s&p asx200

I was interested the chances of PSA entering the ASX200, so I did a little research...

As many people already know, the next adjustment to the S&P ASX200 is in March this year.

The following stocks are struggling at the moment with their market capitalization, and are candidates for the chopping block......These stocks have the lowest market caps in the ASX200 atm, and they also seem to be in downtrends:

AYO Market Cap $120 million
GHG $146 million
TEM $154 million
VSL $165 million
HWE $163 million
ASB $171 million (might be OK)

The following companies should be new additions to the ASX200 in March given the high capitalization of each:

ALH $821 mill
JB HiFi $238 mill
PRX $367 mill

The problem for PSA, as I see it, is that there have been a whole host of other newish companies that have run hard in 2003. Many of these now have a market cap of between $200 and $250 million. (PSA has a market cap of $148 million at todays close of $1.25)

Some of the companies in this category include:

TIM, AAC, FAN, FUN, RSG, NAL, KIM, SGL, REB.
Note that even KAZ and CLH, which were ejected from the ASX200 recently, have made comebacks to around the $200 million mark. Additionally there are around 10 companies BELOW the $200 million mark that are ahead of PSA at the moment. for example HIG BDG CNT

However, it should be noted that there are liquidity requirements that must be met in order to make the S&P ASX200. Not all of the above companies would meet these at this time. Moreover, S&P are reluctant to make wholesale additions and deletions to the index because of a desire for stability of the index etc

As I see it, PSA needs to get to about $1.80 to seriously have a chance of making the ASX200. $1.80 would give it a MC of about $210 million. I could be wrong, especially since ROC and ARQ are already there with a MC's of $171 million and $191 million respectively. But with the number of new companies that have run hard - that have higher market value than PSA, and are not yet in the ASX200, PSA may find it tough. It may even be that ROC/ARQ's spots are in danger without further price advances from them.

On the upside, further rationalization of gaming and some other industries should allow vacation of a few spots in the index in the near future. TAB, UTB, BIR, NVS and others may all be deletions by June. Hopefully some of the more speculative stocks that have run above PSA may pull back as well, leaving the path more open.

I think if PSA could crack it by Christmas this year it would be a great achievement. Mind you with the spectacular success already this year (happy days), who knows, the ASX200 could come a lot faster than that....


As usual opinion only... comments welcome


Cheers,

Christian