Significant Changes in ASX200 Stock Reshuffle

Summary

• The liquidity risks inherent in the COVID-19 scenario could further impact the long-term performance of companies.
• The technological innovations driving the momentum could affect the performance and therefore the composition of ASX200
• In the upcoming time, the financial and stock return would be inspired by economic reboot along with the buyer’s attitude.

The world equity market has been performing somersaults ever since COVID-19 pandemic opened Pandora’s box, stimulating the investors to rummage through the securities for building a crisis-proof portfolio. The development curve of many companies ran out of the road during the turmoil, exacerbated by the lockdown restrictions and the period of low economic activity. At the same time, Australian markets also saw a few dark horses emerging to outshine many conventional players with their strategic solutions at the right time.

While the Australian reopening fostering hopes of economic revival has taken the edge off the turbulence; the stock market continues to behold the wavering trends. The spillover of all the flips and twirls in the equity scenario can be witnessed with several changes in S&P Dow Jones Indices in the Quarterly Rebalance. The altered composition would be effective at open of 22 June 2020.

Many companies which have been waiting in the wings to become the constituent of the index owing their strong performance welcomed good tidings. Meanwhile, many others bid adieu to the critical performance indicator. ASX200 overhaul was marked by the additional removal (5 additions vs 6 Removal) due to the demerger between GrainCorp Limited (ASX:GNC) and United Malt Group Limited (ASX:UMG).

With this backdrop, let us look at the key additions and removal that hallmarked the stock restructuring in ASX200

A Closer Look at the ASX 200 Additions

Centuria Industrial REIT (ASX:CIP)

Centuria Industrial REIT (ASX:CIP) which is Australia’s predominant industrial property investment vehicle (A-REIT) was incorporated as one of the components of ASX200. The company believes that inclusion would provide existing unitholders, the liquidity enhancement opportunities while also assist in expanding its unitholder’s bases.

CIP provides investment opportunities through real estate investment trust. The company, as indicated on 5 May, holds a total portfolio value of A$1.6 billion with 49 high-quality investment properties. The Group’s Asset Under Management (AUM) of A$7.3 billion incorporates A$6.4 billion real estate AUM.

The transformation of the e-commerce, food logistics and pharmaceutical has been the reckoning force for the company, while Portfolio tenants weighted to defensive sectors provides strong portfolio WALE of 6.9 years to CIP.

Source: CIP Presentation

Mesoblast Limited (ASX:MSB)

The prominent player in allogeneic cellular medicines for inflammatory diseases, Mesoblast Limited (ASX:MSB) witnessed substantial progress in operational growth along with the robust financial position for the period ending 31 March 2020.

The financial performance of the nine months of FY2020 demonstrated revenue increase of 113% to USD 31.5 million.

In the wake of COVID-19, the company developed remestemcel-L as a potential critical therapy, which is undergoing Phase 3 randomised controlled trial in the US.

Omni Bridgeway Limited (ASX:OBL)

Omni Bridgeway Limited (ASX:OBL) involved in the management, funding and investigation of litigation was also included into ASX 200. The strong financial position is characterised by the total cash and receivables of A$254 million as on 18 May 2020.

As on 12 June 2020, OBL stock has given the 3-month return of 23.44% to close at $4.910 per share.

Perseus Mining Limited (ASX:PRU)

Perseus Mining Limited (ASX:PRU) through Scheme of Arrangement will acquire 100 percent stake in Exore Resources Limited. Perseus has a diverse range of expertise for advancing both of Exore’s Bagoe and Liberty projects while also allowing the exploration of Exore’s highly prospective ~2,000 km2 land package

Perseus has a strong cash position with the cash of USD 124.7 million in hand (as on 31 March 2020).

Megaport Limited (ASX:MP1)

Megaport Limited (ASX:MP1) is the software-based company which provides flexible integration platform ensuring the connectivity of customers to other networks and cloud providers.

Megaport monthly recurring revenue increased by 19% from A$4.6 million in December 2019 to A$5.4 million in March 2020. Meanwhile, in Q3 FY20, the total enabled data centres and cloud On-Ramps increased by 9% and 10% respectively.

The organisational shift to the remote working enabled by the digital enablement has provided the company to expand its elastic interconnection business.

Source: MP1 Presentation

The Stocks Bidding Adieu to ASX 200

Estia Health Limited (ASX:EHE)

Estia Health Ltd (ASX:EHE) amidst the uncertainty around COVID-19 has withdrawn FY20 guidance. It is one of the largest residential aged care providers in the country with 69 homes. In the early stages of the pandemic-induced lockdown, the occupancy fell from 93.8% on 17 March 2020 to 91.7% on 26 April 2020. The company’s net debt increased by A$3.3 million from 31 December 2019 to 20 May 2020.

HUB24 Limited (ASX:HUB)

HUB24 Limited (ASX:HUB) offers a range of investment options through technologically integrated investment and superannuation platform. The company’s March quarter saw the inclusion of 26 new managed portfolios which combines equities and diversified asset classes.

In the quarter, net inflows for HUB saw an increase of 72% from the previous corresponding period to $1.4 billion. The negative market movement led to the decline in the Fund Under Administration (FUA) by 13.1% for the quarter from A$2.1 billion on 31 December 2019 to A$15.1 billion on 31 March 2020. However, FUA recorded the pcp growth of 31.6%.

Jumbo Interactive Limited (ASX:JIN)

Jumbo Interactive Limited (ASX:JIN) provides a digital platform for the lotto experience. The company usually witnessed about 75% sale of the Australian lottery tickets through retail channels before the onset of COVID-19.

The management addressed the possibility of minor delays on the introduction of Lottery SaaS. The company has four contracts with ~A$140 million in potential ticket sales volume which, when rolled out, would increase TTV and revenue by around A$4.6 million. In comparison, NPBT would increase by around A$3.5 million. However, the financial impacts would be evident in FY2020.

Mayne Pharma Group Limited (ASX:MYX)

Mayne Pharma Limited (ASX:MYX) is a speciality pharmaceutical company focussed on commercialising branded and generic pharmaceuticals. Its contract development and manufacturing services also accentuate the overall offerings of the company. MYX entered into an agreement with Mithra Pharmaceuticals SA for commercialising a combined oral contraceptive, E4/DRSP in Australia. It has also submitted a drug application to the FDA for the same.

Pilbara Minerals Limited (ASX:PLS)

Australian explorer, Pilbara Minerals Limited (ASX:PLS) wholly owns Pilgangoora Lithium-Tantalum Project which enjoys robust infrastructure. The increase in the mining capacity from 1.2 Mtpa to 5Mtpa has decreased mine-life from over 40 years to 23 years.

PLS stock in the last three months as on 12 June 2020 has given the return of 67.5% to close at $0.310.

Pinnacle Investment Management Group Limited (ASX:PNI)

Pinnacle Investment Management Group Limited (ASX:PNI) provides a portfolio of investment managers with the support services and high-quality infrastructure and distribution. The company’s aggregate Affiliates’ FUM on 31 March 2020 has decreased from 31 December 2020 by 15%.