INARI Amerton Bhd is almost certain to emerge the first a technology company to be represented in the FBM KLCI index as it was the highest market ranking company among the non-FBM KLCI constituents with a market cap of RM15.7 bil and being the 29th highest market ranking stock in Malaysia as of yesterday’s (Nov 22) closing price.
Deemed one of Malaysia’s top semiconductor company, the Penang-based Inari Amerton is very likely to replace Hap Seng Consolidated Bhd which is unlikely to meet the liquidity criteria as it did not meet the median daily trade per month of ≥ 0.04% for eight out of 12 months based on Bloomberg data.
“Our analysis suggests that Hap Seng has only met this criterion in six out of the past 12 months,” observed CGS-CIMB Research’s head Ivy Ng Lee Fang.
“As such, it could be removed from the FBM KLCI index in the upcoming review, and be replaced by the highest market cap ranking company that is presently not included in the index as per ground rules.”
FTSE Russell is due to announce the results of its upcoming semi-annual review of FTSE Bursa Malaysia Index Series on Dec 2 (Thursday) with the review leveraging the market capitalisation data at the close of Nov 22’s (yesterday) trading. All constituent changes pursuant to the review will take effect on Dec 20 (Monday).
“This review is followed closely by the market as it could have an impact on FBM KLCI index-linked products like FTSE 30 ETF and KLCI index-linked funds,” opined CGS-CIMB Research.
“The current FBM KLCI constituents account for about 57% of the total market capitalisation as of Nov 22’s closing.”
Based on Inari’s represented index shares of 2.28 billion at the current price of RM4.24 versus Hap Seng’s 649.52 million at RM7.70, Kenanga Research estimated that Inari would come in at around 1.97% weightage versus Hap Seng’s existing 1.03% weightage.
“At RM4.24, Inari which is the 30th largest (stock) by market cap needs to remain at least above 36th (spot) to avoid direct removal in the next review round,” research head Koh Huat Soon pointed out.
“Whether Inari can remain in the FBM KLCI beyond just one semi-annual period would depend on, among others, whether it can remain above 36th position in size.”
Such was the case with Supermax Corp Bhd which dropped out of the FBM KLCI in the June 2021 review just six months after being admitted in December 2020.
“Our tech analyst Samuel Tan is bullish on Inari, setting a target price of RM4.80 (13% upside), reinforcing our confidence that Inari is likely to remain in the FBM KLCI for the long haul,” added the research house.
At 10.20am, Inari was down 6 sen or 1.42% to RM4.18 with 4.79 million shares traded, thus valuing the company at RM15.43 bil. – Nov 23, 2021
