A Thai Stock’s 1,000% Surge Leaves Market Watchers Dumbfounded
(Bloomberg) -- Electronic-parts maker Delta Electronics (Thailand) Pcl’s shares have surged almost 13-fold over the past year, leaving market watchers and even the company puzzled. With fundamentals not strong enough to justify the meteoric rise, analysts too are falling out of love with the stock.
While stocks in the sector have emerged as a hot play after the pandemic boosted work-from-home activities and spurred demand for video-conferencing, cloud services and e-commerce, Delta has rallied more than any of the world’s electrical stocks with a market value of more than $500 million.
The gains have pushed it so far ahead of analyst estimates that it’s now the lowest-rated stock in the SET 100 Index, a gauge of Thailand’s large listed companies. Delta has a consensus of 1.55 on a scale ranging from 1 representing a sell call to 5 triggering buy, the data show. Of the 11 analysts actively covering the stock, all but one advise selling it.
“Delta has defied all fundamentals,” said Jason York, an equity trader at Krungsri Securities Co. “Its business hasn’t changed so dramatically.”
Delta’s shares surged 27% to close at a record 718 baht on Friday. Its $30 billion market value makes it the third-biggest company on the Thai stock exchange after PTT Pcl, the state-controlled oil giant, and Airports of Thailand Pcl.
Some of the stock gains can be attributed to Delta’s recent addition to MSCI Inc.’s global standard indexes. An expansion to supply electric vehicle components may also be drawing some investors’ interest, according Samsung Asset Management.
“There is mania over everything EV even if it is not the majority revenue generator,” said Alan Richardson, a fund manager at Samsung Asset in Hong Kong. Still, the fervor over its EV involvement won’t last long, he said.
But Delta said in a statement its business also includes creating products and solutions for a sustainable world and innovations in the areas of EV, renewable energy, smart cities and data management among others.
The unit of Taiwan’s Delta Electronics Inc., makes components for automobiles and data centers, among other products. Net income in the first nine months more than doubled to 5.5 billion baht ($183 million) on rising sales of its electronic parts and products, the company said in October.
That said, the stock is now trading at about 115 times its 12-month forward earnings, compared with an average multiple of 18.7 over the past five years, according to data compiled by Bloomberg. Analysts’ average 12-month price target is 66% lower than Thursday’s closing price.
Delta’s shares slumped 33% through Thursday after hitting an all-time intraday high on Dec. 28.
The sharp moves prompted a Dec. 30 warning from the stock exchange about its volatility before it imposed limited transactions to cash from Jan. 6 to 26.
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