Exchange Trading Curbs Spark $9 Billion Rout in Top Thai Stock

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(Bloomberg) — Delta Electronics (Thailand) Pcl, an electronic-parts maker that shot up this year to become the country’s most valuable stock, slumped as the bourse imposed trading curbs to quell unexplained gains in its shares. Analysts also queried the surge in its valuation.

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Delta, a unit of Taiwan’s Delta Electronics Inc., slumped as much as 23%, the most since December 2020. The retreat erased about $9 billion from the company’s market value, which ended Monday at a record $42 billion. 

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Traders must pay cash upfront before placing buying orders for the Thai firm’s shares and can’t use them as collateral for other transactions, the Stock Exchange of Thailand said after the market closed Monday. The measures came after the Delta wasn’t able to explain yesterday’s 5.4% gain 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 Co., wrote in a note. Being dropped from the indexes will prompt some funds to reduce their holdings of Delta, he said.

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Gains in Delta’s stock price have pushed it so far ahead of analyst estimates that it’s now the lowest-rated member of the SET 50 Index, a gauge of Thailand’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.

Delta’s valuation isn’t justifiable, said Tan Chirasittikorn, an analyst at Kasikorn Securities Pcl. A free float of about 3% of its shares along with its inclusion in the key SET50 Index underscore the stock’s high volatility, he said. 

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 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 ($104 million) as its sales increased, the company said in April.