The Short Report

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    [0] => Array
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            [0] => ((TSE))
            [1] => ((AGO))
            [2] => ((GXY))
            [3] => ((FLT))
            [4] => ((SGT))
            [5] => ((SLR))
            [6] => ((UGL))
            [7] => ((MMS))
            [8] => ((WHC))
            [9] => ((KCN))
            [10] => ((MSB))
            [11] => ((COH))
            [12] => ((PDN))
            [13] => ((JBH))
            [14] => ((SBM))
        )

    [1] => Array
        (
            [0] => TSE
            [1] => AGO
            [2] => GXY
            [3] => FLT
            [4] => SGT
            [5] => SLR
            [6] => UGL
            [7] => MMS
            [8] => WHC
            [9] => KCN
            [10] => MSB
            [11] => COH
            [12] => PDN
            [13] => JBH
            [14] => SBM
        )

)

This story features FLIGHT CENTRE TRAVEL GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: FLT
The company is included in ASX200, ASX300 and ALL-ORDS

Guide:

The Short Report draws upon data provided by the Australian Securities & Investment Commission (ASIC) to highlight significant weekly and monthly moves in short positions registered on stocks listed on the Australian Securities Exchange (ASX).

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

Summary:

Period: Week to, and month to, August 29, 2013

Result season and its hangover continued to dominate shorting activity last week, and once again weekly decreases of more than one percentage point greatly outnumber weekly increases, in this case by seven to two. Transfield was the star on the weekly short increase side having shot up after posting its result in the period, with a subdued outlook still overhanging, while short decreases were more of a mixed bag. Shorters continue to bite the bullet on teflon Flight Centre, while a share bounce for heavily-shorted UGL has sparked a bit of covering and McMillan Shakespeare shorts were reduced ahead of the election. Transfield has moved into the Top 20 most shorted at 18, while otherwise there has been little movement in the table.

The numbers were balanced on a monthly basis with many familiar stocks still featuring. There were five monthly increases of two percantage points or more last week to five decreases. Atlas Iron is threatening to break into the top 20 shorted while incumbent Kingsgate's debt worries continue to provide fodder. Cochlear continues to be a shorters' favourite. On the reduction side, it's again Flight Centre featuring along with fellow consumer discretionary JB Hi-Fi, both of which caught the shorters out with solid results.

Weekly Short Increases

Shorts in Transfield Services ((TSE)) increased to 7.97% from 5.66%

Transfield reported in the period and brokers suggested a cashflow turnaround is underway with debt covenants no longer looming. The shares shot up, but brokers warned the outlook remained subdued nevertheless and the shorters appear to agree.  

Shorts in Atlas Iron ((AGO)) increased to 6.52% from 5.54%

Atlas posted a big miss with its result the week before, but improving Chinese data has been floating all iron ore boats more recently. Rising costs are proving Atlas’ biggest headwind, and the shorters are keen.

Weekly Short Decreases

Shorts in Galaxy Resources ((GXY)) decreased to 2.33% from 0.70%

Galaxy offered a rights issue last month to raise capital and the increase in shorts likely reflects an arbitrage play on that issue. GXY is not covered by FNArena brokers.

Shorts in Flight Centre ((FLT)) decreased to 5.77% from 7.11%

Flight Centre shorts dropped from about 9% to 7% the week before last, taking FLT out of the top 20, and from 7% to under 6% last week. After yet another strong result in tougher times, this once popular target is seeing the shorters throw in the towel.

Shorts in Singapore Telecom ((SGT)) decreased to 1.75% from 3.06%

SingTel basically issued a full-year profit warning at its quarterly the week before hence despite generally positive views from brokers, the share price fell over the period. Shorters have likely taken profits.

Shorts in Silverlake Resources ((SLR)) decreased to 1.03% from 2.32%

Silverlake has raised capital and will raise more with an SPP next month. Movements in short positions likely reflect plays against the new capital issue.

Shorts in UGL ((UGL)) decreased to 10.99% from 12.10%

The only thing missing from UGL in 2013 has been the Y, albeit the shares have grafted back since the big profit warning in May. The proposed demerger also offers up opportunities for shorters, and despite this reduction UGL has only slipped to 6 from 4 in the top 20.

Shorts in McMillan Shakespeare ((MMS)) decreased to 3.23% from 4.28%

The period in question preceded the election and the polls increasingly tipped a solid Coalition victory which would in theory end all McMillan’s FBT problems.

Shorts in Whitehaven Coal ((WHC)) decreased to 7.61% from 8.64%

Whitehaven has slipped to 20 from 16 in the top 20 with this reduction but approval for the Maules Creek mine continues to be delayed in a climate not too inspiring for coal. WHC draws no Buy ratings from FNArena database brokers.

Monthly Short Increases

Shorts in Atlas Iron increased to 6.52% from 2.38%

See above.

Shorts in Kingsgate Consolidated ((KCN)) increased to 9.24% from 5.11%

Kingsgate guided to no growth in production in FY14 and the company’s debt is increasing in low gold price environment. Three FNArena database broker cover KCN and they all have Sell ratings post the FY13 result. Fodder for shorters.

Shorts in Mesoblast ((MSB)) increased to 5.93% from 2.72%

Mesoblast for some is the great hope in stem cell technology but the company has been recently frustrated by regulator delays to trials and is hoping for better things in FY14. MSB posted a miss in the period with its result and the shorters have the taste.

Shorts in Transfield Services increased to 7.97% from 4.90%

See above.

Shorts in Cochlear ((COH)) increased to 11.16% from 8.95%

Cochlear has retained its Top 20 spot at number 5 this week with the ongoing story being one of mounting competition in the global hearing device space and a lot at stake from COH’s new N6 product following the costly recall of the N5.

Monthly Short Decreases

Shorts in Paladin Energy ((PDN)) decreased to 6.25% from 14.01%

Paladin will continue to make its way out of the monthly list now the capital raising arbitrage play is over, unless there is a new development.

Shorts in Flight Centre decreased to 5.77% from 12.53%

See above.

Shorts in JB Hi-Fi ((JBH)) decreased 8.64% from 15.18%

Once number one, JB Hi-Fi is quietly moving down the top 20 list – this week from to 16 from 14 – post a solid earnings result and improving consumer confidence in the wake of RBA rate cuts.

Shorts in St Barbara ((SBM)) decreased to 1.90% from 4.69%

Shorts in St Barbara fell sharply the week before on the gold price rally and this monthly figure is still reflecting that fall.

Shorts in Whitehaven Coal decreased to 7.61% from 10.68%

See above.
 

Top 20 Largest 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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