Bay of Plenty honey and health products company Comvita will this week be included in the benchmark S&P/NZX 50 Index, which chairman Neil Craig says is expected to improve broker coverage and institutional interest in the company's shares.
Comvita's inclusion results from the proposed removal of software company Diligent Corp, which has reached an agreement to be acquired by US private equity firm Insight Partners at a valuation of almost $1 billion. The S&P Dow Jones Indices announced that Comvita would replace Diligent on the S&P/NZX 50, S&P/NZX 50 Portfolio Index and the S&P/NZX MidCap Index, after the close of trading tomorrow.
Mr Craig said the company was aware it was among three or four companies that were on the brink of inclusion, but was not sure whether they would make it this time. Comvita had a current market cap of about $475 million. "But it's not just size and market cap - they also take into account liquidity," he said.
"The significance of inclusion for us is that a lot of institutions only invest in top 50 stocks in New Zealand. And a lot of broking firms won't research firms outside the 50. But when you're in the 50 it attracts people looking from outside and inside New Zealand and the company gets more attention generally. All those factors mean greater interest in the stock. And arguably top 50 stocks are more highly priced."
Andrew Harvey-Green, a senior equity analyst at Forsyth Barr, said index inclusion was generally a good thing for a company.
"There's more coverage in stocks that are in the 50 as opposed to outside the 50," he said.
"And you also have indexes that will only hold stocks that are in the top 50, so you have more buying interest in the stock as well."
Mr Craig said, in statement to the NZX, that inclusion was another positive step forward for Comvita on its journey to becoming a truly global, natural health products company.
"Recently, we affirmed our strategic plan to deliver $400 million of revenue by 2020, and index inclusion will increase our relevancy to New Zealand and offshore investors," he said.
"We welcome new shareholders who share our vision of realising Comvita's potential in delivering naturally sourced health products to the world. Index inclusion is also rewarding for our existing, very loyal shareholder base who have supported Comvita over many years. We look forward to further opportunities to grow value for them."
There were just four Bay of Plenty companies listed on the NZX - Comvita, Trustpower, Port of Tauranga and Seeka Kiwifruit Industries.
S&P/NZX 50 Indexs:
* Comprised of 50 of the largest and most traded companies listed in New Zealand.
* Covers approximately 90 per cent of the New Zealand equity market by capitalisation.
* S&P Dow Jones Indices and NZX agreed to co-brand the suite of NZX Indices in June 2015, when S&P Dow Jones Indices assumed responsibility for calculating, maintaining and licensing.