The FTSE 100 Christmas Reshuffle: Royal Mail PLC, Ashtead Group plc, Vedanta Resources plc And Croda International Plc
The latest quarterly review of the FTSE 100 has just been published. The review sees Vedanta Resources (LSE:VED) and Croda International (LSE:CRDA) drop out of the UK’s top index, and Royal Mail (LSE:RMG) and Ashtead (LSE:AHT) join the blue-chip elite.
The FTSE committee made its decision after the market closed yesterday, and the changes take effect from the start of trading on Monday 23 December.
Indian natural resources conglomerate Vedanta Resources is the latest foreign mining company to be ejected from the FTSE 100. Miners have had a tough year generally, but Vedanta’s shares have fallen over 30% to 812p since the September index review, leading to the company’s demotion to the second-tier FTSE 250.
Vedanta’s price-to-earnings (P/E) ratio for the year ending March 2014 is a pricey 19, but analysts are forecasting a big bounce in profit the following year, which, if it materialises, gives a bargain P/E of 9. The current-year forecast dividend yield is also attractive at 4.5% — as high as it’s ever been, if memory serves.
Joining Vedanta in falling through the FTSE 100 trapdoor is a firm of a very different dye. Speciality chemicals group Croda International was founded in 1925 in the East Riding of Yorkshire to manufacture lanolin, a protective waxy substance secreted by sheep.
Croda’s strong earnings growth in recent years has slowed of late, and a disappointed market has pushed the shares down 15% since September. Even so, the current-year forecast P/E remains on the high side at 17, and the dividend yield is a lowly 2.8%. Analyst forecasts for 2014 don’t improve the value much.
Entering the FTSE 100 amid the avalanche of Christmas cards is Royal Mail. The company was privatised through a flotation in October, when investors eagerly snapped up the shares at 330p a time.
The shares closed yesterday at 586p — a 78% gain in two months — giving the company a market capitalisation of getting on for ?6bn. That puts the firm comfortably in the middle ranks of the FTSE 100.
Royal Mail’s P/E for the year ending March 2014 is pushing 17, but analyst forecasts of 30% earnings growth the following year bring the rating down to a much more reasonable 13. At the same time, the forecast dividend yield rises from 2.7% to 4%.
Ashtead rents construction and industrial equipment, and is the second-largest operator in both the UK and the US. Ashtead’s shares traded at under 50p at the bear-market bottom of 2009, but a relentless rise has seen the company climb the All-Share index, culminating with entry into the FTSE 100 at yesterday’s closing price of 730p.
Ashtead’s P/E for the year ending April 2014 is over 17, but analyst forecasts of 15% earnings growth the following year bring the rating down to a more reasonable 15. There’s not much income on offer, though: the forecast dividend yield rises from 1.4% to 1.6%.
> G A Chester does not own any shares mentioned in this article.