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LONDON (Alliance News) - Mondi, Sports Direct International and Coca-Cola HBC look set to replace Serco Group, Eurasian Natural Resources and Wood Group in the FTSE 100 at Wednesday night's quarterly FTSE index review, based on an analysis of current market capitalisation by Alliance News.
The review, which is mainly based on changing market capitalization, takes place September after the close Wednesday, is announced Friday, with the new constituent lists effective from market open September 23.
FTSE 100 listed securities with the smallest market cap will move down to the FTSE 250 and those with the biggest market cap in the FTSE 250 will move up to the FTSE 100.
Re-indexing can cause big stock price moves as fund managers with FTSE 100 tracker portfolios offload stocks that no longer sit in the index and buy the stocks that move in, says Daniel Monks, UK Equities Fund Manager at Canada Life.
The review also looks at liquidity issues that could prevent a stock moving into the FTSE 100, but none of the candidates this time around are likely to suffer any issues, said Jefferies equities analyst Justin Jordan.
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Coca-Cola HBC (ALL.CCH): Market capitalisation GBP6.7 billion. The world's second-largest bottler of Coca-Cola products was only admitted to the FTSE main market on April 29, and was allocated UK nationality effective August 21 having fled the Athens stock market. Given the recent nationality change, large market capitalisation and recent strong turnover, the company is likely to jump straight from the main market into the FTSE 100 index, according to analysts at JP Morgan. Current share price 1,844 pence.
Sports Direct (ALL.SPD): Market capitalisation GBP4.2 billion. Sports Direct's market capitalisation has more than doubled in the last year, with a 40% share price increase in the quarter since the last index review. Fund Manager Daniel Monks is impressed by the "excellent performance" of the business, a chain of sports shops owned by Mike Ashley that are now a familiar site in high streets and shopping centres across the UK. Monks says retail has been strong in general in the UK and that Sports Directs margins are on the up, with the top line growing. Current share price 704.5 pence.
Mondi (ALL.MNDI) - Market Capitalisation GBP3.86 billion. A paper producer with a cyclical business model. The move to the FTSE 100 is more borderline than the other two securities and will depend on performance in the coming days. Revenues and profits are improving, benefiting from a pick up in Europe, but the company has high operational gearing, according to Monks. The high fixed costs make the company's profits sensitive to a change in sales. Current share price 1,060p.
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Serco Group (ALL.SRP) - Market Capitalisation GBP2.78 billion. Serco provides outsourcing services and makes 45% of its revenue from government contracts. Its shares lost about 17% in value in one day last week when the company announced a police investigation into part of its government prisoner-transfer contract amid allegations that staff on that contract had falsified data. The drop in market cap put Serco firmly in line for deletion from the FTSE 100 index. The three month police investigation into the company continues. However, outside of G4S, the UK government has few competitive alternatives for its contracts and if the stock continues to under-perform on its way out of the leading index it could start to look cheap, according to Jefferies. Current share price 557p.
Eurasian Natural Resources (ALL.ENRC) - Market Capitalisation GBP2.93 billion. The ferrochrome miner has under-performed the index as investors move money away from emerging markets and related industries, says Monks. The company also has corporate governance issues as ex-director Paul Judge files a counter claim against the firm after it sued him on the accusation of deliberately passing confidential information from a board meeting to the media. The Kazakhstan-focused company looks likely to be deleted from the leading index and added to the FTSE 250. Current share price 227.2p.
Wood Group (ALL.WG) - Market Capitalisation GBP2.97 billion. The oil and gas services company looks likely to leave the FTSE 100 index on technicalities. The sector has been under pressure generally, with the market very focused on execution of oil and gas service providers at this time, says Mark Wilson, oil and gas analyst at Macquarie. Wood group has not underperformed it's sector by a large amount, but is a smaller company than peers like Petrofac and can't compete on market cap, so it's now facing a stock price fall as managers of FTSE 100 trackers sell. Current share price 797.5p.
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By Jon Darby; jondarby@alliancenews.com; @jondarby100
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