While Syrah Resources, Domino’s Pizza Enterprises, JB Hi-Fi and Myer have been some names that we have seen to be the ones that are targeted under short selling on a regular basis, few other names that have taken the short selling spots lately have been discussed herein below:

Greencross Limited

Lowering of full year guidance:Greencross Limited’s (ASX: GXL) stock climbed up 2.29 per cent on June 18, 2018 while the group is under short selling radar with over 11% short positions. While the first half result was decent, the group’s downgraded profit guidance (by about 9 per cent) impacted the stock performance lately. GXL also plans to cut costs by about 5 per cent as part of a strategic review. The group expects FY18 EBITDA between $97 million and $100 million owing to non-cash impairments. It however aims to get back to earnings growth in FY19. The group’s earlier performance was in line during 1HFY18 wherein revenue grew by 9% to $433.3 Mn as against prior corresponding period (pcp). The top-line growth was mainly supported by 4.5% sales growth of Group LFL and network expansion during the same period. EBITDA increased by 9% to $54.4 Mn and underlying EBITDA increased by 8% to 56 Mn. However, the top line growth in the first half translated directly into bottom line growth. As a result of this, underlying NPAT has shown growth of 11% to $24.2 Mn as against of $22.1 Mn in 1HFY17. The NPAT margin stood at 5.6%, up by 8 bps on year on year basis. On the balance sheet front, current ratio and quick ratio stood at 0.72x and 0.30x, respectively in the six months as at 31 December 2017 while debt to equity ratio was moderately down to 0.60x in 1HFY18 from previous six months (0.62x). On the other hand, the group has expanded its network by adding 8 retails stores, 8 veterinary clinics and 3 specialist and emergency practices during the period.


Network Expansion Trend (Source: Company Reports)

Apart from the aforesaid facts, the Board of Directors appointed Lucas Barry as a Chief Financial Officer of the company and is expecting his support to grow the integrated multi-channel pet care value proposition across Australia and New Zealand.  In one year, the stock price fell by 19.56 per cent as at June 15, 2018 and is trading above its 52-week low levels ($3.840).  Hence, we maintain our “Hold” recommendation on the stock at the current market price of $ 4.480, considering the outlook while GXL has been noted to be at acceptance 20% haircut to the market value of securities during collateral valuation (as at June 18, 2018).
 

Genworth Mortgage Insurance Australia Limited

Update on Buy-Back Shares Event: Another name that was added to short selling stocks’ list is Genworth Mortgage Insurance Australia Limited (ASX: GMA) with over 10% short positions. Since listing on the Australian Securities Exchange, the group has distributed all of its after-tax profits to the shareholders and returned more than $1 Bn (i.e., $2 per share), to shareholders through ordinary and special dividends and other capital management initiatives such as buy-backs and capital reductions event. Following this, the group has recently updated to the market that it has bought back 297,375shares via on-market trade for the consideration of $778,498.01. Further, it intends to buy back shares with an aggregate consideration of $78,892,988.47. The group’s financial position remains strong with $3.3bn in cash and investments and $1.2bn in unearned premium reserve (UPR) as of March 31, 2018. At the end of 2017, the company maintained a regulatory capital base of $2.1 Bn and a coverage ratio of 1.93 times the Prescribed Capital Amount (PCA) on a Group (Level 2) basis. As at 31 March 2018, the group had reduced its PCA to 1.84 times, reflecting the completion of the $100 million on-market share buy-back and the non-renewal of a $50 Mn layer of reinsurance. However, the group focuses on to redefine its core business model wherein the undertaken extensive work will develop a broader suite of capital and risk management solutions for lenders that complement its traditional Lenders Mortgage Insurance (LMI) offering.


Unearned premium by year as at 31 March 2018 (Source: Company Reports)

Besides the above updates, the shareholders of the company have recently approved several resolutions in AGM meeting such as buy-back event, re-elected Ian Macdonald and Leon Roday as a Director of the company, remuneration report, and granted share rights to Georgette Nicholas, Chief Executive Officer and Managing Director. The stock price was up by 6.05 per cent in past one month as on June 15, 2018. Given the trading volatility in view of property market scenario, we maintain our “Hold” recommendation on the stock at the current price of $ 2.630.
 

Orocobre Limited

Update on Cauchari Joint Venture Project:Orocobre Limited (ASX: ORE) has recently announced an update on Cauchari resource estimate for its Cauchari Joint Venture Project in Jujuy, Argentina based on the Phase II drilling results. According to the release, the resource of Cauchari has seen the rise of 3.0 megaton Lithium Carbonate Equivalent for the 2017/2018 programme. The exploration program is being overseen by JV partner Advantage Lithium Corp who holds 75% interest at Cauchari site while Orocobre owns 29% of Advantage Lithium’s issued capital and has 25% direct interest in the joint venture. Further, the management stated that the group will continue to deliver the quality programme in years ahead with the support of its partner and JV manager Advantage Lithium. Besides this, Phase III drilling is in progress to overhaul its inferred resource and underlying brine to measured and indicated resources for the definitive feasibility study (DFS) scheduled for completion in Q2 2019.


Cauchari Project Lithium and Potassium Resource Estimate as of May 2018 (Source: Company Reports)

Moreover, ORE disclosed to ASX that one of its directors, Leanne Heywood had a direct interest in the company and acquired 2,250 more ordinary shares via on-market. Another director, Robert Hubbard had an indirect interest in the company and acquired 5,000 more ordinary shares via on-market Purchase with the total consideration of $24,750. Meanwhile, the stock has fallen 12.89 per cent in the past six months as at June 15, 2018 as the group reported for softness in production for the March quarter (2,802 tonnes, down 29% from 3,937 tonnes in the December quarter) due to adverse natural conditions noted at Olaroz. Based on foregoing developments, we maintain our “Hold” recommendation on the stock at the current price of $ 5.150, while the stock has attracted for short positions over 12%.
 

Australian Agricultural Company Limited

Removal from S&P/ASX200 Index:Australian Agricultural Company Limited (ASX: AAC) reported its FY18 earnings results which were mostly consistent with the preliminary result ranges announced in April month and recorded statutory net loss after tax of $102.6 Mn in FY18 as compared to the statutory net profit of $71.6 Mn in FY17. The earnings were impacted by several factors such as stiff competition, reduced volumes due to less reliance on external supply, and increased input costs driven by dry weather conditions.Nevertheless, the management will be mainly focused on maintaining its balance sheet and prudent debt coverage ratios and optimizing supply chain, thus ensuring its long-term sustainable growth within the tight economic scenario.On the balance sheet front, the company enjoys virtual debt-free status along with cash & cash equivalent reserve of 11.2 Mn as at 31 March 2018. Following this, the current ratio and quick ratio stood at 3.48x and 1.19x, respectively in FY18, representing adequate liquidity to fulfill any shortcoming liability in near future. The group is also looking for options regarding its underperforming $100 million abattoir and beef business near Darwin. On the other hand, AAC stock has been removed from S&P/ASX All Australian 200 Index, effective from June 18, 2018 as per June 2018 Quarterly Rebalance of the S&P/ASX Indices. Meanwhile, the stock climbed up 3.77 per cent in the past three months and is trading close to 52-week low leve


FY18 Cash Flow Statement (Source: Company Reports)

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