Delta shares slump after SET imposes curbs

Delta shares slump after SET imposes curbs

Investors cautioned that electronics firm’s performance doesn’t justify sky-high share prices

Visitors examine different types of EV chargers developed by Delta Electronics (Thailand) Plc during the 2022 Asean Sustainable Energy Week at the Queen Sirikit National Convention Center in Bangkok in September last year.
Visitors examine different types of EV chargers developed by Delta Electronics (Thailand) Plc during the 2022 Asean Sustainable Energy Week at the Queen Sirikit National Convention Center in Bangkok in September last year.

Shares of Delta Electronics (Thailand) Plc, which have shot up this year to become the country’s most valuable stock, slumped on Tuesday as the Stock Exchange of Thailand imposed trading curbs to quell unexplained gains. Analysts also queried the surge in its valuation.

The local unit of Taiwan-based Delta Electronics Inc slumped as much as 23%, the most since December 2020. The retreat erased about 310 billion baht from the company’s market value, which ended Monday at a record 1.46 trillion baht.

Traders must now pay cash upfront before placing buying orders for the company’s shares and can’t use them as collateral for other transactions, the SET said after the market closed on Monday. The curbs will be in effect until July 10.

The measures were imposed after Delta said it was unable to explain the 5.4% gain on Monday that took its year-to-date surge to 42%.

“Investors should be much more cautious on Delta shares as the stock risks being removed from some key indices following the recent steps,” Koraphat Vorachet, an analyst at Krungsri Securities, wrote in a note. Being dropped from indices such as the SET50 or SET100 will prompt some funds to reduce their holdings of the company, he said.

Gains in Delta’s stock price have pushed it so far ahead of analysts’ estimates that it is now the lowest-rated member of the SET50 Index, a gauge of the country’s 50 largest listed companies. Delta has a consensus of 1.27 on a scale ranging from one to five, Bloomberg-compiled data show. The lowest level on the scale signals a sell call and the highest a buy recommendation. Of the 15 analysts actively covering the stock, all except one advise selling it.

The climb in Delta’s stock followed the pandemic-triggered shift to working from home that spurred demand for the company’s video-conferencing products, cloud and e-commerce services. An expansion into components for electric vehicle charging stations and renewable energy helped the gains. 

Still, the stock traded at about 82 times its 12-month forward earnings as of Monday, more than double an average multiple of 40 over the past five years, according to data compiled by Bloomberg. Analysts’ average average 12-month share price target is 51% lower than Monday’s closing price.

Delta, which also makes components for factory robots among other products, saw net income in the first three months increase 30% from a year earlier to 3.61 billion baht as its sales increased, the company said in April.

Delta shares closed on Tuesday on the SET at 96 baht, down 21.50 baht (18.3%) in turnover worth 4.38 billion baht.

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