2 Most Shorted Stocks - JBH, ORE

JB HI-FI LIMITED 

Analyzing Performance in FY 2018: In FY 2018, JB HI-FI LIMITED (ASX: JBH) garnered net profit after tax or NPAT amounting to $233.2 million which implies the YoY growth of 12.3%. As per ASIC or Australian Securities and Investments Commission, as on October 9, 2018, JBH was shorted 19.9%. In Australia, it generated total sales amounting to $4.54 billion which implies the YoY growth of 9.4% in FY 2018. During the same period, the division witnessed hardware and services sales growth of 11.9% YoY thanks to the computers, communications, games hardware, audio as well as drones categories.


Dividends (Source: Company Presentation)
In the same division, the software sales witnessed the decline of 8.5% YoY in FY 2018 primarily because of a fall in the movies category. In JB HI-FI New Zealand, the company recorded sales amounting to NZD231.5 million in FY 2018 which implies marginal fall of 1.1% on the YoY basis. The company’s Good Guys business witnessed the positive momentum in FY 2018 as, in the same period, it witnessed the sales amounting to $2.10 billion which implies the growth of 67.0% YoY.

What JB HI-FI Plans to Do Ahead: As per the management of JB HI-FI, it plans to come with 5 JB HI-FI Australia stores in the FY 2019. Apart from this, the company would be opening 2 The Good Guys stores and during the same year it plans to shut down 1 JB HI-FI New Zealand store. The management also believes that the company would be able to generate total sales of approximately $7.1 billion of which JB HI-FI Australia is expected to contribute $4.75 billion, The Good Guys would be generating $2.15 billion while JB HI-FI New Zealand is expected to garner NZD0.22 billion.

Technical Overview: A technical indicator, Exponential Moving Average (EMA), has been applied on the daily chart of JB HI-FI Limited using the default values. As per the observation, the stock price has crossed the EMA and is expected to move downward i.e. it was a bearish crossover. However, the current market price is A$24.520. Thus, we maintain our “Expensive” rating on the stock at $ 24.520.
 

OROCOBRE LIMITED

Deep Look into Cash Flow Statement: Orocobre Limited (ASX: ORE) ended FY 2018 with total cash from operating activities amounting to US$33.3 million thanks to the receipts amounting to $112.7 million from the customers. These receipts were garnered by Olaroz because of the increased average prices. The company’s cash used in the investments amounted to $19.2 million in FY 2018 and the highest expense was related to the purchase of plant and equipment. However, the company also recorded cash proceeds amounting to $3.3 million from unloading the assets.


ORE’s Underlying Net Profit (Source: Company Presentation)

Orocobre saw cash amounting to $261.3 million which was provided by the financing activities. The primary contributor for this is the proceeds amounting to $284.2 million which the company has garnered through the issue of shares (strategic placement as well as rights issue) which got reduced by the transaction costs. As per ASIC or Australian Securities and Investments Commission, as on October 9, 2018, Orocobre was shorted 16.8%.

How Orocobre’s Management Views Broader Market Moving Ahead: According to the management of Orocobre, the company faced certain challenges in FY 2018 like the inclement weather because of which its annual production got affected. As per the management, the questions related to the global market fundamentals in regard to the lithium were weighing on the investors’ sentiments because of the fall in the prices in the Chinese spot market. The management expects that the price volatility would remain but in the short-term and additionally, they stated that Chinese spot market does not represent a significant portion of the global market. The management of Orocobre believes that moving forward, the fundamentals are expected to be intact in the long-term because of the support from the consumers, regulators as well as government. 

Technical Analysis: A technical momentum indicator, Relative Strength Index or RSI, has been plotted in the daily chart of Orocobre Limited and the default values have been used for the same. As per the observation, the 14-day RSI is near the oversold region and hence, a rebound is expected to be witnessed. Thus, a bullish momentum might come. As a result, we maintain our “buy” rating on the stock at the price of A$3.700.

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