5 Stocks under Short Sellers' Radar – BGA, GXY, BKL, HVN, NEA

  • Feb 11, 2020 AEDT
  • Team Kalkine
5 Stocks under Short Sellers' Radar – BGA, GXY, BKL, HVN, NEA

Short sellers continue to search for stocks which they believe are inflated or riding high on some sort of fad. Hunting these kinds of stocks is not easy and requires a lot of analyses. Short-sellers look for same attributes that investors look while deciding which stocks to sell.

In Australia, the Australian Securities & Investment Commission (ASIC) deals with the matter of market regulations in Australia. ASIC has clearly segregated short selling transactions in two categories, namely naked short selling and covered short selling.

Short Selling transactions are required to be disclosed under the guideline of the ASIC:

  • Any short sale in the licensed market (includes major stock exchanges in Australia) is required to be disclosed.
  • Short sales are reported separately as short selling transaction & short selling position reporting.
  • Failure to comply with the disclosure requirement is an offence.

We have identified 5 Stocks that are currently under short sellers' radar. Let’s take a look at these stocks and their recent updates.

Bega Cheese Ltd Ordinary (ASX: BGA)

Australian cheese product manufacturer, Bega Cheese Ltd Ordinary has a market cap of around $914.83 million on ASX with stocks trading at around $4.3 per share (as at 1:30 PM on 11 February 2020).

Recently, while providing an update on bushfires in Bega region, the company informed that the fire has not directly impacted its sites in Bega but has impacted a number of its employees and dairy farm suppliers in the region.

The bushfires have had a minimal direct impact to the company overall or milk supply or its ongoing operations, however they have affected farm operations and infrastructure including the destruction of fencing and power lines.

In FY20, the company expects its normalised EBITDA to be in between $95 million – 105 million, compared to $115 million in FY2019. The company has been reviewing its supply chain and overhead cost to remain competitive and will continue to manage its supply chain for domestic and international trade to mitigate further downside risk.

BGA’s stock is currently trading at a PE multiple of 74.910x. The stock experienced a short interest of ~11.01% (as per the ASIC report of 5 February 2020).

Galaxy Resources Ordinary (ASX: GXY)

Lithium producer, Galaxy Resources Ordinary (ASX: GXY) has brine assets in Argentina, Canada and Australia. For the December 2019 quarter, the company’s production volume of lithium concentrate at Mt Cattlin was at 43,222dry metric tonnes. This figure was at the upper end of the production guidance range of 35,000 – 45,000 dmt.

During the quarter, sale of lithium concentrate stood at 29,778dmt. The figure was below the guided range of 30,000 - 45,000dmt. Out of the total sales, 14,778 dmt was shipped and 15,000 dmt was not shipped. The company delayed shipment of this product until Q1 2020, wherein 65% of the product was already paid for, by the customers.

The stock experienced a short interest of ~18.47% (as per the ASIC report of 5 February 2020). In the last one year, GXY stock provided a return of 44.76% in its share price. By AEDT (2:53 PM), GXY stock was trading at $1.112 with a market cap of around $442.24 million.

Blackmores Limited Ordinary (ASX: BKL)

Natural health solutions provider, Blackmores Limited Ordinary (ASX: BKL) currently has a market cap of around ~$1.56 billion on ASX. The company currently operates in an incredibly complex environment – where consumer expectations, competitive forces, government regulation and market conditions are constantly evolving.

In FY19, the company generated revenue of $610 million and Underlying net profit after tax of ~$55 million. The securities of BKL were placed on a trading halt on 10 February 2020 at the request of BKL, on account of a pending announcement regarding its half-year results and outlook for the full year, to give the market revised guidance on the full impact of coronavirus.

The stock experienced a short interest of ~8.45% (as per the ASIC report of 5 February 2020). In the past six months, BKL stock provided a return of 5.96% to its shareholders.

Harvey Norman Holdings Limited (ASX: HVN)

Harvey Norman Holdings Limited (ASX: HVN) is primarily involved in the operations of integrated retail, franchise, property and digital enterprise business

Harvey Norman’s Financial Achievements for FY2019

  • 4% increase in Reported Profit Before Tax (PBT) to $574.56 million
  • Robust Net Assets of $3 2 billion Robust Net Assets of $3.2 billion, a substantial 8 8% increase from prior year a substantial 8.8% increase from prior year
  • 18% PBT return on net assets
  • 4 5% increase in Earnings Per Share (EPS) 4.5% increase in Earnings Per Share (EPS) to 34 70 cents
  • Net debt to equity ratio a conservative 19.46%, an improvement from 25.5% last year

By AEDT 2:41 PM, HVN stock was trading at a price of $4.705, near to its 52 weeks high price of $4.720. The stock experienced a short interest of ~8.43% (as per the ASIC report of 5 February 2020).

Nearmap Ltd (ASX: NEA)

Digital content leader, Nearmap Ltd (ASX: NEA) recently acquired technology and intellectual property from Primitive LLC for a consideration of US$3.5 million which is allowing it to extract and disseminate roof geometry from widescale 3D content along with the new type of location intelligence to customers.

The company is expecting its FY20 Group annualized contract value to be in the range of $116 mn-$120 mn. It is scaling growth and is investing in automation and analytics to identify new customers and upsell opportunities. The company is also expecting its first enterprise sales of AI content in Australia and North America in 2H20 with commercialization in MapBrowser.

In the last month, NEA stock price witnessed a fall of 26.92%. The stock experienced a short interest of ~10.68% (as per the ASIC report of 5 February 2020).

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