Hikma Pharmaceuticals (LSE: HIK) is set to be the first Jordanian company to enter the FTSE 100 when the FTSE committee announces the results of its quarterly index review on Wednesday. Tullow Oil (LSE: TLW) is expected to be demoted to the FTSE 250 to make way for the drugs firm.
The index changes will come into effect from the start of trading on Monday 23 March.
Hikma’s shares have climbed 26% since the last FTSE review in December, giving the company a market capitalisation of £4.9bn at a share price of 2,470p. At the time of writing, Hikma would rank at number 80 in the UK’s top index.
Hikma was founded in 1978 by Samih Darwazah — a former marketing manager of US drugs giant Eli Lilly — and listed on the London stock exchange in 2005. The company manufactures branded and non-branded generic and in-licensed products, generating 54% of its revenue from the US, 40% from the Middle East and North Africa, with the remainder coming from Europe and the rest of the world.
Hikma trades on a forward P/E of 26. That looks a bit pricey to me, although the company does have plenty of firepower for internal investment and acquisitions to drive further strong earnings growth in the years to come. FTSE 100 status will also raise the company’s profile.
Tullow Oil has been thoroughly whacked by the collapse of the oil price. The shares, which are currently trading at 365p, are about 60% down from their 52-week high. Today’s market capitalisation of £3.3bn, means that Tullow, which entered the FTSE 100 in 2007, is now set to be demoted to the second-tier FTSE 250.
Tullow posted a £1.6bn statutory loss for 2014. An improvement is expected this year, as the company slashes exploration expenditure to focus on producing assets, but a P/E of 35 doesn’t look hugely attractive on the face of it.
Another oil company set for a miserable FTSE review is Afren. The debt-laden firm has seen its shares crash by more than 90% in the past year, and is set to be unceremoniously kicked out of the FTSE 250 into the FTSE SmallCap index.
