Delta Electronics shares jump on 2012 results, dividend payout

Investors were also lured by Delta Electronics' proposed cash dividend of NT$5.3 (US$0.18) per share -- a payout ratio of almost 80 percent of its 2012 earnings per share, they said.

As of 11:29 a.m., shares of Delta Electronics had added 7 percent, the maximum daily increase, to NT$119.00, with 6.67 million shares changing hands. The benchmark weighted index on the Taiwan Stock Exchange (TWSE) was down 0.24 percent at 7,975.22.

“Delta Electronics reported higher-than-expected earnings in 2012 on the back of an improving product portfolio, which boosted its gross margin,” MasterLink Securities analyst Tom Tang said.

At an investor conference held Tuesday, Delta Electronics announced net income in 2012 of NT$16.11 billion, up 47 percent from a year earlier. Earnings per share rose to NT$6.68, from NT$4.56 a year earlier, and gross margin rose to 24.5 percent, from 21.3 percent in 2011.

In the fourth quarter alone, Delta Electronics posted NT$3.75 billion in net profit, or NT$1.56 per share. Tang said the fourth quarter EPS was higher than market estimates of NT$1.20-NT$1.30.

That helped Delta Electronics post higher-than-expected earnings for 2012 as a whole and beat the NT$6.3-NT$6.4 in EPS anticipated by the market.

“Delta Electronics is keen to broaden its product mix, shifting its resources to products and services that command higher profit margins, such as industrial automation,” Tang said. “I'm impressed by the improvement in its gross margin last year.”

According to Delta Electronics, new businesses, including industrial automation and cloud-technology based products, are expected to serve as engines of the company's growth in 2013.

“The market is now expecting an EPS of NT$7-NT$8 for 2013,” Tang said. “Due to its profitability, Delta Electronics has become one of the favorites of foreign institutional investors, and it is possible that foreign investors are firmly on the buy side now.” As of Tuesday, foreign institutional investors owned a 72.75 percent stake in Delta Electronics, according to the Taiwan Stock Exchange.

“Furthermore, Delta Electronics tends to issue stable dividends to shareholders. The near 80-percent payout ratio is very attractive,” Tang said.

“When the company posts a higher EPS for 2013, its shareholders should pocket a fatter dividend then,” he said.

In a research note issued Wednesday, Barclays Capital raised its target price for Delta Electronics shares to NT$132.00 from NT$123.00 because of the higher than expected EPS.

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