The Short Report

Array
(
    [0] => Array
        (
            [0] => ((NRW))
            [1] => ((BPT))
            [2] => ((TSE))
            [3] => ((PDN))
            [4] => ((ASL))
            [5] => ((KCN))
            [6] => ((HFA))
            [7] => ((SLR))
            [8] => ((FXJ))
            [9] => ((TFC))
            [10] => ((AWC))
            [11] => ((CAB))
            [12] => ((BLY))
            [13] => ((DSH))
            [14] => ((COH))
            [15] => ((PDN))
            [16] => ((WSA))
            [17] => ((FXJ))
            [18] => ((PPT))
            [19] => ((SGT))
            [20] => ((GUD))
            [21] => ((SEK))
        )

    [1] => Array
        (
            [0] => NRW
            [1] => BPT
            [2] => TSE
            [3] => PDN
            [4] => ASL
            [5] => KCN
            [6] => HFA
            [7] => SLR
            [8] => FXJ
            [9] => TFC
            [10] => AWC
            [11] => CAB
            [12] => BLY
            [13] => DSH
            [14] => COH
            [15] => PDN
            [16] => WSA
            [17] => FXJ
            [18] => PPT
            [19] => SGT
            [20] => GUD
            [21] => SEK
        )

)

This story features BEACH ENERGY LIMITED, and other companies.
For more info SHARE ANALYSIS: BPT
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, March 5, 2014.

A week after the end of the result season, shorting activity has evened out in terms of increases and decreases following an earlier bias towards decreases following a largely successful month. Last week saw some result-related movements from late reporters such as NRW Holdings, while otherwise a lingering focus on debt and commodity prices features in the six short increases of one percentage point or more. Six short decreases occurred for disparate reasons.

Monthly short increases/decreases were also balanced at 8/7 of 2ppt or more with many familiar names on either side. Shorts have continued to build in the likes of Boart Longyear while Cochlear is back in the frame yet again, and on the decrease side stocks such as Fairfax, Perpetual and Seek are still seeing the shorerts withdraw after surprise earnings results. We welcome Ausdrill back in at the bottom of the Top 20 shorted list now that Western Areas' placement is complete.
 

Weekly Short Increases

Shorts in NRW Holdings ((NRW)) increased to 8.36% from 4.90%

Having posted a weak profit result late in February, NRW’s share price has fallen ever since on no sight of improving conditions. The company is looking at acquisitions but has a contract vacuum in FY16 at this stage.

Shorts in Beach Energy ((BPT)) increased to 4.35% from 2.99%

Beach posted a cracking result in late February and has received a lot of positive market attention for its shale oil potential to boot, but many an analyst warns of the high-risk long-datedness of unconventional prospects and this leaves BPT set for a reality check, or at least the shorters think so.

Shorts in Transfield Services ((TSE)) increased to 7.70% from 5.74%

Despite attracting controversy with its Detention Centre contract win, Transfield is a company struggling with high gearing and a competitive environment and brokers are not convinced FY14 guidance is achievable.

Shorts in Paladin Energy ((PDN)) increased to 11.60% from 9.76%

Every day the uranium price fails to rally, Paladin burns cash. With little sign of a near term upswing, shorters are no doubt betting it’s only a matter of time before PDN is forced to raise more capital, having exhausted about every other defence.

Shorts in Ausdrill ((ASL)) increased to 9.86% from 8.27%

While Ausdrill posted a decent result last month, its share price fell last week ahead of this week’s gold price rebound. ASL’s fortunes are inexorably linked to gold mining service demand and miners are reining in their capex.

Shorts in Kingsgate Consolidated ((KCN)) increased to 9.60% from 8.33%

Short interest in Kingsgate has been rekindled in the wake of the company’s result which showed a fall in cash balance and increase in gearing. Kingsgate's funding capacity with regard its development plans is becoming less viable as the months go past. The shorters smell a raising. KCN has moved to 19 from 20 on the Top 20 most shorted.

Weekly Short Decreases

Shorts in HFA Holdings ((HFA)) decreased to 0.00% from 2.61%

HFA’s share price fell in the wake of its result but the coverage is not being updated from FNArena database brokers. This decrease fully reverses the previous week’s increase.

Shorts in Silver Lake Resources ((SLR)) decreased to 5.03% from 6.84%

Silver Lake announced a capital raising last month and last week announced it would close down its Murchison project to concentrate on its Mt Monger project. SLR shorts will diminish as they are matched out against new shares.

Shorts in Fairfax Media ((FXJ)) decreased to 7.13% from 8.30%

Fairfax shocked the nation at its result release last month by reporting an increase in earnings and a lift in dividend. Last week FXJ departed the Top 20 after a long tenure.

Shorts in TFS Corp ((TFC)) decreased to 0.04% from 1.17%

Forestry company TFS has seen a share price rally in the wake of government support for a reopening of previously prohibited Tasmanian forest acreage.

Shorts in Alumina ((AWC)) decreased to 2.93% from 4.01%

Alumina’s share price has struggled since its announced 2013 loss on the reality of a global alumina/aluminium market in surplus. Shorters are cashing in.

Shorts in Cabcharge ((CAB)) decreased to 8.04% from 9.12%

A surprisingly positive result prompted a jump in Cabcharge shares since last month and with decrease CAB has now moved out of the Top 20 despite a regulatory cloud still engulfing the company.

Monthly Short Increases

Shorts in Kingsgate Consolidated increased to 9.60% from 4.73%

See above.

Shorts in Beach Energy increased to 4.35% from 1.46%

See above.

Shorts in Boart Longyear ((BLY)) increased to 9.54% from 6.96%

Boart’s weak result shocked no one but even though the company has avoided covenant breaches, its outlook remains challenged. A strategic review is underway and might involve capital restructuring. Five of seven FNArena brokers rate BLY a Sell. The stock sits at 20 on the Top 20.

Shorts in Dick Smith Holdings ((DSH)) increased to 4.71% from 2.43%

Brokers like Dick but for the stoic band of bricks & mortar retail shorters, Dick’s listing represented a new toy in the toy box. A prospectus-beating result failed to stir up market excitement.

Shorts in Ausdrill increased to 9.86% from 7.60%

See above.

Shorts in NRW Holdings increased to 8.36% from 6.14%

See above.

Shorts in Cochlear ((COH)) increased to 17.13% from 14.97%

Outside of ETFs and non-ordinary share listings, Cochlear is the most shorted stock on the market and has been on the podium for a very long time. Despite constant talk of market share attack following the N5 recall, COH has defied the shorters and held up as a market favourite. One day, perhaps, the shorters will win.

Shorts in Paladin Energy ((PDN)) increased to 11.60% from 9.52%

See above.

Monthly Short Decreases

Shorts in Western Areas ((WSA)) decreased to 9.37% from 13.16%

Western Areas posted a decent result last month but also completed a share placement. This big reduction in shorts, dropping WSA to 19 from 7 on the Top 20, represents the closing trade on a placement play.

Shorts in Fairfax Media ((FXJ)) decreased to 7.13% from 10.70%

See above.

Shorts in Cabcharge decreased to 8.04% from 11.13%

See above.

Shorts in Perpetual ((PPT)) decreased to 2.56% from 4.96%

Perpetual was for some time seemingly a perpetual loser even as the stock market rose all last year but last month’s solid result represented a turnaround for the fund manager, and along with the earlier Trust Co acquisition, and the stock has risen ever since.

Shorts in Singapore Telecom ((SGT)) decreased to 3.82% from 6.18%

SingTel shorts fluctuate with tedious regularity without noticeable reason beyond perhaps a telco pairs trade. An announced restructure of the Singapore business has prompted a share price rally since a reasonable quarterly result.

Shorts in GUD Holdings ((GUD)) decreased to 5.95% from 8.05%

GUD reported very early in the result season and enjoyed 15 minutes of fame but its share price has since trailed off again as the company struggles with its premier brands. Having once been a Top 20 stalwart, GUD has fallen well out of the running as the shorters cash in.

Shorts in Seek ((SEK)) decreased to 1.07% from 3.07%

The odds were against Seek posting a strong profit result given the weakening employment situation in Australia, but it’s hard to keep a good online pioneer down. Seek’s stock price has skyrocketed since.
 

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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