Rbs - Round Up - 041209

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

The Round Up 4 December 2009 Issue No. 232 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

UGL (UGLKZC)

MINI Trading Buy – Top sector pick

BXB (BXBKZG)

MINI Trading Buy – Recovery Story

ASX (ASXKZI)

MINI Trading Buy – Strong November trading

Round Up Corner

Banks Update – ANZ,CBA,NAB,WBC

Equities Move

Last

% Move

Range

Volume

ASX 200

+12.2

4774.6

+0.3%

+12 to +12

$5.1 bn(A)

SPI - yesterday

+23.0

4788.0

+0.5%

-4 to +30

19,592(L)

Dow Jones

-86.5

10366.2

-0.8%

-103 to +55

Low

S&P 500

-9.3

1099.9

-0.8%

-11 to +8

Low

Nasdaq

-11.9

2173.1

-0.5%

-13 to +19

Avg

FTSE

-14.4

5313.0

-0.3%

-16 to +45

High

Move

Last

% Today

% Past Month

-0.54

76.06

-0.7%

-4.1%

Gold Spot

-5.15

1210.55

-0.4%

+12.1%

Nickel (LME)

-13.56

722.63

-1.8%

-10.2%

Aluminium (LME)

-1.08

95.35

-1.1%

+12.1%

Copper (LME)

-2.18

319.62

-0.7%

+9.5%

Zinc (LME)

-0.90

107.90

-0.8%

+10.4%

Commodities

Oil-WTI spot

Silver

-0.28

18.96

-1.5%

+10.5%

Sugar

+0.07

22.54

+0.3%

-3.6%

Dual Listed Companies (DLC’s) Move

%Move

Last

AUD Terms

Diff to Aus

NWS (US)

unch

unch

14.00

15.13

-8.1 c

RIO (UK)

-108.5 p

-3.3%

£31.84

56.98

-1653.2 c

BLT (BHP UK)

-10.5 p

-0.5%

£19.315

34.57

-790.0 c

BXB (UK)

-9.5 p

-2.6%

£3.548

6.35

-12.1 c

American Depository Receipts (ADR’s)

BHP (US)

Move

%Move

Last

AUD Terms

Diff to Aus

-0.60

-0.8%

77.30

41.77

-70.4 c

AWC (US)

-0.13

-2.2%

5.79

1.56

-2.1 c

TLS (US)

+0.01

+0.1%

16.07

3.47

-1.7 c

ANZ (US)

-0.05

-0.2%

20.35

21.99

-20.9 c

WBC (US)

-0.37

-0.3%

112.40

24.29

-16.8 c

NAB (US)

-0.05

-0.2%

26.50

28.64

-4.4 c

LGL (US)

-0.96

-2.8%

33.79

3.65

-2.9 c

RMD (US)

-0.28

-0.5%

51.65

5.58

-1.9 c

JHX (US)

+1.15

+3.0%

39.40

8.52

+1.5 c

PDN (CAN)

-0.01

-0.2%

4.05

4.15

-3.1 c

Overnight Commentary United States Commentary Not for the first time this week, US indices struggled for direction. A reasonable outcome from the weekly jobs data offset by a weak ISM number and a tough day for the financials. Heading into the bell, the Dow down 15pts the S&P down 0.1% and the Nasdaq 0.3% higher. Financials - Outside of BofA, it was a tough day for the financials and in particular the bank stocks. For the 2nd consecutive session the sector stood between the S&P and any meaningful gains, US Bancorp down 4%, so too Regions Financial, Capital One down 3.5% and Wells Fargo trading 2% lower. Financials - BofA one of the Dow's top performers, up 2% on news the group will look to repay $45bln in bailout funds. Also helping the cause and giving investor confidence an additional boost, a broker upgrade from "under" to "outperform". Eco - 3Q Non Farm Productivity +8.1% vs +8.5% expected. Unit Labour Costs -2.5% vs -4.1% expected. Initial Jobless Claims 457K vs consensus at 480K, Continuing Claims 5465K vs 5400K. ISM Non Manufacturing for November 48.7 vs 51.5 expected and down on last months 50.6. Retail - Abercrombie&Fitch down 8% and one the S&P500's worst performers on a dip in November sales. For the 4 week period ended November 28 sales slipped 8% on pcp, year to date down 19% on the 2008 number. Builders - Luxury Homebuilder Toll Brothers down 7% after reporting a larger than expected loss in the 4Q. Mgmt commentary with respect to the US Housing recovery was also reasonably subdued, expectations are for a very gradual return to form with no mention made of any V shaped bounces.

United Kingdom & Europe Commentary The FTSE reversed yesterday's gain to be down 0.3% with weakness in the miners outweighing strength in the financials, with banks being boosted by the BoA announcement. The FTSE Eurofirst 300 was off 0.15%, the DAX fell 0.2% but the CAC rose 0.1% UK Banks - The sector was boosted by the BoA announcement with part state owned RBS and Lloyds topping the leaderboard. RBS and Lloyds added 4.7% and 4.4% respectively while Barclays jumped 2.4%, Standard Chartered rose 1.2% and HSBC was flat. Euro Banks - Comments from the ECB chief kept the continent more subdued than the UK. Deutsche Bank eked out a gain of 0.1%, Commerzbank added 1.5% as did SocGen but BNP fell 0.6%.

Eco - The ECB announced it would keep interest rates on hold at 1 per cent but said it would begin indexing the cost of 12-month funds. Jean-Claude Trichet, ECB president, stressed the measures did not constitute a start to monetary tightening. Eco - Britain's service sector grew more slowly than expected in November. PMI Services came in at 56.6 vs 57 expected but importantly it was the 7th month in a row above the expansionary 50 level.

Commodites Commentary Miners - The sector weighed on the index with gold retreating from highs and base metals also came off. BHP fell 0.5%, Rio sank 3.3%, Anglo was off 2.6% and Xstrata ended 3.8% lower. Energy - Crude stayed around the $77 mark with the majors mixed. BP fell 0.6%, Shell added 0.3%, BG Group was off 1.1% and Tullow sank 3%. In Europe Total was up 0.6%, Statoil fell 0.9% and Repsol ended the session 0.3% higher.

SPI Commentary The SPI traded up 19pts or 0.3% to 4788. Open at 4769 with a high of 4797 and a low of 4756. Volume 19,339. Overnight the SPI traded down 34 to 4754.

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 US

Tuesday

AUS US

Wednesday

AUS US

Friday

Chicago PMI, Milwaukee NAPM, Dallas Fed Manufacturing AIG/PWC manufacturing PMI, Building approvals, Real public final demand, RBA cash rate decision ISM, Construction spending, Pending home sales

AUS US

Thursday

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

ADP employment report Nominal retail trade Non farm productivity

AUS US

Non-farm payrolls, unemployment rate, average weekly hours, factory orders

*Dates are indicative only and may change

MINI Trading Buy: United Group (UGLKZC) – Top sector pick UGL remains RBS Research’s top sector pick. We forecast that growth in the Resources division will lead to rolling EPS upgrades in FY10 and beyond. IPL's confirmation of the A$683m Moranabah project delivery timetable is seen as a positive lead indicator for upgrades. RBS Research target price $16.00, Buy UGLKZC

Source: IRESS

Maintenance of the Moranbah schedule supportive of resources growth With guidance for a flat underlying FY10 NPAT, we still expect a return to double-digit growth in FY11 led by resourcerelated spend that has complimentary benefits for the Rail division. IPL’s confirmation that the Mornabah project schedule (UGL share A$683m) remains unchanged could act as a catalyst for potential consensus forecasts upgrades in FY11. Lower risks plus attractive returns and upside from cyclical recovery We continue to see risk mitigation and risk management in contract pricing as a core UGL competency. With only 8% of the order book effectively exposed to lump sum fixed-price projects, there is lower sector risk than for major peers. A portfolio of engineering and asset services offer attractive EPS growth prospects beyond FY10F and FY09 wins should fuel future earnings growth, supported by the robust order book of A$9.3bn.

RBS MINIs over UGL Security UGLKZC

ExDate 780.04

ExPrc

CP

ConvFac Long

1

Delta

Description 1

MINI Long

MINI Trading Buy: Brambles (BXBKZG) – Recovery Story BXB’s AGM trading update last week conmtained few surprises and highlighted that conditions remain soft in BXB's key markets. While conditions may remain tough in the short term, RBS Research maintain a long-term Buy on the back of BXB's leverage to economic recovery. Last week’s pullback to the previous key resitance level at $6.50 is a buying opportunity. Buy BXBKZG

Source: IRESS

BXB’s AGM trading update showed underlying group revenue down 3% on the pcp, with CHEP and Recall both recording 3% declines. Given the weak economic conditions through the period to October we think this was not a bad outcome. Outlook commentary suggests conditions remain weak with BXB yet to see a pickup in activity in its key US and European markets. CHEP With a 5% decline in revenue, the CHEP Americas business was slightly weaker than expected. A soft US market was the primary driver, with management now estimating pallet issues in the US will be 3% below FY09. CHEP EMEA declined 1% (+1% ex-autos), while CHEP Asia Pacific increased 2% (+4% exautos) reflecting the better economic environment in the region. Buy at the bottom for longer-term upside RBS retain long-term Buy rating. We think the BXB business will prove itself over time and see sentiment returning as a pickup in the economic environment feeds through to earnings growth. Executing on the US will be key. Target price $7.51. RBS MINIs over BXB Security

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

BXBKZG

382.1

Long

1

1

MINI Long

BXBKZP

981.09

Short

1

1

MINI Short

BXBKZR

911.27

Short

1

1

MINI Short

MINI Trading Buy: Aust Securities Exchange (ASXKZI) – Strong November trading RBS Research have a Buy recommendation on ASX with a 12mth Target Price of $40. Yesterday ASX released November trading activity showing a surprisingly strong rebound to trading volumes in cash and deriviative products. Cash equity volumes were in line with RBS Research’s forecast at 541k/day (up 31% on the pcp), while futures & options volumes were up a sizeable 47% on an average daily basis. Furthermore, both primary and secondary issuances remained healthy. Get long ASX with ASXKZI for a valuation uplift to Target Price of $40.

Source: IRESS

Cash equities – value traded up 19% on the pcp at A$5.1bn Total average daily volume traded was 541k in November, up 31% on the pcp. The daily average value traded was up 19% on the pcp to A$5.1bn (although this is down on the A$5.4bn in October). Overall we view these as strong numbers and remain confident that our forecast of A$6.0bn in average value traded for FY10 remains intact. Futures & options – November volumes up 47% on the pcp November was an exceptionally strong month for futures & options with average daily volumes up 47% on the pcp. Management attributed this strength to strong trading in 3-year treasury bond futures, as the contract has become the focal point of liquidity across the yield curve. The uncertainty around future cash rates contributed to the volumes, as did the high level of Commonwealth Government bond issuance (A$4.8bn). ASX last traded $33.33, BUY ASXKZI for 1-for-1 upside towards RBS Target Price of $40.00

RBS SFIs over ASX Security

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

ASXKZI

2101.11

2415

Call

1

1

MINI Long

RBS Round Up Corner: Banks Sector Update – ANZ,CBA,NAB,WBC Post the bank reporting season, CBA trading update and ANZ, NAB and WBC going ex dividend, the banks have underperformed. RBS Research believe banks will wait until they understand how businesses are performing post Christmas before poviding further upbeat commentary. This is likely to weigh on relative share price performance in the short term, however the BDD cycle seems to be peaking and any pullbacks in the banks into the end of the year should be used as a buying opportunity.

Sector performance Banks' PE relative (to All Ords) is back down to 86%, having underperformed the market over the last month. While this is above the long-run average, given short-term structural advantages, we believe the sector can trade at a premium. The banks are now trading at an average PE of 13.5x FY10F on IBES consensus. Investment view – RBS Research prefer ANZ and NAB to WBC and CBA As a result of a normalising earnings cycle, we believe relative valuation will again play a significant role in the relative performance of stocks in the sector. RBS believe ANZ and NAB still have the greater share price upside potential over the next six to 12 months, given their 1-2 PE point discounts.

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]

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