K+S set to become first commodity stock in DAX

FRANKFURT Aug 29 (Reuters) - Potash maker K+S SDFG.DE looks set to become the first commodity stock in Germany's DAX top-30 equity market index .GDAXI, analysts say.

Potash prices have more than quadrupled within the last year due to strong demand for fertiliser, the driving factor behind the rise towards the DAX league for K+S, which has upgraded its 2008 outlook three times this year.

Stock market operator Deutsche Boerse's (DB1Gn.DE) index committee meets on Sept. 3 and is widely expected to decide that K+S will replace tourism and shipping group TUI (TUIGn.DE) in the blue-chip index.

"That K+S will join the DAX is as sure as 'amen' in church," said Anke Platzek, index analyst at German bank LBBW.

Any changes will take effect on Sept. 22. Such revisions are important for many investment vehicles, notably index-tracking funds, which buy new entrants and sell exiting stocks.

Deutsche Boerse's index revisions are based on free-float market capitalisation and trading volumes. In July, K+S ranked 18th by market value and 21st by turnover on the Frankfurt stock exchange, according to Deutsche Boerse data.

TUI was 44th and 31st, respectively.

K+S -- whose shares have nearly doubled in value this year, making them the outstanding gainers in Frankfurt's mid-cap index .MDAXI to which they have belonged for 10 years -- now has a market capitalisation of 13.3 billion euros ($19.6 billion), or 2.5 times projected full-year 2008 revenue and 9 times projected 2008 earnings before interest and tax.

At 0845 GMT on Friday, the stock was trading at 80.82 euros, a multiple of 12.8 to the mid-point of the company's own full-year earnings per share forecast of between 6 and 6.65 euros.

That compares with P/Es of 14.7 for Canadian Potash Corp of Saskatchewan Inc (POT.TO), 20 for U.S. Intrepid Potash (IPI.N) and 11.6 for Russia's Uralkali (URKA.MM).

K+S, which employs 12,000 people in over 20 countries, plans to spend more than 2 billion euros in coming years to raise its potash output. (Additional reporting by Kerstin Leitel and Patricia Gugau) (Reporting by Peter Starck)