The Short Report

This story features METCASH LIMITED, and other companies. For more info SHARE ANALYSIS: MTS

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 amounts 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 May 31, 2018

Last week saw the ASX200 bottom out under 6000 before beginning a choppy recovery this week.

While the prior week saw quite a lot of movement on the short table, last week saw very little at all. Only one stock saw a move of one percentage point or more, being APN Outdoor ((APO)), which fell to 7.1% from 9.7%. See below.

Beyond that, special mention goes to Metcash ((MTS)), which saw shorts rise to 8.7% from 7.9% after issuing a profit warning.

We’ll also note BWX ltd ((BWX)) has dropped to 6.6% from 7.3% in the wake of its takeover offer.

AMP ((AMP)) Watch: 3.7% last week from 3.5%. 

Weekly short positions as a percentage of market cap:

10%+

SYR    19.7
DMP   16.3
JBH     15.5
GXY   14.5
MYR   13.3
NAN   12.4
AAC   11.9
ORE    11.9
VOC   11.8
GXL    11.2
IVC     10.9
IGO     10.7
NWS   11.2
HT1     10.0

In: IGO           Out: HT1                                            

9.0-9.9

GEM, HT1, MYX

In: HT1           Out: IGO, APO
                                                                                               
8.0-8.9%

MTS, BIN, AAD, HVN, MLX, IPH, PLS

In: MTS                       Out: RFG, GMA

7.0-7.9%

GMA, FLT, TPM, WEB, BGA, IFL, BKL, QUB, SFR, RFG, APO

In: APO, GMA, RFG             Out: MTS, BWX

6.0-6.9%

RSG, ING, TGR, CSR, BWX, SEK, KAR, MOC, BAP, PRY

In: BWX                    

5.0-5.9%

ALX*, SUL, NSR, AHG,  MYO, BEN, CCP, NUF, IMF, JHC, NXT, BOQ, GTY

In: GTY                     

                       
Movers & Shakers

Last week APN Outdoor upgraded its FY18 earnings guidance in a rare “confession session” anti-warning. The share price quickly shot up 13% and given short positions fell to 7.1% from 9.7%, short-covering was clearly involved.

The upgrade suggested that the damage done to APN’s earnings prospects after having lost the Yarra Trams contract has now been overcome with new business.

APN Outdoor is currently in a bidding war for HT&E’s ((HT1)) outdoor advertising business, Adshel, along with rival oOh!media ((OML)). APN has gazumped oOh!media's $470m bid with $500m, but not all cash. Brokers suggest HT&E would prefer a cash bid, which would likely require APN to raise capital.

And no doubt HT&E is waiting to see if oOh!media comes back again.

The irony is that up until 2013, what are now known as HT&E and APN Outdoor were both part of the same company, APN News & Media.

We note shorts in HT&E fell to 9.4% last week from 10.0%.

oOh!media did spend some time on the 5% plus shorted table but has not been spotted for many weeks.

ASX20 Short Positions (%)

* Replaces WFD for the moment

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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