Managing Director, Zero One, Zero One

Vincent Fernando, CFA

Managing Director, Zero One

Equity Bottom-Up

Delta Electronics Thailand  / Equity Bottom-Up

<ul>
<li>The valuation divergence between Delta Electronics Thai (DELTA TB) and its parent Delta Electronics (2308 TT) has hit a new extreme.</li>
<li>Delta Thailand surged 9.3% Thursday on no news, even prompting the Thailand Stock Exchange to query the company.</li>
<li>Delta Taiwan's stake in Delta Thailand is now worth more than all of Delta Taiwan. The valuation divergence would seem unsustainable, however when things revert is uncertain.</li>
</ul>


The valuation divergence between Delta Electronics Thai (DELTA TB) and its parent Delta Electronics (2308 TT) has hit a new extreme.
Delta Thailand surged 9.3% Thursday on no news, even prompting the Thailand Stock Exchange to query the company.
Delta Taiwan's stake in Delta Thailand is now worth more than all of Delta Taiwan. The valuation divergence would seem unsustainable, however when things revert is uncertain.


Delta Taiwan Vs. Thailand Monitor: Valuation Divergence Hits a New Extreme

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

Delta Electronics Thailand  / Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/delta-electronics-thailand-pcl-98806732-8ac4-42b2-a565-ba32673d1e5a" target="_blank" data-smartkarma-citation="entities:20912:1" rel="noopener">Delta Electronics Thailand (DELTA TB)</a> still trades at a higher market cap than <a href="https://www.smartkarma.com/entities/delta-electronics-inc" target="_blank" data-smartkarma-citation="entities:12688:1" rel="noopener">Delta Electronics (2308 TT)</a> though the gap has been narrowing over the last few months.</li>
<li>
<a href="https://www.smartkarma.com/entities/delta-electronics-thailand-pcl-98806732-8ac4-42b2-a565-ba32673d1e5a" target="_blank" data-smartkarma-citation="entities:20912:1" rel="noopener">Delta Electronics Thailand (DELTA TB)</a>'s real float is around 18% and foreign investors hold 94.07% of the shares outstanding.</li>
<li>
<a href="https://www.smartkarma.com/entities/delta-electronics-thailand-pcl-98806732-8ac4-42b2-a565-ba32673d1e5a" target="_blank" data-smartkarma-citation="entities:20912:1" rel="noopener">Delta Electronics Thailand (DELTA TB)</a> has traded weak following the placement in October and there could be further downside versus <a href="https://www.smartkarma.com/entities/delta-electronics-inc" target="_blank" data-smartkarma-citation="entities:12688:1" rel="noopener">Delta Electronics (2308 TT)</a>. </li>
</ul>



Delta Electronics Thailand (DELTA TB) still trades at a higher market cap than Delta Electronics (2308 TT) though the gap has been narrowing over the last few months.

Delta Electronics Thailand (DELTA TB)'s real float is around 18% and foreign investors hold 94.07% of the shares outstanding.

Delta Electronics Thailand (DELTA TB) has traded weak following the placement in October and there could be further downside versus Delta Electronics (2308 TT). 


Delta Electronics (DELTA TB / 2308 TT): More Downside from Here

Zero One

Founded in 2015, Zero One produces independent investment research and provides corporate finance advisory services with a focus on both listed and private technology companies. Founder Vincent Fernando has over 20 years of experience in US and Asia capital markets.

Independent Investment Research

<ul>
<li>Delta Thailand vs. Taiwan valuation differential has returned to an historically extreme level.</li>
<li>For 2024E &amp; 2025E growth expectations continue to be similar for the two companies, yet Delta Thailand's FY2024E PER is 50x while Delta Taiwan's is 20x.</li>
<li>We see substantial relative value in Delta Taiwan and expect likely reversion of relative valuation due to latest return to historically extreme mismatch.</li>
</ul>


Delta Thailand vs. Taiwan valuation differential has returned to an historically extreme level.
For 2024E &amp; 2025E growth expectations continue to be similar for the two companies, yet Delta Thailand's FY2024E PER is 50x while Delta Taiwan's is 20x.
We see substantial relative value in Delta Taiwan and expect likely reversion of relative valuation due to latest return to historically extreme mismatch.


Delta Taiwan Vs. Thailand Monitor: Parent Could Sell More of Its Stake; Thai 50x PER Vs. Taiwan 20x

<ul>
<li>Two thirds of the way through the review period, we see one change for the <a href="https://www.smartkarma.com/entities/stock-exchange-of-thailand-set-50-index" target="_blank" data-smartkarma-citation="entities:31493:1" rel="noopener">SET 50 Index</a> in December with <a href="https://www.smartkarma.com/entities/kce-electronics-pcl" target="_blank" data-smartkarma-citation="entities:1892:1" rel="noopener">KCE Electronics (KCE TB)</a> replacing <a href="https://www.smartkarma.com/entities/ngern-tid-lor-pcl" target="_blank" data-smartkarma-citation="entities:31103:1" rel="noopener">Ngern Tid Lor (TIDLOR TB)</a>. </li>
<li>There is one close change where <a href="https://www.smartkarma.com/entities/i-tail-corp-pcl" target="_blank" data-smartkarma-citation="entities:36428:1" rel="noopener">I-TAIL (ITC TB)</a> could replace <a href="https://www.smartkarma.com/entities/srisawad-corp-pcl" target="_blank" data-smartkarma-citation="entities:9480:1" rel="noopener">Srisawad Power 1979 (SAWAD TB)</a> in the index.</li>
<li>
<a href="https://www.smartkarma.com/entities/delta-electronics-thailand-pcl-98806732-8ac4-42b2-a565-ba32673d1e5a" target="_blank" data-smartkarma-citation="entities:20912:1" rel="noopener">Delta Electronics Thailand (DELTA TB)</a> is unlikely to be deleted while <a href="https://www.smartkarma.com/entities/berli-jucker-public-co-ltd" target="_blank" data-smartkarma-citation="entities:3685:1" rel="noopener">Berli Jucker (BJC TB)</a> fails liquidity and is unlikely to be added.</li>
</ul>


Two thirds of the way through the review period, we see one change for the SET 50 Index in December with KCE Electronics (KCE TB) replacing Ngern Tid Lor (TIDLOR TB). 
There is one close change where I-TAIL (ITC TB) could replace Srisawad Power 1979 (SAWAD TB) in the index.

Delta Electronics Thailand (DELTA TB) is unlikely to be deleted while Berli Jucker (BJC TB) fails liquidity and is unlikely to be added.


SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close

<ul>
<li>We have an Underperform rating for Delta Electronics Taiwan as a single stock trade due to our concerns that its valuation has been inflated by Delta Thailand.</li>
<li>The extreme valuation mismatch between Delta Thailand and Delta Taiwan has corrected to some degree (Delta Thai crashed 23%) but still has a long way to go.</li>
<li>Delta Thailand should be removed from the SET50 Index in our view, the stock could be at risk of just such an action by year end according to precedent.</li>
</ul>


We have an Underperform rating for Delta Electronics Taiwan as a single stock trade due to our concerns that its valuation has been inflated by Delta Thailand.
The extreme valuation mismatch between Delta Thailand and Delta Taiwan has corrected to some degree (Delta Thai crashed 23%) but still has a long way to go.
Delta Thailand should be removed from the SET50 Index in our view, the stock could be at risk of just such an action by year end according to precedent.


Delta Taiwan Vs. Thailand Monitor: Thailand Mismatch Correcting & This Could Pull Down Delta Taiwan

Thailand

Delta Electronics (Thailand) PCL designs and manufactures electronic equipment. The Company produces power systems for telecommunications, medical equipment, and industrial automation.  Delta also produces fans, electromagnetic interference filters, and solenoids.

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Delta Electronics Thailand (DELTA TB)

Delta Taiwan Vs. Thailand Monitor: Valuation Divergence Hits a New Extreme

Delta Taiwan's stake in Delta Thailand is now worth more than all of Delta Taiwan. The valuation divergence would seem unsustainable, however when...

Vincent Fernando, CFA

Delta Electronics (DELTA TB / 2308 TT): More Downside from Here

DELTA TB has underperformed 2308 TT over the last few months but still trades richer on all valuation metrics. There could be further...

Brian Freitas

Delta Taiwan Vs. Thailand Monitor: Parent Could Sell More of Its Stake; Thai 50x PER Vs. Taiwan 20x

We see substantial relative value in Delta Taiwan and expect a likely reversion of valuation due to 1) the return of an historically extreme...

Vincent Fernando, CFA

SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close

KCE could replace TIDLOR in the SET50 in Dec. ITC is a close add and could replace SAWAD. The impact on the stocks is big given the index is...

Brian Freitas

Delta Taiwan Vs. Thailand Monitor: Thailand Mismatch Correcting & This Could Pull Down Delta Taiwan

We have an Underperform rating for Delta Electronics Taiwan as a single stock trade due to our concerns that its valuation has been inflated by...

Vincent Fernando, CFA

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