DELTA: Producing Good Revenues despite Lacking of Cash

DELTA: Good Revenue, But Lack of Cash

Delta Electronics (Thailand) Public Company Limited (DELTA) was the talk of the town after the share price spiked to ฿838.00/share on Monday, Dec 28th before dropped to ฿560.00/share at the closing bell, a decline of 18.13%.

 

Under normal circumstances, SET shall warn investors as the share price of DELTA has moved at an abnormal outstanding pace, but President of the Stock Exchange of Thailand (SET) Mr. Pakorn Peetathawatchai stated only “no irregularity in DELTA’s movement” without further information.

 

Is DELTA’s movement actually regular? 

 

Previously, the share price spike was mainly the effect of investor speculation on an improving earnings performance, but lately the price has already surpassed its fundamental factors, is it still common..?

 

The sales revenue was 17,540 million baht, increased 41.4% YoY and 21% QoQ, and earnings was 2,643 million baht, increased 327.7% YoY and 30% QoQ. Meanwhile, the total revenue for the nine-month period was 44,184 million baht and net profit was 5,520 million baht compared to a profit of 2,959 million baht in 2019…On the face of it, the performance seems sound.  

 

But cash and cash equivalents are moving in the opposite direction of the profit and revenue. As of September 30, 2020, DELTA’s cash and cash equivalents was 12,363 million baht, decreasing from 12,394 million baht in 2019…Indicating a good earnings with a low cash flow. 

What happened with that cash..?  

 

The highlight figure is trade accounts and other receivable, which has risen nearly 50% YoY to 14,195 million baht, reflecting that DELTA has an order in hand, but has yet to distribute..? Are there any significance..? While, the inventories soared to 11,256 million baht… Surprisingly, sales grew, but why did the balance of inventories still increase ..? 

 

Total Liabilities rocketed about 50% to 18,887 million baht, the major increase came from trade payable, which was resulted from the increase in raw material purchasing of 15,371 million baht.

 

However, DELTA clarified that an improving liability was due to the preparation for the future products, but will they be outstanding orders? Because even though there were a lot of orders in the past nine months, 90% of them are under due.

 

While, the dividend yield is only 0.32%. Therefore, analysts recommend short-term holding.