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Mr. Paiboon Nalintrangkun, President of the Federation of Capital Market Organizations of Thailand (FETCO), posted a personal page on Facebook. Caution about investing in DELTA or Delta Electronics (Thailand) Public Company Limited that you should study the fundamentals carefully.
DELTA shares are up almost 1,000% this year and more than 200% in the last two months.
DELTA, or Delta Electronics (Thailand) Public Company Limited, is a subsidiary of DELTA Electronics (Taiwan), which owns more than 70% interest in DELTA.
DELTA is a manufacturer and provider of commercial design, energy management solutions and electronic component manufacturing. The company is mainly specialized in the production of power supplies.
The reason DELTA has gained a lot of attention in the past. It is expected to come from 3 main points which are
1. Strong earnings growth after reaching new highs in the last two quarters, with a net profit of 2,021 million Bt (+ 132% year-on-year) and a net profit of 2,642 million Bt (+ 327% year-on-year).
2. The trend of the electric vehicle industry in many countries is bright due to the various supporting policies of the government around the world. It is expected to generate significant revenue for the company in the future, as DELTA is a producer of essential products related to electric vehicles such as chargers, fans and on-board charging stations.
3. DELTA is calculated on various indices such as MSCI (effective December 21) and SET50 (effective early 2021) due to market capitalization and liquidity criteria. This has resulted in the continuous attraction of investment funds from foreign funds in the past. This is reflected in the high participation of 96-97% in the hands of foreign investors in the last period.
However, DELTA’s share price has risen more than 10 times with a market value of billions of dollars. As a result, Forward P / E, according to the Bloomberg consensus in 2021-65, is 89.1-79.0 times higher than DELTA, Taiwan, which is the purchased parent company, selling at 22.4-19.4.
DELTA’s market capitalization is still 6.98 billion baht, close to parent company DELTA Taiwan at 7.09 billion baht, even though the net profit of the parent company is almost 4 times higher than that of DELTA.
DELTA’s estimated net profit according to the Bloomberg consensus in 2021 is 7,741-9,571 million baht (average of 8,178 million baht), 2022 is 8,723-11,103 million baht (average of 9.395 million baht), which is Only 26% of DELTA Taiwan in 2021 was 25,411-37,497 million baht (average of 31,244 million baht), in 2022 it was 29,670-43,528 million baht (average of 36,487 million baht).
DELTA’s target price, based on the Bloomberg consensus of 10 securities companies, is estimated at 150-263 baht (average 191.2 baht), lower than DELTA’s current share price of 560 baht, almost 65 %.
A key factor contributing to the extreme overheating of DELTA stocks. Probably due to the very low Free Float (FF) levels of the company.
According to stock market data, the company has a FF of 22.35%, although this figure does not seem very low. However, if the 5-7 shareholders are deducted, who own 4.39-4.83% of their shares (which will probably be considered long-term, but the market counts this part as FF because they use the criterion of Strategic Shareholders of 5%) The true FF is only the remaining 8.52%.
Naturally, the stock price of a company with low free fleets does not always reflect the fundamentals of the company. Due to the small number of shares traded on the market, prices can therefore easily be distorted in times of good news and strong purchasing power.
Invest in stocks with low free float and price movements. You need to study the fundamentals carefully. And be very careful
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