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KUALA LUMPUR (Dec 4): The glove sector will become the second largest in weighting of the FBM KLCI after the banking sector, following the inclusion of Supermax Corp Bhd later this month.
Supermax is replacing KLCCP Stapled Group, which comprises KLCC Property Holdings Bhd and KLCC Real Estate Investment Trust (REIT), following the semi-annual review of the FTSE Bursa Malaysia index series yesterday. All the constitutive changes will take effect at the beginning of operations on December 21.
With the latest changes, the rubber gloves sector will be represented by three components: Top Glove Corp Bhd, Hartalega Holdings Bhd and Supermax Corp Bhd, representing an estimated weight of 11.76% based on share prices. at noon today.
The Supermax index stocks that will be represented on the KLCI have a weighting of around 2.03%, while Top Glove is 5.03% and Hartalega 4.7%.
Meanwhile, the banking sector will remain the largest in the KLCI with a weighting of 25.22% through the representation of five banks, namely Malayan Banking Bhd or Maybank (8.85%), Public Bank Bhd ( 6.85%), Hong Leong Bank Bhd or HLB. (3.75%), CIMB Group Holdings Bhd (3.68%) and RHB Bank Bhd (2.1%).
It is followed by the glove sector with 11.76%, telecommunications companies (with 10.12%, excluding Telekom Malaysia Bhd or TM) and public services (with 9.13%). These sectors have a combined weight of 56.23% of the KLCI.
Meanwhile, Kenanga Research said that the addition of Supermax to the KLCI will result in only a marginal increase in the earnings per share (EPS) of the index for the financial year 2021 (FY21).
“The entry of Supermax should likely increase KLCI’s FY 21 EPS as its contribution to earnings is expected to exceed that of KLCCP. After taking into account the dilutive impact of a higher divisor, we estimate that rebalancing could still potentially improve earnings per share by around 2%, ”the research house said in a note today.
According to Bloomberg, there are 11 analysts covering Supermax and they all have “buy” calls to the counter, with a 12-month consensus price target (TP) of RM12.39, suggesting a 49% rise from the price of their RM8.34 shares as of 4pm today. At that price, it had a market capitalization of RM21.5 billion.
Following the review, KLCI’s reserve list now comprises the index’s five highest-ranking non-constituents by market capitalization, which are Kossan Rubber Industries Bhd, QL Resources Bhd, MR DIY Group (M) Bhd, Westports Holdings Bhd and KLCCP. according to a statement from Bursa.
Under FTSE Russell rules, a stock would be added as a component of the KLCI if its market capitalization rises to 25th or higher, while it would be removed from the index if it falls to 36th or lower.
Malacca Securities Sdn Bhd senior analyst Kenneth Leong said analysts expected both Supermax and Kossan to be included as the glove’s share prices were trading near their all-time highs.
However, following a host of positive vaccine news, glove stock prices fell back from their highs, causing Kossan’s market capitalization to decline and not be included in the list of the top 30 companies in Bursa by market capitalization.
Kossan’s share price peaked at RM9.59 on August 6, but has since declined. Compared to its share price of RM6.09 at 4.15pm today, it has registered a drop of 36.5%. However, it is up 191% from RM2.08 on Jan 2, 2020.
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