Coca Cola HBC shares fizz as sellers caught short by Ukraine truce

Coca-Cola HBC traded at the top of the FTSE 100 for much of Thursday’s session, getting a lift along with other stocks exposed to Russia, after leaders at peace talks in Belarus agreed a ceasefire for Ukraine.

The Russian Trading System (RTS) index rallied more than 4% on the news.

It’s likely today’s surge in CCHBC is at least partly fuelled by short sellers having been caught out by the truce news and being forced to cover in a hurry.

Markit’s most recent data on Coca Cola HBC pegged it as having the 8th most-shorted stock in the FTSE 100 in terms of utilisation—shares borrowed versus shares available to loan—at 23%.

Hit by Ukraine after quitting Greece for London

Coca Cola Hellenic Bottling Company AG, once listed solely on Greece’s Athex exchange, switched its main listing to London in 2013, together with a move of its HQ to Switzerland.

It was initially formed in 2000, when the 30-year old Hellenic Bottling Company acquired the de-merged European operations of an Australian bottler for the Coca-Cola Company.

As the world’s second-largest Coca-Cola bottler and amongst the largest beverage distributors in Europe, CCHBC has become a principle firm of its type in Ukraine via its Coca-Cola Beverages Ukraine subsidiary.

Understandably, with its historical exposure to Greece as well as the more recent Ukraine burden, Coca Cola Hellenic has in recent years struggled with severe spikes in unforeseen costs and impairments.

These compounded existing financing risks that made its credit shaky. Its credit ratings teetered just above the ‘junk’ threshold in 2012.

Battererd balance sheet

CCHBC’s retained earnings (or accumulated deficit)—residual earnings from operations, not distributed to shareholders, an additional measure of financial health—was €4.34bn in the red at the end of its 2013 financial year and still a little above €4bn under water by the end of September 2014.

The firm did manage to eke out a 3% rise in profit to £240m last year, but with gross, operating and net margins all retreating by 0.3%-0.8%, CCHBC would be at the riskier end of the scale for most investors.

 Long-term underperformer

Apart from a few weeks last winter, Coca Cola Hellenic stock has not traded above its 200-day moving average since February 2014.

It may have formed a bottom last month though.

Whilst improving, momentum in my view doesn’t currently favour the upside on an absolute basis in this stock, judging by the daily chart.

A half-hourly view of trading in CCHBC Daily Funded Trade shows gains for any longs that were opened at the suggestion of the MACD ‘fast line’ system, embedded within City Index’s AT Pro platform.

Those who entered at that signal should obviously note upside momentum in this time frame is now clearly ‘overbought’.

Additionally, the attached Volatility Quality Index is slackening off judging by VQR’s main yellow line, whilst its longer-term MA (red) hasn’t budged much.

Excitement is dying down, but so too is this name’s ability to post sharp moves in either direction.