KUALA LUMPUR: Bumi Armada Bhd and Nestle (M) Bhd may replace PLUS Expressways Bhd and possibly Gamuda Bhd in the FTSE Bursa Malaysia KLCI (FBM KLCI) by the middle of December.
The FTSE Bursa Malaysia Index Series’ semi-annual review begins from Nov 22 and its results will be out on Dec 8. Changes to the KLCI will be effective towards the end of December.
PLUS is expected to be delisted by mid-December after it finalises its takeover exercise, which is expected to be completed by Dec 7, said Maybank Investment Bank Research in a research note on Nov 17.
Gamuda may also be heading for the exit as it has dropped out of the top 35 largest companies in Malaysia by market capitalisation. Gamuda will be removed from the KLCI if it does rank within the top 35 stocks by market capitalisation on Nov 30 — FTSE’s cut-off date, according to its regulations, the report said.
As at last Thursday, Gamuda’s market capitalisation of RM6.63 billion ranked 38th.
Bumi Armada, Nestle and AirAsia Bhd are strong candidates to be included in the KLCI, according to a report by OSK Research on Nov 14.
A local research head said market capitalisation is the first criteria taken by the FTSE in determining a KLCI member.
According to OSK Research, Nestle will be a “definite shoo-in” to replace PLUS and possibly Gamuda, as it is also on the reserve list.
The list comprises the five highest ranking non-constituents of the index by market capitalisation. Stocks in the reserve list will replace an existing KLCI component delisted prior to the half-yearly review.
Next to Nestle are Bumi Armada and AirAsia. OSK Research said between Bumi Armada and
AirAsia, the latter has a higher chance of being included as it is on the reserve list.
“It’s a toss-up between Bumi Armada and AirAsia, but we think AirAsia might have a slight edge,” OSK Research said.
But after news on Nov 15 that Bumi Armada will be included in the MSCI Malaysia Index, OSK research head Chris Eng, who wrote the Nov 14 report, told The Edge Financial Daily that the counter is likely to join the KLCI.
Although not on the reserve list, Bumi Armada has a larger market capitalisation than AirAsia. Because it was listed on July 21, Bumi Armada did not make the reserve list created in June.
At a closing price of RM3.93 last Friday, Bumi Armada’s market capitalisation stood at RM11.51 billion, while AirAsia’s market capitalisation came to RM10.39 billion at its Friday closing price of RM3.74.
Nestle, which closed at RM50 last Friday, with a market capitalisation of RM11.73 billion had the highest ranking among stocks on the reserve list. The other stocks on the reserve list are UEM Land Holdings Bhd, IJM Corp Bhd and S P Setia Bhd.
“If both stocks [Nestle and Bumi Armada] retain their ranking in terms of market value by Nov 30, they will likely be featured in the revised FBM KLCI 30 list come the next review,” said Maybank.
However, another research head said AirAsia is considered more liquid than Bumi Armada and Nestle, a factor to be taken into consideration by FTSE.
Bumi Armada had 866.27 million free float shares with a value of RM4 billion based on its closing price last Friday. Its free float represented 30% of its total shares outstanding. AirAsia had 1.6 billion free float shares, which translated into a value of RM7.8 billion and 60.4% of its total shares outstanding.
Nestle’s free float of 41.88 million shares, represents 17.9% of its total shares out, with a value of RM2.1 billion.
Prospects for Bumi Armada remain good with Bloomberg showing four “buy/overweight” calls with an average target price of RM4.55. AirAsia has five “buy/overweight” calls with target prices averaging RM4.65.
Supposing that both companies reach their average target prices, Bumi Armada with a share base of 2.9 billion will end up with a market capitalisation of RM13.324 billion, and AirAsia, with a share base of 2.7 billion, will have a market capitalisation of RM12.917 billion.
Nestle, with a share base of 234.5 million, has two “buy” calls with an average target price of RM52.70. Its market capitalisation will be RM12.36 billion if it reaches its average target price.
According to Bloomberg data, Nestle has a beta of 0.52 which makes is less volatile in relation to the KLCI compared with AirAsia and Gamuda, which had a beta of 1.60 and 1.44 respectively. No current beta was available for Bumi Armada.
This article appeared in The Edge Financial Daily, November 21, 2011.
The FTSE Bursa Malaysia Index Series’ semi-annual review begins from Nov 22 and its results will be out on Dec 8. Changes to the KLCI will be effective towards the end of December.
PLUS is expected to be delisted by mid-December after it finalises its takeover exercise, which is expected to be completed by Dec 7, said Maybank Investment Bank Research in a research note on Nov 17.
Gamuda may also be heading for the exit as it has dropped out of the top 35 largest companies in Malaysia by market capitalisation. Gamuda will be removed from the KLCI if it does rank within the top 35 stocks by market capitalisation on Nov 30 — FTSE’s cut-off date, according to its regulations, the report said.
As at last Thursday, Gamuda’s market capitalisation of RM6.63 billion ranked 38th.
Bumi Armada, Nestle and AirAsia Bhd are strong candidates to be included in the KLCI, according to a report by OSK Research on Nov 14.
A local research head said market capitalisation is the first criteria taken by the FTSE in determining a KLCI member.
According to OSK Research, Nestle will be a “definite shoo-in” to replace PLUS and possibly Gamuda, as it is also on the reserve list.
The list comprises the five highest ranking non-constituents of the index by market capitalisation. Stocks in the reserve list will replace an existing KLCI component delisted prior to the half-yearly review.
Next to Nestle are Bumi Armada and AirAsia. OSK Research said between Bumi Armada and
AirAsia, the latter has a higher chance of being included as it is on the reserve list.
“It’s a toss-up between Bumi Armada and AirAsia, but we think AirAsia might have a slight edge,” OSK Research said.
But after news on Nov 15 that Bumi Armada will be included in the MSCI Malaysia Index, OSK research head Chris Eng, who wrote the Nov 14 report, told The Edge Financial Daily that the counter is likely to join the KLCI.
Although not on the reserve list, Bumi Armada has a larger market capitalisation than AirAsia. Because it was listed on July 21, Bumi Armada did not make the reserve list created in June.
At a closing price of RM3.93 last Friday, Bumi Armada’s market capitalisation stood at RM11.51 billion, while AirAsia’s market capitalisation came to RM10.39 billion at its Friday closing price of RM3.74.
Nestle, which closed at RM50 last Friday, with a market capitalisation of RM11.73 billion had the highest ranking among stocks on the reserve list. The other stocks on the reserve list are UEM Land Holdings Bhd, IJM Corp Bhd and S P Setia Bhd.
“If both stocks [Nestle and Bumi Armada] retain their ranking in terms of market value by Nov 30, they will likely be featured in the revised FBM KLCI 30 list come the next review,” said Maybank.
However, another research head said AirAsia is considered more liquid than Bumi Armada and Nestle, a factor to be taken into consideration by FTSE.
Bumi Armada had 866.27 million free float shares with a value of RM4 billion based on its closing price last Friday. Its free float represented 30% of its total shares outstanding. AirAsia had 1.6 billion free float shares, which translated into a value of RM7.8 billion and 60.4% of its total shares outstanding.
Nestle’s free float of 41.88 million shares, represents 17.9% of its total shares out, with a value of RM2.1 billion.
Prospects for Bumi Armada remain good with Bloomberg showing four “buy/overweight” calls with an average target price of RM4.55. AirAsia has five “buy/overweight” calls with target prices averaging RM4.65.
Supposing that both companies reach their average target prices, Bumi Armada with a share base of 2.9 billion will end up with a market capitalisation of RM13.324 billion, and AirAsia, with a share base of 2.7 billion, will have a market capitalisation of RM12.917 billion.
Nestle, with a share base of 234.5 million, has two “buy” calls with an average target price of RM52.70. Its market capitalisation will be RM12.36 billion if it reaches its average target price.
According to Bloomberg data, Nestle has a beta of 0.52 which makes is less volatile in relation to the KLCI compared with AirAsia and Gamuda, which had a beta of 1.60 and 1.44 respectively. No current beta was available for Bumi Armada.
This article appeared in The Edge Financial Daily, November 21, 2011.
