Rbs - Round Up - 020909

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

The Round Up 2 September 2009 Issue No. 167 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

WDC (WDCKZG)

MINI Investment Buy– bottom of cycle?

TLS (TLSKZD)

MINI Trading Buy – Buy the dips

Round Up Corner

RBS Monthly Market Review – August 2009

Equities Move ASX 200

Last

% Move

Range

+35.5

4514.6

+0.8%

SPI - yesterday

+50.0

4521.0

Dow Jones

-185.7

9310.6

S&P 500

-22.6

998.0

Nasdaq

-40.2

1968.9

FTSE

-89.2

4819.7

Volume -13 to +45

$5.3 bn(A)

+1.1%

-9 to +55

32,477(A)

-2.0%

-204 to +62

Avg

-2.2%

-24 to +8

Avg

-2.0%

-44 to +26

Avg

-1.8%

-89 to +12

Avg

Commodities Move Oil-WTI spot

Last

% Today

% Past Month

-1.44

68.52

-2.1%

-1.9%

Gold Spot

+5.25

956.50

+0.6%

+0.3%

Nickel (LME)

-35.97

829.04

-4.2%

+2.1%

Aluminium (LME)

-2.57

82.11

-3.0%

-3.0%

Copper (LME)

-12.59

280.62

-4.3%

+8.2%

Zinc (LME)

-1.25

82.92

-1.5%

+5.9%

Silver

+0.12

15.02

+0.8%

+7.9%

Sugar

-0.15

24.24

-0.6%

+30.3%

Dual Listed Companies (DLC’s) Move

%Move

Last

AUD Terms

Diff to Aus

NWS (US)

-0.36

-2.8%

12.28

14.86

-27.0 c

RIO (UK)

-82.50

-3.4%

23.31

45.60

-1176.2 c

BLT (BHP UK)

-42.50

-2.6%

15.86

31.01

-627.5 c

BXB (UK)

+11.25

+3.0%

3.87

7.56

-9.9 c

American Depository Receipts (ADR’s) Move

%Move

Last

BHP (US)

-0.87

-1.4%

AWC (US)

-0.06

-1.1%

TLS (US)

-0.25

-1.8%

AUD Terms 61.43

Diff to Aus

37.17

-12.2 c

5.41

1.64

-5.8 c

13.49

3.26

-1.5 c

ANZ (US)

unch

unch

17.91

21.67

-32.7 c

WBC (US)

-1.33

-1.3%

100.71

24.37

-47.7 c

NAB (US)

-0.24

-1.0%

23.61

28.57

-62.0 c

LGL (US)

-0.53

-2.3%

22.59

2.73

-2.6 c

RMD (US)

-0.50

-1.1%

45.41

5.49

+8.5 c

JHX (US)

-0.13

-0.5%

28.72

6.95

-11.9 c

PDN (CAN)

-0.22

-5.0%

4.17

4.57

-27.5 c

Overnight Commentary United States Commentary Major US indices sufferred their biggest one-day pullback in over two weeks despite another round of better-than-expected manufacturing data out of the US, Europe and China. A combination of renewed credit concerns (especially around banks earnings) and continued worries about overbought conditions feulled the sense of risk. Dow finished off 185pts and S&P 500 lost 2.2%. Eco - ISM Manufacturing improved in Aug to 52.9 v 50.5 forecast, the first expansionary number since Jan 09, and up from 48.9, as did ISM Prices Paid at 65.0 v 57.8, from 55.0, and July Pending Home Sales up 3.2% vs 1.5% forecast, from 3.6% prev. Total Vehicle Sales improved to 14.1m for Aug, vs 13.3m forecast, from 11.3m. Financials - AIG tumbled 21%, Hartford Financial lost 11%. BoA fell 6.4%, AmEx down 5.4%, JP Morgan dropped 4.1% as the financial stocks were the worst hit. Concerns that bank shares have risen too fast and that the market can't sustain the moves saw red across the board. Resources - Alcoa fell 3.8% and Caterpillar dropped 3.2% as commodities were sold off as traders followed stock-market moves as a gauge for growth. Copper experienced it's sharpest decline for two months, down 4.3%, Nickl fell 4.2% and Aluminium dropped 3.0%. Industrials - Concerns that the recent rally in equities has outpaced the outlook for earnings saw major industrials names also sold off, General Electric fell 4%, Intel fell 2.9%, DuPont and 3M down 2.8%.

United Kingdom & Europe Commentary The FTSE fell 1.8% or 89pts as questions remain over the sustainability of the recent rally with the FTSE also playing catch up after being closed Monday. The FTSE Eurofirst 300 dropped 1.8%, the CAC was off 1.9% and the DAX sank 2.4% after failing at a technical break out level. Eco - Weak UK data reinforced the more negative tone at the start of the month. PMI Manufacturing was 49.7 vs 51.5 expected and down from 50.8 previously. However Eurozone PMI Manufacturing came in better than forecast at 48.2 vs 47.9 exp'd and 47.9 previous. UK Banks - The sector was the biggest drag on the index with HSBC, Lloyds, Barclays, RBS and Standard Chartered losing between 1.9% and 4.8%. Euro Banks - Banking stocks were generally lower on the continent as well. UBS sank 5.8%, Credit Suisse was off 3.3%, BNP fell 3.8%, SocGen was 3.6% lower and Deutsche Bank fell 2.85% but Commerzbank jumped 3.6% after the CEO said the bank could return to profit next year.

Insurers - RSA Insurance shed 4.8% as a report of a rights issue to raise up to $1bn unsettled investors and surprised analysts, who said they saw no need for a cash call. Peers Legal & General and Prudential fell 3.3% and 2.1%, respectively. Utilities - E.ON, Germany's largest energy company, was off 4.1% after a broker downgrade. Domestic rival RWE fell 2% whilst French power and gas utility GDF Suez dropped 1.8% giving up gains made last week after a positive outlook statement.

Resources Commentary Miners - Global recovery concerns again saw metal prices weaker with UK stocks playing catch up. BHP dropped 2.6%, Rio fell 3.4%, Anglo was 4.96% lower, Xstrata sank 4.1% and Eurasian Natural Resources was the worst performer off 6.9%. Energy - Crude was also hit with the weak sentiment sending the majors lower. BP, Shell, BG Group, Cairn Energy and Tullow Oil lost 1.4% to 3.9%. In Europe Total was 1.8% lower, Statoil dropped 0.8% and Repsol ended down 1.7%.

SPI Commentary The SPI traded up 50pts or 1.12% to 4521. Open at 4472 with a low of 4462 and a high of 4526. Volume 30,874. Overnight the SPI traded down 71pts to 4450.

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 Investment Buy: Westfield Group (WDCKZG) – Bottom of devaluation cycle? Post result, WDC has maintained FY09 operating EPS guidance of 94-97cps, despite a cut in the FY10+ payout policy to 70-75%. With WDC arguably at the bottom of a challenging earnings and property devaluation cycle, RBS Research are more confident of a sector re-rating and upgrade to Buy. RBS target price $14.16. WDC is trading in an uptrending channel. Buy WDCKZG below $12.

Source: IRESS

RBS Research expect the level of cap rate expansion for WDC to ease materially and the NOI decline across the UK and US portfolios to cease in the 2H09. RBS see ongoing rerating from here as evidence mounts of a stabilisation and slow improvement in property markets and move to a Buy with a longterm positive disposition on quality property companies such as WDC. WDC reported negative revaluations of A$2.9bn across the portfolio which were not unexpected. The cut in the dividend payout from 100% of operational earnings to 70-75% would no doubt have caught those expecting an equity raising by surprise but we see this and the deferred development schedule positioning WDC well to respond to any upturn in the broader property market.

RBS MINIs over WDC Security

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

WDCKZG

650.83

716

Long

1

1

MINI Long

WDCKZR

1847.47

1662

Short

1

1

MINI Short

MINI Trading Buy: Telstra Corporation (TLSKZD) – Buy the dip TLS 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: RBS Monthly Market Review – August 2009 Sector performance – August 2009 Price

Sector

curr

-12m

1m

3m

6m

12m

S&P/ASX 200

4479.1

5135.6

5.5

17.3

33.9

-12.8

200 Cons Discret

1490.1

1710.6

4.0

20.0

48.5

16281.5 18704.3

200 Energy 200 Healthcare 200 Info Technol 200 Materials

3m

6m

12m

-12.9

-1.5

2.7

14.6

-0.1 -0.2

6.1

10.9

33.8

-13.0

0.6

-6.4

-0.1

9733.6

7.1

11.9

-2.1

-13.4

1.5

-5.4

-36.0

-0.6

594.3

518.6

4.1

15.5

46.0

14.6

-1.4

-1.8

12.1

27.4

3669.8

200 Property

1m

8433.6

10955.2 14036.1

200 Industrials

Relative performance (%)

Price Absolute performance (%)

-1.3

7.9

31.8

-21.9

-6.8

-9.4

-2.2

-9.2

4858.2

11.3

25.9

56.7

-24.5

5.8

8.6

22.8

-11.7 -27.2

875.3

1459.2

14.1

20.0

31.3

-40.0

8.6

2.7

-2.7

200 Cons Staples

7179.0

7338.7

1.0

12.7

18.0

-2.2

-4.5

-4.7

-15.9

10.6

200 Telecoms

1133.4

1486.4

-7.1

5.1

-5.8

-23.7

-12.7

-12.3

-39.7

-11.0

200 Utilities

4056.2

5327.6

-3.8

-1.6

6.3

-23.9

-9.3

-18.9

-27.6

-11.1

200 Fin Ex Property

5210.1

4967.1

11.8

29.2

50.6

4.9

6.2

11.9

16.7

17.7

Priced at close of business 31 August 2009. Source: IRESS

A positive reporting season and improved macro backdrop: but where to from here? The June 2009 reporting season in Australia was generally seen as successful. The high level of company earnings surprise overshadowed a huge (19%) earnings fall on a pcp basis. The macroeconomic outlook also improved during the month. However, market valuations remain fair to full, and the key question is what will drive the market further upwards from here? We continue to position our model portfolio for economic recovery, but believe the strong market rally we have seen over the past six months may slow somewhat from here. Australia's performance vs the world In local currency, the All Ordinaries (+5.5%) outperformed the US S&P 500 (3.4%), the regional MSCI ex Japan Index (0.7%) and the World MSCI ex Australia Index (+3.8%). The best and worst performing sectors The best performers were Property (+14.1%), Financials ex Property (+11.8%), and Industrials (+11.3). The worst performers included Telecommunication Services (-7.1%), Utilities (-3.8%) and Materials (-1.3%). The top five and bottom five performing S&P/ASX 200 stocks The top five performers from the S&P/ASX 200 (price) Index for the month included ING Industrial Fund (+87.0%), PMP Ltd (+81.0%), Flight Centre (+47.8%), Lynas Corporation (+44.9%) and Transfield Services (+44.6%). The bottom five performers were Carnarvon Petroleum (-22.2%), Energy World Corporation (-21.1%), Atlas Iron (-18.6%), Independence Group (-17.5%) and Sunland Group (-16.9%).

MINIs approaching stop loss Underlying

MINI Code

MINI Type

Strike

Stop Loss

BXB

BXBKZR

Short

$8.73

$7.85

CBA

CBAKZT

Short

$50.33

$47.53

XJO

XJOKZX

Short

$4,890.61

$4,646.00

ANZ

ANZKZV

Short

$25.46

WES

WESKZT

Short

$29.61

Share Price $

7.66

$

Approx. MINI Value $

Share: Stop Loss

1.07

2.5%

46.31

$

4.02

2.6%

$ 4,514.60

$

3.76

2.9%

$22.91

$

22.00

$

3.46

4.1%

$26.65

$

25.58

$

4.03

4.2%

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