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.