There is certain to be a reshuffle among the S&P indices this new quarter – not least because of the delisting of Brickworks Ltd (ASX: BKW). While it's early days, Wilsons Advisory has made some early predictions.
Being added to or removed from an S&P/ASX Index is a big deal as it dictates whether certain fund managers and exchange-traded funds (ETFs) that track the indices must buy or sell a stock.
Three stocks which Wilsons predicts are strong candidates to drop from the S&P/ASX 200 Index (ASX: XJO) in the next shuffle are uranium producer Boss Energy Ltd (ASX: BOE), chicken wholesaler Inghams Group Ltd (ASX: ING), and intellectual property services group IPH Ltd (ASX: IPH).
With only about 15% of the calculation period elapsed, we see likely index moves across the ASX50, ASX100 and ASX200. In the ASX200, Catalyst Metals Limited (ASX: CYL) has been named to fill Brickworks' M&A gap subject to scheme approval, and we expect Pantoro Gold Limited (ASX: PNR) to replace Gold Road Resources Limited (ASX: GOR) if its scheme meeting is approved. After those M&A substitutions, the likely additions to replace Boss Energy, Inghams and IPH are Resolute Mining Limited (ASX: RSG), Catapult Group Limited (ASX: CAT) and Regis Healthcare Limited (ASX: REG).
Wilsons says Domino's Pizza Enterprises Limited (ASX: DMP) is also at risk of dropping out, which could lead to the inclusion of Aussie Broadband Limited (ASX: ABB).
At this stage, we see Catapult Group and Regis Healthcare as only marginally priced for inclusion. With Catalyst now earmarked to replace Brickworks, we expect the market to price in Catapult's likely inclusion over the coming days. We do not believe Aussie Broadband's potential inclusion is being priced in and so we view this as an attractive asymmetric opportunity given its valuation discount to Superloop Limited (ASX: SLC). Aussie is also a key beneficiary of the September NBN changes, which could support the share price and help it begin screening for index inclusion.
The next changes to the indices are announced on December 5 and come into effect after market close on December 19.
