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Delta Electronics shares down on rights issue plan

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Delta Electronics shares down on rights issue plan

Taipei, Sept. 15 (CNA) Shares of power management solutions provider Delta Electronics Inc. (???) came under pressure Tuesday morning after the company announced it was planning a rights issue to raise funds, dealers said. The sell-off reflected fears that the rights issue will dilute Delta Electronics' earnings per share, especially at a time when the profitability of many high-tech companies has been eroded by declining global demand, they said. As of 11:04 a.m., shares of Delta Electronics had lost 6.14 percent to NT$160.50 (US$4.92), with 5.83 million shares changing hands. The weighted index on the Taiwan Stock Exchange was down 0.40 percent at 8,274.04. "Look at the downward pressure shouldered by Delta Electronics shares. I think that many investors are not happy with the fund raising plan amid worries over a dilution of the company's EPS," Hua Nan Securities analyst Kevin Su said. At a board meeting Monday, Delta Electronics' directors approved the planned rights issue in which the company will issue up to 171 million new shares to raise about NT$20 billion. It will be Delta Electronics' first rights issue in the company's 45 year history. "Delta Electronics currently has paid-in capital of NT$24.38 billion. The rights issue will make its paid-in capital expand significantly," Su said. "After the deal is completed, its EPS will be heavily diluted, which sparked concerns this morning." In the first half of the year, Delta Electronics posted NT$7.66 billion in net profit, down 22 percent from a year earlier due to weakening global demand. Its EPS for the six-month period was NT$3.14, compared with NT$4.04 a year earlier. Delta Electronics has many interests beyond its core power management system business, such as green energy and cloud technology, and the company said it has created a strong research and development team to help it extend its reach in the future. This diversification will help it reduce its reliance on the sale of PC-related products in the future and help it offset the sluggish global PC market, the company said. In December 2013, Delta Electronics spent NT$17 billion to acquire Oslo-listed power system firm Eltek ASA, which serves telecom, cloud technology and data center sectors mostly in the European and U.S. market. Delta Electronics expects Eltek to boost its sales and began booking Eltek's sales in its accounts in July. "But with the global economy showing signs of slowing down, many companies are faced with uncertainty," Su said. "Many investors simply do not like the move to borrow funds from shareholders right now." Market analysts estimated that Delta Electronics now shoulders about NT$123.1 billion in total debt as of the end of June, so the funds to be raised from the rights issue will be partly allocated by the company to cut its debt burden. (By Han Ting-ting and Frances Huang)


Updated : 2021-09-28 00:38 GMT+08:00