Rbs - Round Up - 081009

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

The Round Up 8 October 2009 Issue No. 192 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

BSL (BSLKZI)

MINI Trading Buy – Poised for recovery

ASX (ASXKZI)

MINI Trading Buy– September Update

AGK (AGKKZE)

MINI Investment Buy – Value in contract wins

Round Up Corner

New MINIs listing today

Equities Move

Last

% Move

Range

Volume

ASX 200

+104.1

4695.7

+2.3%

+21 to +117

$4.9 bn(A)

SPI - yesterday

+115.0

4716.0

+2.5%

+53 to +119

27,526(A)

Dow Jones

-5.7

9725.6

-0.1%

-56 to +9

Avg

S&P 500

+2.9

1057.6

+0.3%

-5 to +3

Avg

Nasdaq

+6.8

2110.3

+0.3%

-8 to +7

Avg

FTSE

-29.1

5108.9

-0.6%

-33 to +18

Avg

Commodities Move Oil-WTI spot

Last

% Today

% Past Month

-1.1

69.8

-1.5%

+2.3%

Gold Spot

+1.4

1043.5

+0.1%

+4.8%

Nickel (LME)

+23.9

842.3

+2.9%

+5.0%

Aluminium (LME)

+0.9

82.0

+1.1%

-1.4%

Copper (LME)

-0.9

275.5

-0.3%

-3.8%

Zinc (LME)

+0.6

86.6

+0.7%

+1.4%

Silver

+0.2

17.5

+1.0%

+7.5%

Sugar

-1.1

22.6

-3.8%

+4.4%

Dual Listed Companies (DLC’s) Move

%Move

NWS (US)

0.08

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

Last

AUD Terms

Diff to Aus

0.01

+13.7 c

15.36

+8.6 c

-2.00

0.00

+27.4 c

49.06

-1169.0 c

4.50

0.00

+17.4 c

31.17

-663.8 c

-25.75

-0.06

+4.0 c

7.10

+6.3 c

American Depository Receipts (ADR’s) Move BHP (US)

%Move 0.95

Last 0.01

AUD Terms

Diff to Aus

+67.1 c

37.67

-13.9 c

AWC (US)

0.19

0.03

+6.5 c

1.83

-1.4 c

TLS (US)

-0.21

-0.01

+14.4 c

3.24

-1.8 c

ANZ (US)

0.07

0.00

+21.1 c

23.69

-15.9 c

WBC (US)

4.00

0.04

+113.5 c

25.49

-1.9 c

NAB (US)

0.39

0.01

+26.5 c

29.76

-26.3 c

LGL (US)

0.32

0.01

+27.8 c

3.12

-1.7 c

RMD (US)

-0.43

-0.01

+43.5 c

4.89

-11.3 c

JHX (US)

-1.23

-0.04

+32.7 c

7.35

-5.3 c

PDN (CAN)

0.30

0.07

+4.3 c

4.59

+10.9 c

Overnight Commentary United States Commentary Consolidation ahead of reporting season and a big couple of days. The Dow finished fractionally lower(-6pts) on weakness from the heavyweight telcos and a breather from some of the cyclical/growth names. Elsewhere, S&P 0.3% despite pain amongst the homebuilders and the Nasdaq 0.3% higher. Resources - First pass, the perennial disappointer in Alcoa looks to have snapped the losing streak. Post the close, reporting 3Q eps ex-items of 4cps vs consensus expecting a 9cps loss. The stock up 2.2% in normal trade and for the 3rd consecutive session finished at the top of the Dow leaderboard. Homebuilders - The sector down 3% and constituents featuring heavily amongst the S&P's worst on speculation Congress wont extend tax breaks for first time homebuyers. Hardest hit were Pulte down nearly 4%, Lennar 3.7% and Dr Horton finished 2.7% lower. Telcos - Weighing heavily on the Dow, AT&T down 3.6% and Verizon 2.6% lower, the worst performers and among the bigget pt takers. AT&T lower on a policy reversal that will allow iphone users access to cheaper phone calls . Financials - Investment banks continued to track higher, BofA and GS up another 2%, JP's 1.8% and Morgan Stanley finished 1.2% higher post a couple of upgrades and an upbeat broker report. Eco - A slow night on the economic front, Mortgage Applications up 16.4% in October following a 2.4% fall in September. Consumer Credit -$12.0bln vs. -$10.0bln expected.

United Kingdom & Europe Commentary The FTSE dropped 0.6% or 29pts as the oil majors gave back some of yesterdays gains and a weak result from Sainsbury saw the food retailers lower. The FTSE Eurofirst 300 was off 0.4%, the DAX fell 0.3% and the CAC ended 0.4% lower. UK Banks - HSBC, up 0.6%, rose despite saying it may delay raising its dividend if new capital rules were applied too heavily or quickly. Barclays was up 0.1% but RBS, Lloyds and Standard Chartered were off between 0.9% and 2%. Eco - In the UK, Nationwide Consumer Confidence for Sep was 71 coming in ahead of the forecast 68 and up from 63 prior. On the continent Europe’s economy contracted more than estimated in 2Q as consumer spending, investment and exports were weaker than earlier reported. GDP in the 16-nation euro region fell 0.2% from 1Q, when it dropped 2.5%. Retail - Sainsbury fell 3.3% after releasing its second-quarter trading update, which met forecasts with a slight slowdown in quarterly sales growth. Peers WM Morrison lost 0.8%, while Tesco , which posted its first-half results on Tuesday, shed 2.3%. In Germany, Metro fell 3.2% after co-founder Otto Beisheim placed a 5.2% stake in the company. Insurers - Aviva, up 3.8%, was higher after announcing plans for a secondary listing on the New York Stock Exchange on October 20. Continued M & A speculation helped the sector with Standard Life, Prudential and Old Mutual up between 1.4% and 2%.

Commodiites Commentary Miners - Generally stronger base metal prices helped but the sector was mixed. BHP added 0.3%, Rio edged down 0.1%, Anglo was also off 0.1%, Xstrata fell 0.75% but Vedanta climbed 0.9%. Energy - US crude inventories fell but gasoline inventories rose more than expected seeing the crude price come back a touch and the sector moved lower on profit taking. BP was off 1.7%, Shell fell 1.25% and Tullow dropped 3.2%. In Europe Total was 0.8% lower, Statoil fell 1.4% and Repsol ended down 0.4%.

SPI Commentary The SPI traded up 114pts or 2.48% to 4715. Open at 4660 with a low of 4655 and a high of 4720. Volume 30,441. The SPI traded down 6pts to 4710 in overnight trading

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

Wednesday

AUS

th

(Daylight saving begins Sunday 4 ), NSW Public Holiday, AIG/CBA services PSI, ANZ job ads

US

US

Trade balance, RBA Cash Rate Decision Non-manufacturing ISM AIG/HIA construction PCI, investor housing finance, owner occ housing finance

US Thursday

AUS US

Friday

Employment, unemployment rate Consumer credit

AUS US

Wholesale inventories, traqde balance

*Dates are indicative only and may change

Trading Buy: Bluescope Steel (BSLKZI) – Poised for recovery The announced return to full utilisation at Port Kembla has pulled forward the recovery leverage timeline. BSL has material outer year recovery leverage starting FY2011, a reduced cost base, and low PB valuation appeal compared to regional its peers. RBS Research have a Buy recommendation with a $3.75 target price. Buy BSLKZI

Source: IRESS

Recovery leverage Increasing demand both domestically and internationally has lifted Port Kembla to 100%, well in excess of the 75% BSL forecast at its FY09 result. The benefits from domestic restocking activity and strong export demand have pulled forward the recovery leverage story. With full utilisation likely to continue through 2Q10, we now expect BSL to return to positive NPAT in 1H10. Underlying valuation appealing RBS Research believe the improved earning outlook and increased steelmaking capacity utilisation enhance BSL’s appealing 0.92x P/B valuation compared to regional peers of between 1.4x to 1.7x. As the steel cycle normalises, we believe these P/B multiples may begin to converge, which is more reflective of the long-term trading history. Greatest recovery leverage With A$132m in permanent costs removed from the business, the greatest earnings leverage in the sector, and upside risks to a demand recovery appearing earlier than anticipated, BSL remains RBS Research preferred pick in the sector.

RBS MINIs over BSL Security

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

BSLKZI

162.43

187

Long

1

1

MINI Long

BSLKZS

472.88

401

Short

1

1

MINI Short

MINI Trading Buy: ASX Limited (ASXKZI) – September Update ASX released their September update yesterday. Cash equities continued to climb steadily as expected with an average of A$6bln traded per day. RBS Research has moved to a trading buy on ASX on the belief that the company will generate significant EPS growth from FY11 as current high volumes flow thorugh to earnings. Play the earnings uplift story on ASX thorugh ASXKZI. Look for a move to $37. RBS Research target price $40 with a buy recommendation

Source: IRESS

September Stats • Cash equities – value traded down 3% but still strong at A$6.0bn • September was definitely a weaker month for futures with relatively light interest rate futures activity. Total futures and options were down 25% on the pcp to 312k/day. On the positive year-to-date figures are down only 16% and, at 262k/day, are already tracking well ahead of the FY09 average of 250k/day. • A$1.9bn was raised in September which is the most for a month since December 2007. Secondary raisings also remained healthy at A$6.7bn and the September quarter (A$27.9bn) was almost as strong as the record June quarter (A$28.4bn). The level of IPO activity seems set to remain robust with a large number of high profile IPOs in the pipeline.

RBS MINIs over Security

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

ASXKZI

2067.05

Long

1

1

MINI Long

ASXKZS

4117.44

Short

1

1

MINI Short

MINI Investment Buy: AGL Energy (AGKKZE) – Value in contract wins RBS Research have upgraded AGK to buy recommendation with a $15.70 price target after updating the wind model for 1360GWh of desalination contracts, an expanded project pipeline and weaker near-term REC prices. The net changes have pushed up valuation to $15.70. AGK is at the bottom end of its trading range. Buy AGKKZE

Source: IRESS

AGK has recently won 1360GWh worth of desal contracts in VIC and SA. While pricing hasn’t been released, RBS Research estimate the group has locked in roughly A$120/MWh with CPI escalation. This ensures that economics will remain robust on a large portion of AGK’s wind farm projects and also means new projects will be accelerated. NSW remains a big opportunity It appears that the NSW Government is inching towards a sell-down of its merchant energy assets in early CY10. We think ORG’s large balance sheet leave it well placed to land the assets that it wants (likely EA), but we would argue AGK is the clear runner up and this means it should still be able to land some accretive assets. A successful potential bid may require an equity raising, but we have faith in AGK’s management that any deal would represent a very compelling opportunity for investors. Rating bumped back up to Buy AGK’s share price has underperformed the market by almost 20% over the last 2 months, reflecting a shift away from more defensive names. We believe the wind opportunity is not yet priced in by the market and expect this to occur gradually over the next 12 months. The New South Wales opportunity can only deliver upside for shareholders. RBS MINIs over AGK Security

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

AGKKZC

1063.09

Long

1

1

MINI Long

AGKKZE

1074.58

Long

1

1

MINI Long

AGKKZP

1772.7

Short

1

1

MINI Short

AGKKZQ

1915.68

Short

1

1

MINI Short

RBS Round Up Corner: New MINIs Listing Security

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

BSLKZJ

$

2.15

$

2.58

Long

1

1

MINI Long

BXBSZW

$

4.50

$

5.18

Long

1

1

MINI Long

CBAKZQ

$

63.00

$

56.70

Short

1

1

MINI Short

CPUSZX

$

6.00

$

6.90

Long

1

1

MINI Long

LLCSZV

$

6.00

$

6.90

Long

1

1

MINI Long

MQGKZZ

$

68.00

$

57.80

Short

1

1

MINI Short

NABKZR

$

36.70

$

33.03

Short

1

1

MINI Short

SUNKZR

$

11.50

$

9.78

Short

1

1

MINI Short

TCLSZX

$

2.10

$

2.42

Long

1

1

MINI Long

TOLSZW

$

4.20

$

4.83

Long

1

1

MINI Long

WBCKZY

$

33.80

$

30.42

Short

1

1

MINI Short

WPLKZP

$

68.50

$

61.65

Short

1

1

MINI Short

MINIs approaching stop loss Underlying

MINI Code

MINI Type

Strike

Stop Loss

Share Price

Approx. MINI Value

Share: Stop Loss

XJO

XJOKZW

Short

$5,082.98

$4,833.00

$ 4,612.80

$

4.70

4.8%

ANZ

ANZKZW

Short

$27.90

$25.12

$

23.77

$

4.13

5.7%

CBA

CBAKZP

Short

$58.11

$52.32

$

49.50

$

8.61

5.7%

IAG

IAGKZP

Short

$4.63

$3.94

$

3.69

$

0.94

6.8%

OSH

OSHKZS

Short

$7.49

$6.74

$

6.31

$

1.18

6.8%

SFI’s approaching stop loss Underlying

MINI Code

MINI Type

Strike

Stop Loss

TTS

TTSSZX

Long

$1.38

$1.64

Share Price $

2.47

Approx. MINI Value $

Share: Stop Loss

1.09

33.6%

AGK

AGKSZX

Long

$7.99

$9.06

$

13.85

$

5.86

34.6%

BSL

BSLSZW

Long

$1.77

$1.94

$

3.04

$

1.27

36.2%

CSR

CSRSZX

Long

$1.01

$1.16

$

1.83

$

0.82

36.4%

LEI

LEISZV

Long

$20.55

$23.10

$

36.67

$

16.12

37.0%

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