Anthony Clark’s three small-cap stock picks

Small Talk Daily Research’s Anthony Clark picked three small-cap companies – Mustek, Novus Holdings, and Afrimat – during a recent JSE SA Stock Picks event.

Clark specialises in small- to mid-cap industrial, agricultural and food stocks.

He was recently rated as the best analyst by the Financial Mail for financial and industrial small and medium market cap companies. 

Clark has been an investor and analyst for over three decades, with the last five years as an independent analyst. 

Since arriving from the UK in 1996, he’s worked for Standard Bank Equities, Genbel Securities, Nedbank Securities, Barnard Jacobs Mellet, and also spent some time at BEE investment business Vunani Securities. 

For the past five years, he’s been independent as the head of Small Talk Daily Research and has consistently been rated in the top five small- and mid-cap analysts by the Financial Mail since 2009. 

Clark selected Mustek, Novus Holdings, and Afrimat as they are trading at cheap valuations and offer substantial upside. 


Mustek is a South African technology supplier and “one of the dynamos of the local IT distribution landscape”. 

It was established in 1987 and is currently trading on the JSE with a market cap of just under R750 million.

Clark said Mustek has quickly built itself up to become the largest manufacturer of personal computers and the reseller of laptops in South Africa. 

It has a significant business in the corporate and government space as well, he added.

“As it stands right now, the current price-earnings ratio is a very lowly 3.7 times, probably one of the lowest in the universe that I track,” he said. 

The stock is currently trading at a “derisory” price-to-earnings (PE) ratio of 3.7 and a large discount to its net asset value due to liquidity issues that come with many small-cap companies. “It’s difficult for institutions to actually acquire the stock despite it having compelling value,” Clark explained. 

“So it tends to be marginalized with only boutique funds, private clients, and specific small-cap funds able to get in or get out of a stock, and the trouble is if any fund wants to get out, the market knows it as a seller, and the stock gets punished.”

However, Clark believes this company holds tremendous value, despite the underlying demand for computer hardware, PCs and laptops having declined since the Covid-19 pandemic.

However, he explained that the “replacement cycle” will work its way through in another year or two, and demand for new hardware will be back. 

But until then, “Mustek is nothing but entrepreneurial”, he said. 

“Realizing that there would be a demand going forward for alternative energy, they moved into solar installation, backup power generators, and these portable power packs, which now are ubiquitous in pretty much everyone’s home, either running their router or running their laptop or home PC during the rampant load-shedding that this country is currently experiencing.”

“With a R10 billion revenue, they’ve gone from a standing start of zero to about a R2 billion revenue from alternative power.” 

The company has also moved away from being a pure hardware manufacturer and reseller by moving into technology services, education, and software. 

“So they’re now major resellers for the likes of Oracle and Microsoft, trying to diversify their income stream.” 

“So inside Mustek, I think the market has failed to appreciate that this hardware company is now evolving into a services company where the margins tend to be quite high.” 

“We’ve also got an alternative power business that is growing extremely quickly from the start. We’ve got load shedding probably for years to come, so companies in that alternative energy space should do quite well.” 

However, Clark warned that the company’s debt is quite high because it took on a significant amount of inventory to have stock in hand, particularly in power solutions. 

“But as that inventory starts to get unwound and the debt situation starts to look a bit more palatable, I think the current PE rating of 3.7 offers scope for upside. So I have a target price on Mustek of R18.”

Novus Holdings

Novus Holdings is a very small-cap printing company with a market cap of just under R1.5 billion that has completely transformed itself over the past few decades.

The company was originally Paarl Media, which was spun out from Naspers and quickly sunk as the era of print media passed.

However, it has since transformed itself into one of the largest commercial printing and manufacturing operations in South Africa.

“Activists swept in, bought up the company, reconfigured it, sold off many of the loss-making operations, made the business leaner and meaner, and recently, they’ve moved into digital education by buying the Pearson Education assets,” Clark said. 

“So not only does Novus now print most of the educational books used in schools and colleges in this country, but the entire spectrum of those books is now online, which means there’s an ongoing annuity element because those books don’t need to be updated physically so often since many things are going online.”

While the company’s performance was negatively impacted when the Russia-Ukraine War broke out, Clark believes it will rebound soon. 

He said the company also pays consistent special dividends, and once the debt from its Pearson transaction starts to be paid off, it will become a prodigious dividend payer. 

“And where is that dividend going? Back to the activist shareholders who own 60% of the company,” he said. 

“So I actually like this business because the activists have an incentive to sort the company out, make it profitable, and start paying money back to themselves.” 

He revealed that the company will also be launching an AI tool for digital learning, “which I think will fundamentally revolutionise how children in this country will use textbooks going forward to learn”.


Clark’s third stock pick is Afrimat – a mid-tier mining and materials company trading on the JSE with a market cap of just under R9 billion.

Clark said the market has yet to fully appreciate that the company’s high-value coal production has doubled, which will see a significant uplift in Afrimat’s earnings over the next 12 to 18 months. 

In addition, the iron ore price is around $122 a ton, which is roughly R2,250 a ton, which will “keep the business humming quite nicely”, he said. 

“With Transnet now beginning to repair the rails, the export should pick up quite nicely.” 

Clark said the “jewel” in this company’s earnings profile going forward will be its cement and aggregates business called Lafarge, which it bought for R800 million net of cash. 

Lafarge was earning R38 million in 2022 and roughly R3 million a month in profit, he said.

“Afrimat hasn’t even got its hands in it yet and is now making R12 million a month. I estimate that in the next 18 to 24 months, Lafarge alone could add R1.50 in value to Afrimat.”

Clark believes that, by 2026, Afrimat, which earned roughly R4.58 for its year ended 2023, could earn R10 a share from a combination of coal, phosphate, Lafarge aggregates, and iron ore. 

“R10 a share in just over two years on a R52 share price, to me, is compelling value for a company which is one of the best capital allocators in the country with a superb management team,” he said.