The Short Report

This story features CENTURIA INDUSTRIAL REIT, and other companies. For more info SHARE ANALYSIS: CIP

Guide:

The Short Report draws upon data provided by the Australian Securities & Investment Commission (ASIC) to highlight significant weekly moves in short positions registered on stocks listed on the Australian Securities Exchange (ASX). Short positions in exchange-traded funds (ETF) and non-ordinary shares are not included. Short positions below 5% are not included in the table below but may be noted in the accompanying text if deemed significant.

Please take note of the Important Information provided at the end of this report. Percentage UIKeyInputLeftArrowamounts in this report refer to percentage of ordinary shares on issue.

Stock codes highlighted in green have seen their short positions reduce in the week by an amount sufficient to move them into a lower percentage bracket. Stocks highlighted in red have seen their short positions increase in the week by an amount sufficient to move them into a higher percentage bracket. Moves in excess of one percentage point or more are discussed in the Movers & Shakers report below.

Summary:

Week ending September 20, 2018

Last week saw the ASX200 continue a choppy graft back from the 6100 recent low.

A lot of the stocks highlighted in green below were red last week and green the week before. As this trend persists, I can only make the assumption it is coincidental that each week’s move just happens to take those stocks up or down a percentage bracket, but it seems overly coincidental they all would also do so in unison, every week.

So take it as you want.

Otherwise, takeovers continued to be a driver of short position movements last week, we might assume.

Last week Centuria Industrial REIT ((CIP)) leapt into the table from oblivion to 9.8% shorted, which can be explained by a takeover offer made for the fund by Propertylink Group ((PLG)). Now Asian platform ESR Real Estate has made a bid for Propertylink, so it’s unclear where that leaves Centuria.

Suffice to say Centuria’s share price has since lost half of the 11% jump it enjoyed on the day of the bid announcement, and in terms of the short position which likely was a takeover play, well, it’s vanished.

In its place is BWX Ltd ((BWX)), which has jumped to 10.7% shorted from 7.7% shorted after two senior executives resigned when a private equity takeover they attempted to orchestrate fell over.

On the other side of the ledger, Bingo Industries ((BIN)) has successfully completed a capital raising to fund the acquisition of Dial-a-Dump for $577.5m. Bingo shorts have fallen to 5.7% from 7.2%, which suggests a standard takeover arbitrage in which a hedge fund shorts the stock and then picks up the rights issue at a discount, locking in a profit.

Beyond that, we welcome to the 5% plus shorted table Speedcast International ((SDA)). See below. 

Weekly short positions as a percentage of market cap:

10%+

JBH     19.5
SYR    16.7
GXY   16.7
ORE    16.2
DMP   13.0
ING     12.3
MTS    11.8
GXL    11.6
BWX   10.7
MYR   10.5
HVN   10.3
GEM   10.3

In: BWX                                            

9.0-9.9

IFL, NWS

Out: CIP, VOC, IGO, NUF, IVC
                                                                                               
8.0-8.9%

CSR, NEC, VOC, IGO, IVC, AAC, NUF, SUL

In: VOC, IGO, IVC, NUF, SUL       Out: NAN                  

7.0-7.9%

GMA, NAN, NXT, MLX, BIN, PLS

In: NAN, NXT                       Out: BWX, SUL, BIN, PLS

6.0-6.9%

PLS, MYO, RSG, KAR, SEK, HT1, SIG, MND, GNC, FLT, MOC

In: PLS                        Out: NXT, NWL, BGA

5.0-5.9%

NWL, BIN, CAB, BLA, KDR, BEN, BAL, MSB, SDA, CQR, CLQ, PPT, AMP

In: BIN, NWL, SDA, PPT                

Movers & Shakers

Satellite services provider Speedcast International ((SDA)) can be included among the list of “new world” growth stocks that have been very popular with investors this past year. More than often we have seen these new world stocks become overly hyped by the market ahead of a spectacular fall from grace.

The stock was up 25% year to date in late August when the company posted a big miss on both FY18 earnings and FY19 guidance and sorely disappointed analysts. The stock fell -40% on the day and has not since recovered.

Speedcast appeared in the 5% plus shorted table last week at 5.3%.

ASX20 Short Positions (%)

To see the full Short Report, please go to this link

IMPORTANT INFORMATION ABOUT THIS REPORT

The above information is sourced from daily reports published by the Australian Investment & Securities Commission (ASIC) and is provided by FNArena unqualified as a service to subscribers. FNArena would like to make it very clear that immediate assumptions cannot be drawn from the numbers alone.

It is wrong to assume that short percentages published by ASIC simply imply negative market positions held by fund managers or others looking to profit from a fall in respective share prices. While all or part of certain short percentages may indeed imply such, there are also a myriad of other reasons why a short position might be held which does not render that position "naked" given offsetting positions held elsewhere. Whatever balance of percentages truly is a "short" position would suggest there are negative views on a stock held by some in the market and also would suggest that were the news flow on that stock to turn suddenly positive, "short covering" may spark a short, sharp rally in that share price. However short positions held as an offset against another position may prove merely benign.

Often large short positions can be attributable to a listed hybrid security on the same stock where traders look to "strip out" the option value of the hybrid with offsetting listed option and stock positions. Short positions may form part of a short stock portfolio offsetting a long share price index (SPI) futures portfolio – a popular trade which seeks to exploit windows of opportunity when the SPI price trades at an overextended discount to fair value. Short positions may be held as a hedge by a broking house providing dividend reinvestment plan (DRP) underwriting services or other similar services. Short positions will occasionally need to be adopted by market makers in listed equity exchange traded fund products (EFT). All of the above are just some of the reasons why a short position may be held in a stock but can be considered benign in share price direction terms due to offsets.

Market makers in stock and stock index options will also hedge their portfolios using short positions where necessary. These delta hedges often form the other side of a client's long stock-long put option protection trade, or perhaps long stock-short call option ("buy-write") position. In a clear example of how published short percentages can be misleading, an options market maker may hold a short position below the implied delta hedge level and that actually implies a "long" position in that stock.

Another popular trading strategy is that of "pairs trading" in which one stock is held short against a long position in another stock. Such positions look to exploit perceived imbalances in the valuations of two stocks and imply a "net neutral" market position.

Aside from all the above reasons as to why it would be a potential misconception to draw simply conclusions on short percentages, there are even wider issues to consider. ASIC itself will admit that short position data is not an exact science given the onus on market participants to declare to their broker when positions truly are "short". Without any suggestion of deceit, there are always participants who are ignorant of the regulations. Discrepancies can also arise when short positions are held by a large investment banking operation offering multiple stock market services as well as proprietary trading activities. Such activity can introduce the possibility of either non-counting or double-counting when custodians are involved and beneficial ownership issues become unclear.

Finally, a simple fact is that the Australian Securities Exchange also keeps its own register of short positions. The figures provided by ASIC and by the ASX at any point do not necessarily correlate.

FNArena has offered this qualified explanation of the vagaries of short stock positions as a warning to subscribers not to jump to any conclusions or to make investment decisions based solely on these unqualified numbers. FNArena strongly suggests investors seek advice from their stock broker or financial adviser before acting upon any of the information provided herein.

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