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Merlin set to be relegated from the FTSE 100

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The Share Centre is predicting that Merlin Entertainments could drop out of the index of Britain’s largest companies ahead of next week’s FTSE 100 rebalancing.

Merlin has had a troubled year following a serious accident at Alton Towers last June, which is continuing to impact on the group’s profitability. Meanwhile Helal Miah, investment research analyst at The Share Centre, says it’s also had to contend with a weak euro and a tough London market.

“Cautious investors will be waiting to see the longer term impact of the Smiler accident, and will also be watching the group’s growth plans with interest,” says Miah. “We currently recommend the stock as a ‘hold’.”

Another company set for relegation out of the FTSE 100 on Wednesday next week is the satellite communications company Inmarsat.

Miah says: “It posted flat annual results in March, reflecting a tough environment where governments are constrained in spending on communications equipment. Profitability was also partially hurt by capital expenditures on the launch of satellites and new services. Management has predicted limited growth for 2016 but does foresee improvement in the medium to longer term.

“We are encouraged by the company’s long term prospects and recommend Inmarsat as a ‘buy’ for medium risk investors seeking a balanced return.”

Despite also being at risk of dropping out of the FTSE 100, another stock The Share Centre recommends as a hold is the shopping centre operator Intu Properties.

Despite its full year results in February showing an 8% rise in net rental income and a 7% increase in underlying earnings, in line with expectations, Miah says consensus forecasts for earnings and dividend growth have been “uninspiring”.

Meanwhile, after 15 years of consecutive growth, Miah says Rightmove is a candidate for promotion into the country’s top 100 companies. It could be joined there by Investec, Autotrader and the chemicals manufacturer Croda.

“There is also the possibility of a quick bounce back into the top league for both Smiths Group and Hikma Pharmaceuticals, who were relegated during the last reshuffle,” Miah says.

See YourMoney.com’s Morrisons rebounds into FTSE 100 as Sports Direct gets the boot story to see the results of the last quarterly reshuffle of companies listed on the London Stock Exchange.