Discount assessment ahead of index update: Damri on the way out of TA-35, new stocks to join TA-125

The upcoming index update on the stock exchange will take place on November 5 (the record date will be October 15). Which companies will be removed from the leading indices and who will enter in their place? Discount Brokerage economists are publishing an initial assessment of the expected changes today.

According to Discount's estimate, the stock of residential construction developer Damri is expected to exit the TA-35 index and move to the TA-90 index, a move they estimate will concentrate demand of about 230 million shekels. As recalled, the company controlled by Yigal Damri has managed to remain in the index in previous updates despite "wavering," and for example, in the previous update in May, it remained after Damri again sold shares to institutional investors and raised 420 million shekels at the last moment. According to Discount economists, the Doral stock is defined as borderline for entry into the TA-35 index, and if it enters the index, another stock might be removed alongside Damri - Canon, the Stock Exchange, or Shufersal.

Discount notes that the focus of the upcoming index update is the implementation of a new stock exchange rule, according to which stocks entering the TA-125 index will receive a tiered weighting factor that will be spread over three updates (a factor of 0.25 in the first update, 0.5 in the second, and 1.0 in the third). Starting from the upcoming update in November, this rule will apply not only to new stocks on the exchange but also to veteran stocks rising to the leading indices (such as Telsys and Afcon).

Discount mentions that there are currently 126 stocks in the TA-125 index, following the entry of the Palo Alto stock, the dual-listed cyber giant, via the fast track. They estimate that the completion of the merger between Israel Canada and Acro will return the index to 125 stocks and equalize the number of incoming and outgoing companies to 5.

Movements in the TA-125 index: These are the companies expected to enter and exit

Expected entrants are Alpha Tau, with demand of about 26 million shekels. Discount notes that it is borderline for entry and needs an additional daily turnover of about 3,600 shekels. Alpha Tau is an Israeli biomed company that developed a cancer treatment and is traded on NASDAQ at a current valuation of about 1.4 billion dollars. Recently, it announced the listing of its shares for trading in Tel Aviv as well.

Other entrants according to Discount's estimate are Telsys, which deals in electronic components, where the expected demand is about 39 million shekels in the current update; the infrastructure company Afcon, with expected demand of about 35 million shekels; the real estate company Tidhar, with about 84 million shekels; and the defense company Bagira with 12 million shekels. (Since the weighting factor will be spread over three updates, the demand will continue in the following updates as well).

In contrast, the five stocks expected to exit the index include, according to their estimate, Sela Capital Real Estate, with supply of about 276 million shekels (or Property & Building with possible supply of about 45 million shekels); the chip testing equipment company Qualitau, with about 246 million shekels; the defense company Arit Industries, with about 145 million shekels; Electra Real Estate with about 74 million shekels; and Wishbone Globaltech with about 34 million shekels. Discount also notes that there are many other stocks currently in the borderline range for exit from the index, including Gilat, Ackerstein, Israel Shipyards, Netto Malinda, Danel, RP Optical, and Delta Brands.