Rbs - Round Up - 081209

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

The Round Up 8 December 2009 Issue No. 234 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

NWS (NWSKZJ)

MINI Trading Buy USD rebound, more value in TV

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

-25.7

4676.5

-0.5%

-51 to +21

$2.6 bn(L)

SPI - yesterday

-33.0

4673.0

-0.7%

-52 to +41

27,375(A)

Dow Jones

+1.2

10390.1

+0.0%

-29 to +54

Very High

S&P 500

-2.7

1103.3

-0.2%

-5 to +5

High

Nasdaq

-4.7

2189.6

-0.2%

-11 to +7

Avg

FTSE

-11.7

5310.7

-0.2%

-71 to +6

Avg

Commodities Move

Last

% Today

% Past Month

Oil-WTI spot

-1.52

73.95

-2.0%

-4.6%

Gold Spot

-6.50

1154.90

-0.6%

+5.5%

Nickel (LME)

-0.32

722.08

-0.0%

-7.9%

Aluminium (LME)

+0.34

96.34

+0.4%

+13.1%

Copper (LME)

-2.02

315.73

-0.6%

+7.6%

Zinc (LME)

-2.94

103.08

-2.8%

+5.8%

Silver

-0.35

18.17

-1.9%

+4.7%

Sugar

-0.07

21.88

-0.3%

+0.2%

Dual Listed Companies (DLC’s) Move

%Move

Last

AUD Terms

Diff to Aus

NWS (US)

+0.29

+2.0%

14.58

15.99

+27.0 c

RIO (UK)

+44.5 p

+1.4%

£31.70

57.16

-1443.4 c

BLT (BHP UK)

+20.0 p

+1.1%

£19.105

34.45

-615.8 c

-3.3 p

-0.9%

£3.485

6.28

-10.5 c

BXB (UK)

American Depository Receipts (ADR’s) Move

%Move

Last

AUD Terms

Diff to Aus

BHP (US)

-0.41

-0.5%

74.86

41.05

+44.1 c

AWC (US)

+0.14

+2.4%

5.86

1.61

+2.7 c

TLS (US)

+0.09

+0.6%

15.77

3.46

+0.9 c

ANZ (US)

-0.27

-1.3%

20.07

22.01

+6.1 c

WBC (US)

-2.41

-2.2%

108.65

23.83

-5.8 c

NAB (US)

-0.47

-1.8%

25.38

27.84

-16.5 c

LGL (US)

-0.70

-2.2%

30.94

3.39

+3.3 c

RMD (US)

-0.04

-0.1%

52.21

5.73

-3.4 c

JHX (US)

-0.31

-0.8%

37.51

8.23

-7.2 c

PDN (CAN)

-0.05

-1.3%

3.92

4.08

+1.4 c

Overnight Commentary United States Commentary US markets looked set for modest gains, before a late sell off with two hours to play. Led lower by the financials and in particular the investment banks, heading into the last 30mins, the Dow is struggling to push back into postiive territory down 5pts, the S&P and Nasdaq 0.4% lower. Eco - Hosing down any residual expectations for a V-shaped recovery, Bernanke said the US economy faces "formidable headwinds" including a weak labour market and tight credit, which will likely mean a "moderate" pace for expansion. As part of a speech to the Economic Club of Washington(midday), Bernanke went on to say inflation remains subdued and reiterated that rates are likely to stay low for an "extended period". Financials - A key contributor toward the Dow's sell off, financials and investment banks gave back most of Friday's gain. BofA down nearly 2%, JP's 1.3%, Well Fargo 2.3%, US Bancorp down 2.3% and Morgan Stanley 2.1% lower. Telcos - One of few real standouts overnight, Sprint Nextel topped the S&P100 up 11% post a bullish Barrons article, Verizon and AT&T trading 2% and 1.4% higher respectively, separated only by Boeing on the Dow dais. Homebuilders - The sector struggled from the opening bell although the pace of the sell-off picked up in the pm. Lennar the worst of the group down nearly 4%, KB home down 3% and Dr Horton down 2%, not helped by news the Chairman and CFO have lifted their compensation by 56% despite reporting a FY net los of $545.3mln. Eco - Consumer Credit for October -$3.5bln vs - $9.4bln expected, a small sign the financial crisis and the impact its having on the household is abating(that said, significantly less important than where unemployment goes in 2010).

United Kingdom & Europe Commentary The FTSE edged 0.2% or 12pts lower as concerns over increased taxes for banks and banker's bonuses cast doubts on the sector. The FTSE Eurofirst 300 was off 0.5% with further worries about Greek banks weighing. The DAX fell 0.6% with the CAC ending 0.2% lower. UK Banks - Further rumours of extra taxes to bankers' bonuses hit the sector. RBS, down 4.7%, was the worst on the FTSE100 with Lloyds not far behind off 4.1%. HSBC dropped 1.5%, Standard Chartered was off 1.4% and Barclays ended 2.1% lower. Euro Banks - Concern over Greece's economy and banks weighed on Euro bourses. EFG Eurobank sank 6% and National Bank of Greece was off 5.6%. Among the majors Deutsche Bank fell 0.7%, Commerzbank dropped 1%, SocGen was off 0.2% but BNP eked out a gain of 0.3%.

Employment - Randstad, up 1.4%, had another good day post the US jobs numbers, with the world's 2nd largest temporary staffing firm being upgraded to buy.

Commodites Commentary Miners - A fall in the $US saw some miners bounce back a touch despite a mixed night on the LME. BHP climbed 1.1%, Rio was up 1.4%, Anglo added 0.5%, Xstrata climbed 0.6% and Antofagasta was the best on the FTSE100 up 2.2% but Fresnillo, off 1.8%, and ENRC, down 2.1%, couldn't recover from earlier falls.

SPI Commentary The SPI traded down 28pts or 0.5% to 4673. Open at 4701 with a high of 4786 and a low of 4654. Volume 28,619. Overnight the SPI traded up 28 to 4729.

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

Thursday

AUS

Aus ANZ job ads

US

US

Aus NAB business confidence, Aus current account balance US consumer credit Aus trade balance, Aus housing finance

US

Friday

Aus unemployment rate

US

US wholesale inventories

NZ

NZ RBNZ cash rate decision

AUS US

US trade balance, US retail sales

*Dates are indicative only and may change

MINI Trading Buy: News Corp (NWSKZJ) – USD rebound, more value in TV The NWS share price has been weighted down on the falling USD index of late, currently trading now at low $15 where it was in early August. The stock looks well supported at this level so we feel that with a stabilising/rising USD, NWS can bounce strongly from this level. RBS Research believes that the introduction of retransmission fees will add a substantial uplift to the TV revenues and valuation. RBS Research has a $19.92 Target Price on NWS which represents a healthy 31.4% upside. Get Long NWS with NWSKZJ.

Source: IRESS

Retransmission fees could be a share-price catalyst News Corp has indicated that it intends to try to start charging the cable, satellite and IPTV operators for the right to retransmit the Fox Network to their pay TV customers. We estimate potential additional revenue and operating profit for News Corp of US$500m+ over a threeto four-year time-frame, which could help drive News Corp’s TV operating profit back up to US$1bn by FY14F (from only US$174m in FY09). etransmission revenues will take time to ramp up as agreements come up for renewal, but the announcement of an initial deal could be a catalyst for an overall re-assessment of the valuation of News Corp’s TV assets. Retransmission fees could add US$3.2bn+ to TV valuation We currently value News Corp’s TV operations at US$3.8bn (8.5x FY11F EBITDA). We estimate that retransmission revenues of cUS$500m per annum would add US$3.2bn to our TV DCF valuation (equivalent to US$1.25 or A$1.40 per share), with further upside if News Corp is able to achieve a rate per subscriber above that of CBS. Buy rating and A$19.92 price target retained We believe guidance for FY10 operating profit growth of ‘high single to low double digit’ is conservative and see potential for ongoing upgrades as the year progresses (we forecast growth of 16%). The stock looks cheap on both peer multiple and a sum-of-the-parts basis, with possible catalysts around retransmission deals and eventual capital management.

RBS MINIs over UGL Security

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

NWSKZJ

1157.22

1272

Long

1

1

MINI Long

NWSKZI

783.16

861

Long

1

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