Delta, once again, causes market fluctuation

Delta Electronics (Thailand) Plc, a prominent electronic component maker in Thailand, has emerged as the country’s most valuable company, surpassing the combined market capitalization of the entire retail sector and the top four largest commercial banks in Thailand.

With a market capitalization of approximately 1.5 trillion Baht, Delta’s value exceeds that of Siam Commercial Bank Plc (SCB), Bangkok Bank Plc (BBL), Kasikorn Bank Plc (KBANK), and Krung Thai Bank Plc (KTB), which together stand at just 1.3 trillion Baht. Additionally, Delta’s market capitalization matches the combined value of major retail companies such as CP All Plc (CPALL), Central Retail Corporation Plc (CRC), Berli Jucker Plc (BJC), Home Product Center Plc (HMPRO), and CP Axtra Plc (CPAXT), totaling around 1.5 trillion Baht.

Surprisingly, Delta contributes about 7.5% to the SET Index (SET100) and 9% to the SET50 Index.

However, some concerns arise when we analyze the fundamentals. Delta’s shares are currently trading at an exorbitant price-to-earnings ratio of 84.63x, which means it would take nearly 85 years to recoup one’s investment based on current earnings per share. This is in stark contrast to companies like Apple, trading at a PE of 32.10x, Meta Platform Inc (Facebook/Instagram) at 23.76x, and Amazon at 82.72x.

Despite authorities’ attempts to curb the manipulation of Delta’s shares, little progress has been made. During the second quarter of this year, Delta recorded a net profit of 4.7 billion Baht, bringing the total profits for the first half of 2023 to 8.28 billion Baht compared to 7.04 billion Baht in the same period of 2022, signifying a 17.85% increase. However, the valuation of 1.5 trillion Baht appears to be overstretched.

The Stock Exchange of Thailand (SET) and the Securities & Exchange Commission (SEC) have been relatively ineffective in tackling those responsible for the manipulation of Delta’s shares. Delta’s market capitalization accounting for nearly 10% of the entire market capitalization, while its profitability represents a mere 1.78% of all profits reported by listed companies on the SET, creates a significant mismatch that requires immediate attention.

In order to mitigate any major systemic risk in case of a decline in Delta’s shares, it is imperative that the SEC and SET hold a joint meeting to devise more effective measures. The current approach of placing a ‘cash balance’ on Delta shares has proven to be inadequate. Moreover, the authorities should publicly disclose the names of individuals involved in the manipulation to deter such activities in the future.

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