GLP: A foreign broker believes that GLP risks being removed from a major index, possibly triggering a selloff in the counter if that happens.
GLP is a member of the FTSE EPRA/NAREIT Developed Index, and its inclusion rests on the condition that at least 50% of EBITDA must come from developed market exposure.
The FTSE EPRA/NAREIT Developed Index was designed to represent general trends in eligible real estate equities globally. It tracks the performance of listed real estate companies and REITs globally and it is free-float adjusted, liquidity, size, and revenue screened.
The broker found out that GLP’s audited EBITDA failed to comply with the definitions of the FTSE EPREA/NAREIT Developed Index as developed markets (Japan and US) accounted for only 44% of the group's FY15 EBITDA. According to the broker, this is the second year of non-compliance for GLP.
It estimates that ~US$50b of funds currently track the index, and a removal could result in institutional pullout from the stock over a period of five days. While share buy-backs may stabilise the share price in the short term, the broker feels that it is only a matter of time before GLP is removed.
This stems from GLP’s growing exposure to China where investments are ongoing while Japanese assets are being divested to GLP J-REIT.
The FTSE Index review will be completed by 3 Sep with changes effective after 18 Sep.