were not good. Revenue declined by 13%, and basic earnings per share decreased by 59%.<\/p>\n

The bad results caused the share price to plummet to around R9.00 per share.<\/p>\n

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Duys noted that Mustek\u2019s working capital \u2014 the company\u2019s inventory and accounts receivable \u2014 has piled up over the last few years.<\/p>\n

He said Mustek was overstocked on renewables, which saw a decline in demand as the market saturated and the levels of load-shedding declined.<\/p>\n

However, there is still demand for these products, and distributors and retailers are still selling them \u2014 albeit at lower margins.<\/p>\n

\u201cThey used to sell them at gross profit margins of over 20%. They are now selling them at margins of 12% to 14%. They are still making money from them,\u201d he explained.<\/p>\n

Duys said that if Mustek\u2019s management succeeds in reducing its working capital, it will release a significant amount of cash.<\/p>\n

The higher cash flow will reduce the company\u2019s debt and interest payments. In turn, earnings will increase.<\/p>\n

Duys said this is expected to happen in a year or two.<\/p>\n

\u201cThe next set of results will not be pretty. Earnings will be down significantly,\u201d he said. \u201cHowever, this will be the new low base to build on.\u201d<\/p>\n

In addition to reducing working capital, Duys said Mustek could de-gear its balance sheet and do share buybacks at these low levels.<\/p>\n

\u201cI can see Mustek rally a lot from that,\u201d he said.<\/p>\n","protected":false},"excerpt":{"rendered":"

Mustek group financial director Shabana Aboo Baker Ebrahim said they are considering acquisitions to grow the company.<\/p>\n","protected":false},"author":15,"featured_media":505488,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"idle","_sma_x_autopost_error":"","_sma_x_post_id":"","_sma_x_attempts":0,"footnotes":""},"categories":[19,15],"tags":[94169,35,737,88862,94171],"class_list":["post-539955","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-hardware","tag-alex-duys","tag-headline","tag-mustek","tag-shabana-aboo-baker-ebrahim","tag-umthombo-wealth"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/539955"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=539955"}],"version-history":[{"count":0,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/539955\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media\/505488"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=539955"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=539955"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=539955"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}