Rbs - Round Up - 010909

This material has been produced by RBS sales and trading staff and should not be considered independent.

The Round Up 1 September 2009 Issue No. 166 The Round Up is a comprehensive daily note produced by the RBS Warrants team providing an overview of market movements along with quality ideas for warrant traders and investors.

In today’s issue Global Market Action

Scoreboard, commentary

Aussie Market Action

SPI Comment, Events & Dividends

STO (STOVZJ)

Trading Buy – A play on LNG

WOWKZF/WESKZT

MINI Pairs Trade – WOW enters hardware

TLS (TLSSZX)

MINI Trading Buy – Buy the dips

Round Up Corner

NEW – Trading warrants

Equities Move

Last

% Move

Range

Volume

ASX 200

-10.5

4479.1

-0.2%

-18 to +48

$6.3 bn(H)

SPI - yesterday

-12.0

4471.0

-0.3%

-25 to +51

35,118(A)

Dow Jones

-47.9

9496.3

-0.5%

-108 to -1

Avg

S&P 500

-8.3

1020.6

-0.8%

-14 to -4

Avg

Nasdaq

-19.7

2009.1

-1.0%

-31 to -15

Avg

FTSE

Commodities Move

Last

% Today

% Past Month

Oil-WTI spot

-3.02

69.72

-4.2%

Gold Spot

-3.95

951.05

-0.4%

Nickel (LME)

865.01

+0.3% -0.3% +15.2%

Aluminium (LME)

84.69

+4.0%

Copper (LME)

293.21

+17.1%

Zinc (LME)

84.16

+11.5%

Silver

14.90

+7.0%

Sugar

+0.87

24.39

+3.7%

+31.1%

Dual Listed Companies (DLC’s) Move NWS (US)

%Move

Last

AUD Terms

Diff to Aus

-0.29

-2.2%

12.64

14.98

-22.4 c

-0.8 p

-0.2%

£3.753

7.24

-18.9 c

RIO (UK) BLT (BHP UK) BXB (UK)

American Depository Receipts (ADR’s) Move

%Move

Last

AUD Terms 62.30

Diff to Aus

BHP (US)

-1.76

-2.7%

36.91

+10.7 c

AWC (US)

-0.08

-1.4%

TLS (US)

-0.49

-3.4%

5.47

1.62

-5.0 c

13.74

3.26

-0.4 c

ANZ (US)

+0.61

+3.5%

17.91

21.22

-7.0 c

WBC (US)

-0.16

-0.2%

102.04

24.18

-19.0 c

NAB (US)

+0.35

+1.5%

23.85

28.26

-22.2 c

LGL (US)

-0.11

-0.5%

23.12

2.74

-3.1 c

RMD (US)

+0.12

+0.3%

45.91

5.44

-0.0 c

JHX (US)

-0.65

-2.2%

28.85

6.84

-11.4 c

PDN (CAN)

+0.24

+5.8%

4.39

4.75

+15.2 c

Overnight Commentary United States Commentary US markets recovered from their lows, but still finished in the red, after Chinese weakness hurt commodity names, and as financials dragged on concerns that their recent recovery had gone too far too quickly. Better manaufacturing data wasn't enough to boost indices, with Dow closing down 48pts and S&P 500 off 8.3pts. Eco - Genrally better manufacturing data for August, from the Chicago Purchasing Manager improving to 50.0 vs 48.0 exp'd and 43.4 previous, and Milwaukee Manufacturing at 56.0 vs 48.0 exp'd and 45.0 previous, although the Dallas Manufacturing improved but still contracting at -9.1% vs -14.0% exp'd and -23.4% previous. Resources - Alcoa lost 3.6% and Caterpillar fell 3% as the LME exchange was closed but Shanghai tumbled on concerns of a slowdown and lending curbs will limit growth. Crude also fell below the $70/barrel level, Freeport-McMoRan lost 3.8% and ExxonMobil fell 1.4%. Financials - AIG lost 9.8% to top the S&P 500 losses after concerns over its valuations as Barron's called its stock overpriced, after the shares more than tripled in August. Elsewhere Citi down 4.4%, BoA lost 2.2% and AmEx fell 1.2%. Energy - Baker Hughes Inc lost 9.6%, to be the worst on the S&P 100, after the world's third-largest oilfield-services provider agreed to buy BJ Services for $5.5bn, a 16% premium for the natural-gas and deepwater bsiness. BJ Services rose 4.1%. Disney - Walt Disney fell 3% after it announced ithad agreed to buy Marvel Entertainment for $4bn in cash and scrip, sending the comic book maker surging 25%. Financial - KKR Financial Holdings, the debt-affiliate of buyout firm KKR & Co, advanced 19% after it was raised to 'market outperform' on improved liquidity, net cashflows to shareholders and positive trends in credit markets.

United Kingdom & Europe Commentary European bourses fell after the Shanghai Composite market plunged 7%. The FTSE Eurofirst 300 dropped 0.65%, the DAX was off 1.1% with the CAC also off 1.1%. London was closed for a public holiday. Euro Banks - Falling global equity markets did little to help the banks. BNP was off 1.7%, SocGen dropped 1%, Deutsche Bank was 2.5% lower and Commerzbank ended down 1.3%. Greek Banks were hit hard by a poor retail sales number. Industrials - HeidelbergCement fell 2.5% after recently announcing China and India were improving. Holcim fell 1.2%, Bouygues dropped 1.4%. Norwegian solar power group Renewable Energy Corp which recently announced a new plant in Singapore sank 4.6%.

Resources Commentary Miners - Metal and mining groups were lower. French miner Eramet dropped 2.6%, aluminium producer Norsk Hydro fell 2.9% and ArcelorMittal was off 2.8%. Energy - Crude was hit with the China weakness falling below $70 per barrel. Total fell 0.8%, Statoil was off 2.9% and Repsol ended 1% lower.

SPI Commentary The SPI traded down 12pts or 0.27% to 4471. Open at 4501 with a high of 4534 and a low of 4458. Volume 34,050. Overnight the SPI traded down 10pts to 4461.

SPI Intraday

SPI Daily

*SPI report taken from the 9:50am open to the 4:30pm close on the previous trading day. Charts taken from IRESS

Upcoming Economic Events for the Week Monday

AUS

Tuesday

AUS

TDMI inflation gauge, HIA new home sales, RBA private sector credit, wages bill, real business sales, company profits, real business inventories, small business profits

US

Chicago PMI AIG/PWC manufacturing PMI, building approvals, real net exports, current account balance, real public demand, RBA cash rate decsiion

US Wednesday

AUS

Real GDP

US Thursday

ISM, pending home sales, construction spending, ADP employment report

AUS

AIG/CBA services PSI, trade balance

US Friday

US FOMC minutes

AUS US

Non farm payrolls, unemployment rate, average hourly earnings, consumer credit

*Dates are indicative only and may change

Upcoming Dividends ExDivDate

Security

Description

Div (c)

Yield

Frk(%)

PayDate

2-Sep-09

ALL

Aristocrat Leisure

4.5

3.57%

100

29-Sep-09

2-Sep-09

TTS

Tattersalls Limited

11

8.47%

100

2-Oct-09

3-Sep-09

NWS

News Corp

6

0.9%

0

14-Oct-09

4-Sep-09

AGK

AGL Energy

28

3.87%

100

30-Sep-09

7-Sep-09

AMP

AMP Limited

14

4.72%

50

16-Oct-09

Trading Buy: Santos Limited (STOVZJ) – A play on LNG STO made a move to $16 yesterday where it found some resistance and closed at $15.80. Look for the stock to consolidate its recent move up before moving to $16.50 which was resistance in March. RBS Research have a buy recommendation on STO with a $16.50 target price. STO reported NPAT of $102mln which beat consensus. The stock went ex dividend 22c and will not fully underwrite the DRP which suggests that the company has a strong funding position. Oil and gas stocks have been strong following results, with STO underperforming WPL and OSH. STO remains RBS Research favourite pick. Buy STOVZJ for a bounce to $16.50

Source: IRESS

STO has been moving higher since July and recently broke resistance at $15. The stock now looks headed to its march high of $16.50 which is also RBS Research target price. STO has transformed into an LNG stock with two recent deals being added to the portfolio of potential LNG developments, bringing the total number of possible LNG assets, at differnent stages of development, up to five. Given this new strategic direction, STO appears to predominantly position itself increasingly as an LNG player. RBS Research believe that this makes the company attractive as a target to international oil companies seeking to participate in the LNG race from an early stage.

RBS MINIs over STO Security STOVZJ

ExPrc 24-Sep-09

Stop Loss

CP

ConvFac

$ 16.00

Call

Delta

4

Description 0.10

Trading Call Warrant

STOVZK

29-Oct-09

$ 14.00

Call

4

0.20

Trading Call Warrant

STOVZY

24-Sep-09

$ 14.00

Put

4

-0.03

Trading Put Warrant

STOVZZ

29-Oct-09

$ 13.00

Put

4

-0.02

Trading Put Warrant

RBS Warrants over STO Security

ExDate

ExPrice

CP

ConvFac

Delta

Description

STOKZD

$ 8.8526

$

9.93

Long

1

1

MINI Long

STOKZE

$ 7.8670

$

8.85

Long

1

1

MINI Long

STOKZT

$22.5094

$ 20.47

Short

1

1

MINI Short

STOKZU

$20.5563

$ 18.73

Short

1

1

MINI Short

MINI Pairs Trade: Woolworths (WOWKZF)/ Wesfarmers (WESKZT) – WOW enters hardware WOW announced to the market that they plan to enter the Australian hardware and home improvement market. This is a logical step in WOW’s domestic growth profile and RBS Research believe it could add $1.25 - $1.75 to WOW’s valuation. Given WES outeperformance over 2009 compared to WOW and the potential market share loss in their Bunnings business, we believe the way to trade the news is to go long WOW and short WES through WOWKZF and WESKZT

Source: IRESS

• • •

Woolworths’ intends to acquire, through a joint venture with US home improvement retailer Lowe’s, hardware wholesaler Danks for an enterprise value of A$87m (securing immediate scale, infrastructure and expertise), as well as establish a Big Box H&HI format (also via the JV), to compete directly with Bunnings. Investment and proceeds in the JV are to be split two-thirds Woolworths and one-third Lowe’s, and RBS Research estimate cA$3.5bn in sales and cA$330m in JV EBIT is possible should the company achieve its plan of 150 sites over five years RBS Research believe a successfully established big box format could enhance valuation $1.25 - $1.75 per share

RBS MINIs over WOW Security

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

WOWKZD

$20.1875

$

21.01

Long

1

1

MINI Long

WOWKZE

$18.5064

$

19.27

Long

1

1

MINI Long

WOWKZF

$23.6341

$

24.59

Long

1

1

MINI Long

WOWKZR

$37.1202

$

35.13

Short

1

1

MINI Short

WOWKZT

$34.2012

$

32.52

Short

1

1

MINI Short

RBS MINIs over WES Security

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

WESKZG

$12.7721

$ 14.63

Long

1

1

MINI Long

WESKZH

$10.5496

$ 12.20

Long

1

1

MINI Long

WESKZT

$29.6274

$ 27.24

Short

1

1

MINI Short

MINI Trading Buy: Telstra Corporation (TLSKZD) – Buy the dip Yesterday TSL traded back down to its medium term uptrend line having gone ex dividend 14c last week and post the Future Fund offering 498mln TLS shares at $3.47 (cum dividend). RBS Research consider the Future Fund selldown a good thing for shareholders despite the ongoing overhang. Use the pullback as a buying opportunity. RBS has a BUY on TLS with $4.50 target price. Buy TLSKZD

Source: IRESS

Telstra Result points and fundamentals • Broadband ARPU up 6.5% to A$57.70. MBB SIOs doubled to 1.05m, helping lift mobile ARPU 4.8% to A$51.84 • Sales of IP-based products increased at double-digit rates. With the rate of PSTN erosion reducing in 2H09 (cf 1H09) the speed-driven revenue lines helped keep total revenue growth at 2.7%. • Maintaining comparable revenue growth in FY10 may be harder as unemployment rises, the A$ strengthens and Sensis sales face a tougher business environment. • The company says achieving its FY10 targets ‘would give us significant excess free cashflow, and all the flexibility that brings’. We think there is enough flexibility to contribute to NBN Co, on the right terms, and still pay an extra 2cps in dividends fully franked. • Key downside risks include further margin contraction, tougher regulation and lower access prices. • Upside risks include faster sales recovery, better cost control and higher access prices. Regulatory issues may be clearer when proposed legislation is tabled, we think by September. RBS MINIs over TLS Security

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

TLSKZC

260.58

274

Long

1

1

MINI Long

TLSKZD

289.16

306

Long

1

1

MINI Long

TLSKZP

449.9

405

Short

1

1

MINI Short

RBS Warrants over TLS Security TLSJZB

ExDate

ExPrice

CP

ConvFac

Delta

Description

29-Oct-09

250

Call

1

0.88

HOT Instalment

TLSIZA

28-Jan-10

250

Call

1

0.95

HOT Instalment

TLSIZQ

14-Jun-10

250

Call

1

1

Rolling Instalment

TLSIZR

14-Jun-10

225

Call

1

1

Rolling Instalment

TLSSZX

4-Feb-19

193.88

Call

1

1

Self Funding Instalment

TLSSZZ

30-Jun-17

255.18

Call

1

1

Self Funding Instalment

RBS Round Up Corner: NEW – Trading Warrants Security

ExDate

ExPrice

CP

ConvFac

ANZWZE

17/12/2009

24.00

Call

4

BHPVZM

17/12/2009

36.00

Call

4

BHPVZN

17/12/2009

32.00

Call

4

CBAVZH

17/12/2009

46.00

Call

5

CBAVZI

17/12/2009

52.00

Call

5

CSLWZA

17/12/2009

32.00

Call

4

MQGVZE

17/12/2009

55.00

Call

5

NABWZF

17/12/2009

30.00

Call

4

NCMVZA

26/11/2009

32.00

Call

4

RIOWZN

17/12/2009

70.00

Call

6

WBCVZM

26/11/2009

27.00

Call

4

WOWWZA

26/11/2009

28.00

Call

4

WPLWZN

17/12/2009

55.00

Call

5

ANZWZU

17/12/2009

21.00

Put

4

BHPWZS

17/12/2009

32.00

Put

4

CBAWZW

17/12/2009

45.00

Put

5

MQGVZQ

17/12/2009

50.00

Put

5

NABWZR

17/12/2009

22.00

Put

4

NCMWZW

26/11/2009

26.00

Put

4

WBCVZV

26/11/2009

23.00

Put

4

WOWWZP

26/11/2009

26.00

Put

4

WPLWZZ

17/12/2009

48.00

Put

5

MINIs approaching stop loss Underlying

MINI Code

MINI Type

Strike

Stop Loss

TOL

TOLKZP

Short

$8.99

$8.08

Share Price $

4,646.00

Approx. MINI Value

Share: Stop Loss

7.97

$

1.02

1.4%

XJO

XJOKZX

Short

4,891.28

4,501.00

$

3.90

3.2%

CBA

CBAKZT

Short

$50.34

$47.53

$

46.00

$

4.34

3.3%

CPU

CPUKZP

Short

$11.79

$10.60

$

10.11

$

1.68

4.8%

SUN

SUNKZQ

Short

$8.72

$8.23

$

7.83

$

0.89

5.1%

For further information please do not hesitate to contact us on the details below

Contact Equities Structured Products & Warrants Toll free

1800 450 005

www.rbs.com.au/warrants

Ben Smoker

02 8259 2085

[email protected]

Robbie Taylor

02 8259 2018

[email protected]

Ryan Corrigan

02 8259 2425

[email protected]

Elizabeth Tian

02 8259 2017

[email protected]

Tania Smyth

02 8259 2023

[email protected]

Robert Deutsch

02 8259 2065

[email protected]

Mark Tisdell

02 8259 6951

[email protected]

Trading Products Team

Investment Products Team

Disclaimer: The information contained in this report has been prepared by RBS Equities (Australia) Limited (“RBS”) (ABN 84 002 768 701) (AFS Licence No 240530) (“RBS Equities”) and has been taken from sources believed to be reliable. RBS Equities does not make representations that the information is accurate or complete and it should not be relied on as such. Any opinions, forecasts and estimates contained in this report are the views of RBS Equities at the date of issue and are subject to change without notice. RBS Equities and its affiliated companies may make markets in the securities discussed. RBS Equities, its affiliated companies and their employees from time to time may hold shares, options, rights and warrants on any issue contained in this report and may, as principal or agent, sell such securities. RBS Equities may have acted as manager or co-manager of a public offering of any such securities in the past three years. RBS Equities’ affiliates may provide, or have provided banking services or corporate finance to the companies referred to in this report. The knowledge of affiliates concerning such services may not be reflected in this report. This report does not constitute an offer or invitation to purchase any securities and should not be relied upon in connection with any contract or commitment. RBS Equities, in preparing this report, has not taken into account an individual client’s investment objectives, financial situation or particular needs. Before a client makes an investment decision, a client should, with or without RBS Equities’ assistance, consider whether any advice contained in this report is appropriate in light of their particular investment needs, objectives and financial circumstances. It is unreasonable to rely on any recommendation without first having consulted with your adviser for a personal securities recommendation. This information contained in this report is general advice only. RBS Equities, its officers, directors, employees and agents accept no liability for any loss or damage arising out of the use of all or any part of the information contained in this report. This Information is not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. If you are located outside Australia and use this Information, you are responsible for compliance with applicable local laws and regulation. This report may not be taken or distributed, directly or indirectly into the United States, or to any U.S. person (as defined in Regulation S under the U.S. Securities Act of 1993, as amended. The warrants contained in this report are issued by RBS Group (Australia) Pty Limited (ABN 78 000 862 797, AFS Licence No. 247013). The Product Disclosure Statements relating to these warrants are available upon request from RBS Equities or on our website www.rbs.com.au/warrants © Copyright 2009. RBS Equities. A Participant of the ASX Group.

Explanation of Warrant Tables: Security – refers to the code ascribed to the warrant, ExDate – refers to the date on which the warrant expires or is reset, ExPrc – refers to the exercise price, or second instalment payment, CP – tells you whether the warrant is a call or a put, ConvFac – the conversion factor of the warrant which tells you how many warrants you need to exercise in order to take possession of 1 share, Delta – tells you how much the warrant will move for a 1c move in the underlying security, Description – Tells you the type of warrant. All charts taken from IRESS unless indicated otherwise