Bualuang Securities (BLS) wrote that the latest exchangeable bond deal involving Delta Electronics (Thailand) Public Company Limited (SET: DELTA) is expected to exert short-term pressure on the company’s share price. The brokerage sees this transaction as an overhang, rather than a fundamental dilution of earnings per share, since no new shares will be issued by DELTA Thailand.
The parent company, Delta Taiwan, announced plans to raise USD 1.5 billion via exchangeable bonds that can be converted into DELTA Thailand shares, as reported by Bloomberg. The issuer, Delta Electronics International Singapore, is a wholly owned subsidiary of Delta Taiwan and currently holds approximately 42.85% of DELTA Thailand. The funds raised will support working capital and future business expansion.
The deal comprises two tranches of zero-coupon bonds: USD 500 million maturing in September 2027, and USD 1 billion maturing in September 2031. Yield-to-maturity rates range from 2-4% for the 2027 series and 0.5-1.5% for the 2031 series, while some sources indicate potential negative yields, according to the analyst. Notably, the 2031 bonds carry a put option, while the 2027 bonds do not.
Bualuang highlights that this transaction is larger in scale and closer to the market price than previous deals. For the 2027 bonds, the conversion premium is set at 15-20% above the reference share price, while the 2031 series offers a 30-40% premium. This compares to a 40% premium in a January 2025 transaction when Delta Group issued USD 525 million in zero-coupon exchangeable bonds.
Analysis of market reactions to prior deals suggests that while temporary weakness in DELTA shares can occur—due to technical flows and external factors such as weaker quarterly profits and trade war concerns—prices have historically recovered when earnings rebound. Bualuang believes the current overhang should not be as severe as the January 2025 episode since DELTA’s profit outlook is improving in the second half of 2026 and the company’s AI and data center business fundamentals remain robust.
Bualuang calculates that with the latest closing price of DELTA at THB 252 and a 10% expected placement discount, the reference share price for conversion will be around THB 227. This implies conversion prices of THB 261-272 for the 2027 bonds and THB 295-318 for the 2031 bonds, accounting for approximately 160-170 million shares or 1.3-1.4% of total shares—higher than previous transactions.
Despite the overhang arising from the sizeable deal and use of Delta Electronics International Singapore (which holds a higher stake in DELTA Thailand than previous issuers), Bualuang maintains its positive outlook on DELTA’s core AI/Data Center, HVDC, and cooling systems businesses. The brokerage reiterates a ‘Buy’ recommendation with a reduced target price of THB 330 per share, based on a lower valuation at +1 standard deviation.
