The latest quarterly review of the FTSE 100 (FTSEINDICES: ^FTSE) has just been published. The review sees 3i Group (LSE: III) and Intu Properties (LSE: INTU) join the UK’s top index, and William Hill (LSE: WMH) and Melrose Industries (LSE: MRO) depart.
The FTSE committee made its decision after the market closed on Wednesday, and the changes take effect from the start of trading on Monday 23 June.
Private equity firm 3i, which counts lingerie retailer Agent Provocateur among its interests, is no stranger to the FTSE 100. 3i had a long stint in the top index until losing its place at the height of the bear market in March 2009. It rejoined the blue-chip elite later in the year, but was back out again by September 2011.
However, with net asset value, earnings and the share price all rising strongly over the last two years, 3i once again regains its position at the top table. A new policy, initiated in 2012, of more generous cash rewards for shareholders has no doubt also helped.
3i’s market capitalisation is £4.1bn at a share price of 424.6p. The shares have advanced faster than net asset value and now stand at a 22% premium.
Intu is the most blandly-named incarnation of a business that previously operated as Capital Shopping Centres and, before that, Liberty International. The company was demoted from the FTSE 100 in March 2013, but re-enters after recently acquiring another two top UK shopping centres, largely funded by a £500m rights issue.
Intu’s promotion brings the number of real estate investment trusts (REITs) in the FTSE 100 to four — the other three being Land Securities, British Land and Hammerson.
Income is the attraction for many investors in REITs, and Intu’s forecast 4.3% yield, at a share price of 317.9p, is the best of the lot.
Bookmaker William Hill drops out of the FTSE 100 with its shares at 347p — 30% lower than last summer. A miserable spell for the company was rounded off when the Chancellor raised duty on fixed-odds betting terminals in March’s Budget. On the bright side, William Hill’s forecast P/E is 12, which doesn’t seem too demanding, and there’s a reasonable yield of 3.5%, too.
The FTSE 100 also says goodbye to Melrose — after a stay of less than two years. Investors have cooled on this rather oddball company, which specialises in buying manufacturing businesses, improving them and then selling them on. I’m never quite sure how best to value Melrose, but at 280.5p the forward earnings multiple of over 17 is on the expensive side of the index average, while the 2.9% dividend yield is sub-par.
G A Chester does not own shares in any company mentioned.