Discount retail group tipped for stock market elevation
Liverpool-based discount retailer B&M could find itself elevated to the FTSE 100 next month as part of the latest reshuffle.
Northwich vet products manufacturer, Dechra Pharmaceuticals, is also tipped as a possible dark horse for promotion, says Russel Mould, investment director at Manchester-based investment platform AJ Bell.
He believes these possible additions could be at the expense of current FTSE 100 members, ITV and British Land.
Mr Mould said: “The FTSE 100 witnessed eight changes back in June after the last quarterly reshuffle, when Avast, GVC, Homeserve and Kingfisher replaced Carnival, Centrica, easyJet and Meggitt.
“And there could be more drama this time around, especially as ITV looks certain to lose its place in the elite index and British Land membership is looking wobbly.”
B&M’s market capitalisation is £4.8bn – about £1bn higher than its pre-lockdown levels and £2bn higher than its mid-March low, when the market dipped.
The retailer, based in the Speke area of South Liverpool, has surged during the lockdown, driven by rising sales in its grocery, DIY and gardening departments.
In July it reported a strong year to its new fiscal year, with first quarter total group revenues 27% better, at £1.154bn.
Mr Mould said: “B&M European Value Retail looks best placed to vault into the FTSE 100, as its market cap is currently high enough to rank above the 90th position that merits automatic promotion.
“This would be B&M European Value Retail’s first time in the FTSE 100 and promotion would come just over six years after the company’s flotation at 270p a share.
“Elevation for the retailer would offset ITV’s automatic demotion. The broadcaster’s £2.5bn market cap leaves it ranked around 140th and with little chance of survival this time around.
Russ Mould
“Meanwhile, British Land is teetering on the brink. Its market cap of £3.3bn leaves the Real Estate Investment Trust ranked right on the cut-off point of 110th. Any further slippage could open the door to a FTSE 250 firm and a number of companies are jockeying for position.
“They include former FTSE 100 members Direct Line, ConvaTec, Weir and Foreign & Colonial Investment Trust, who were last relegated in September 2019, December 2017, September 2015 and September 2009, respectively.”
He added: “Potential debutants include student housing provider UNITE, Bill Ackman-led investment vehicle Pershing Square, precision instruments specialist Renishaw and Dechra Pharmaceuticals.
Announcing its interim results back in February, Dechra unveiled a 7.1% increase in six month revenues of £248.5m, while pre-tax profits soared from £9m the previous year to £19.5m.
Its current market capitalisation is £3.41bn.
All of the major FTSE indices are reviewed on a quarterly basis.
They are set according to share prices from the close of business on the Tuesday before the first Friday of the review month – in this case Tuesday, September 1.
The changes will be announced after the close on Wednesday, September 2, and come into effect as of the market opening on Monday, September 21.
In general, a stock will be promoted into the FTSE100 at the quarterly review if it rises to 90th position, or above – by market capitalisation – and a stock will be demoted if it falls to 111th, by market value, providing it fulfils the other criteria, such as free float and a presence on the main market.
