There’s a significant change coming in one of the major investment measures for Australian investors – on September 20 AGL will be dropped from the ASX-50 because of the collapse in its share price in the past three years thanks to the rise of renewables and the slump in electricity prices.
AGL is one of three notable companies to be dropped from the ASX 50 subindex of the ASX 200 in the quarterly recasting by S&P Dow Jones.
The collapse in its share price and electricity prices saw AGL decide to split itself into two companies one based on the on the nose coal fired power stations and associated assets, the other based on the electricity and gas distribution sales, distributions and renewable assets.
The decision to drop the company from the ASX 50 (which includes the 50 most valuable companies listed on the ASX) suggests that the post-split companies will not be highly rated by investors, especially Accel, the company that will house the fossil fuel assets).
It’s highly likely Accel will struggle to attract much interest from big investors.
a2Milk (a2M), a previous market darling will de dropped because of the 65% slump in its share price in the past year as its sales in China have been brought undone by the way Covid has locked down international borders.
That has all but choked off the company’s ‘daigou’ sales channel based on Chinese tourists visiting Australia and buying its products and taking them back to China.
a2M shares are down 50% year to date in 2021 and 65% in the 12 months to last Friday.
Ampol (ALD, the old Caltex Australia) is being dropped even though its share price hasn’t slid like AGL and a2Milk’s shares have done in the past year or so.
They have rebounded strongly from early to mid 2020 by the collapse in global oil prices in the first Covid lockdown in 2020.
Ampol shares are up 13% in the past year, but down 0.6% year to date.
The company might feel entitled to feel a little miffed at the exclusion, even though it is not as bad as being dropped from the ASX 50, 100 or 200.
Moving into the ASX 50 are Resmed, whose shares are up 39% year to date and 70% in the past year as the company’s assisted sleeping machines and ventilators have been boosted by Covid.
Tabcorp shares were added because the shares are up 25% this year and 37% in the past 12 months solely on the battle by three or four buyers to grab control of its gambling business. The company’s AGM on October 19 will get an update on that and the demerger process for the lotteries and Keno businesses in 2022.
Ampol may feel a bit miffed because it looks like it has been forced out by the demerger of Endeavour Drinks from Woolworths.
S&P Dow Jones explained in Friday evening’s announcement “note that there is an additional removal from the S&P/ASX 50 and S&P/ASX 100 as they are currently carrying an additional constituent following the recent Woolworths Group Limited (XASX: WOW) demerger of Endeavour Group Limited (XASX: EDV).
Market value might explain Ampol’s dropping – at Friday’s close it had a value of $6.75 billion, just over half the $12.42 billion market cap of Endeavour.
On the ASX 100, Virgin Money (the old UK banking business of the NAB and Virgin Money) is in while Boral, now 70% controlled by Seven Group Holdings is out, as is another investment of Kerry Stokes’ key company, Beach Energy. Beach’s 39% slump in its share price perhaps explains that omission.
