Rbs - Round Up - 111109

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

The Round Up 11 November 2009 Issue No. 215 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

DJS (DJSSZX)

SFI Investment Buy – Sales remain strong

QAN (QANKZJ)

MINI Trading Buy – Beneficiary of high AUD

QBE (QBESZX)

SFI Investment Buy – Investor Update

Round Up Corner

NEW MINIs Listing today

Equities Move

Last

% Move

ASX 200

+58.7

4733.6

SPI - yesterday

+50.0

Dow Jones

+20.6

S&P 500

-0.1

1093.0

Nasdaq

-3.0

2151.1

FTSE

-4.6

5230.6

Range

Volume

+1.3%

+59 to +59

$5.7 bn(A)

4734.0

+1.1%

+44 to +99

34,129(A)

10247.5

+0.2%

-29 to +34

Avg

-0.0%

-6 to +3

Avg

-0.1%

-13 to +7

Avg

-0.1%

-14 to +29

Low

Commodities Move Oil-WTI spot

Last

% Today

% Past Month

-0.4

79.1

-0.4%

+9.6%

Gold Spot

+1.4

1105.2

+0.1%

+5.2%

Nickel (LME)

-27.4

760.0

-3.5%

-10.3%

Aluminium (LME)

+0.3

87.3

+0.4%

+2.7%

Copper (LME)

-0.5

295.1

-0.2%

+4.7%

Zinc (LME)

+0.1

96.9

+0.1%

+6.2%

Silver

-0.3

17.3

-1.6%

-2.3%

Sugar

-0.5

21.3

-2.2%

+3.1%

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

%Move

Last

AUD Terms

Diff to Aus

0.01

0.00

+14.6 c

15.70

+7.5 c

RIO (UK)

1.00

0.00

+30.4 c

54.73

-1271.9 c

BLT (BHP UK)

-5.50

0.00

+17.7 c

31.84

-665.5 c

BXB (UK)

-6.25

-0.02

+3.9 c

7.03

-2.2 c

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

%Move -0.02

Last 0.00

AUD Terms

Diff to Aus

+71.5 c

38.42

-7.2 c

AWC (US)

0.01

0.00

+6.2 c

1.67

-1.8 c

TLS (US)

-0.13

-0.01

+15.1 c

3.25

-0.9 c

ANZ (US)

-0.28

-0.01

+21.1 c

22.64

-16.2 c

WBC (US)

-1.66

-0.01

+122.8 c

26.39

-1.1 c

NAB (US)

0.11

0.00

+28.0 c

30.05

-7.5 c

LGL (US)

-0.31

-0.01

+31.6 c

3.39

+1.5 c

RMD (US)

-0.28

-0.01

+49.0 c

5.26

-5.8 c

JHX (US)

-1.25

-0.04

+34.0 c

7.32

-1.3 c

PDN (CAN)

-0.05

-0.01

+4.1 c

4.22

-5.2 c

Overnight Commentary United States Commentary By recent standards, a reasonably subdued trading session overnight. Volumes remain uninspiring and a tight trading range throughout the day, has the Dow hanging on to a 20pt gain heading into the bell. Some weakness across the growth names for the minute, offset by ongoing strength from selected financials. S&P flat and the Nasdaq down smalls. Financials - For the 2nd consecutive sessions, BofA and Amex holding down the top 2 spots on the Dow.BofA trading 2% higher and Amex up 1.5%, the latter ticking higher after mgmt said worldwide spending climbed 3% in October. Retail - Priceline joined the list of retailers to either beat with 3Q numbers and/or be upgraded. The stock up 17% and the clear winner on the S&P500 after sales and profits beat the street, $3.45/share vs $2.92 expected. Homebuilders - Beazer Homes up 7%(well off highs), its best day in 3 months, returning to profit after 3 years in the red. For the period, net income for the 3 months through September came in at 87cps vs an $11.77/share loss in the prior period and well ahead of consensus set for a $1.40/share loss. The sector down 3%, not convinced by the quality of the Beazer numbers. Insurance - MBIA down 25% on heavy turnover after returning a wider than expected 3Q loss. Blaming among other things, ongoing weakness in the US Housing market, the loss of $3.50/share compares with consensus at $1.09/share.

United Kingdom & Europe Commentary The FTSE drifted 0.1% or 5pts lower with weakness in miners and telco heavyweight Vodafone outweighing strength in the banks after a positive update from HSBC. The FTSE Eurofirst 300 was off 0.2%, the DAX fell 0.1% and the CAC ended flat. UK Banks - HSBC jumped 4% after the bank said its global banking and markets division was having a record year and losses on consumer loans had shown their first fall in three years. Barclays sank 5.1% despite also signalling bad debts may be falling with concern surrounding the future of its investment banking operations. Lloyds was flat after announcing 5,000 job cuts, RBS fell 0.9% but Standard Chartered rose 0.6%. Insurers - AXA SA was up 2% after raising €2bn. Some analysts however are worried that AXA has a weaker starting footprint in Asia and a weaker balance sheet to start acquisitions. Telcos - Vodafone was down 1.5% as analysts pointed to underlying weakness and tough competition in emerging markets after the company reported in-line results and an extension to its cost-cutting programme to £2bn. Auto - VW sank 8% after the Qatar sovereign wealth fund said it would sell half of its 50mn preferred shares to increase the stocks liquidity. Daimler was off 0.3%, BMW fell 2.2%, Peugeot ended 1.3% lower and Renault dropped 3%. Fiat eked out a gain of 0.1% after a broker upgrade.

Eco - Germany's ZEW Economic Sentiment reading came in lower than expected at 51.1 vs 55 expected and down from 56 previously. French industrial production also slipped unexpectedly coming in -1.5% vs +0.5% expected and down from +1.8% previously.

Commodiites Commentary Miners - Weaker metal prices saw profit taking after the sector had risen 13% in 5 days. BHP fell 0.3%, Rio was flat, Anglo dropped 2.2%, Xstrata sank 1.8% and Vedanta ended down 1.2%. Energy - Crude fell back below the $80 mark when the threat of Tropical Storm Ida petered out. BP fell 0.3%, BG Group dropped 0.9%, Tullow was off 0.2%, Cairn finished 2.4% lower but Shell managed a gain of 0.3%. In Europe Total was flat, Statoil dropped 1.1% but Repsol finished 0.4% higher.

SPI Commentary The SPI traded up 50pts or 1.07% to 4734. Open at 4756 with a high of 4783 and a low of 4728. Volume 29,890

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

Friday

AUS

RBA Gov Lowe speaks, ANZ job ads, investor home loans, owner occ housing finance

US RBA’s Broadbent speaks, NAB business confidence, NAB business conditions

US

US

WMI consumer confidence Veterans’ Day holiday Employment and unemployment

US

US

Trade balance, import prices, Michigan cons confidence

*Dates are indicative only and may change

SFI Investment Buy: David Jones (DJSSZX) – Sales remain strong DJS reported 1Q10 sales which support RBS Research belief that the company is on track to upgrade guidance after the Christmas trading period. RBS Research have a buy recommendation DJS, which is one of the favoured exposures in the consumer discretionary space. DJS should enjoy strong operational leverage as consumer spending rebounds through FY11F and FY12F. Play through DJSSZX

Source: IRESS

Buy before the upgrade DJS reported positive like for like sales contrasted with existing FY10 sales guidance of -3% to -5% underlying lfl sales growth. RBS forecast 2.0% lfl sales growth for FY10, believing the balance of risks suggests management will upgrade guidance to 5-10% underlying NPAT growth with the 2Q10 sales announcement in February. RBS target price remains at $6.40 post the sales update 1Q10A sales +4.5% total, +1.9% lfl (excluding one-offs) DJS reported headline sales for 1Q10A of A$452.1m, +4.5% pcp (+2.2% including one-offs; 1Q09A: -6.3%). More importantly, lfl sales for the quarter grew 1.9% (excluding the impact of the Bourke Street redevelopment), ahead of guidance for the full year of -3% to -5% growth Buy DJSSZX

RBS SFIs over DJS Security DJSSZX

ExDate 4-Feb-19

ExPrc

CP 169

ConvFac Call

1

Delta

Description 0

Rbs Feb19 169 I W

MINI Trading Buy: Qantas Airways (QANKZJ) – Load factor and yields improving QAN is leveraged to an economic recovery and is a big beneficiary of the appreciating AUD/USD. Comments at QAN’s AGM suggest management is confident it has passed the worst. Updated currency forecasts result in earnings upgrades for FY10-11F. Given strengthening economic conditions and higher currency, RBS Research maintain Buy recommendation with $3.35 target price. September traffic statistics also highlighted increased load factors and improvements to domestic yields. Use the recent pullback to buy QAN. Play thorugh QANKZJ

Source: IRESS

QAN management appears increasingly confident that the worst is behind the company. The next critical piece of information is to see yield improvement, which RBS Research believe may become evident in 2H10 as demand has stabilised and the worst of the discounting appears to have passed. QAN is also a beneficiary of a rising AUD/USD. With an estimated 39% of QAN’s cost base exposed to the USD, earnings are positively impacted. Given the spot price sits at $0.92, further earnings upside potential exists. On RBS estimates a 1c increase in the AUD equates to a A$14m increase in NPAT (4.3%). RBS Research has a Buy recommendation on QAN with a target price of $3.35. With the economic environment strengthening and currency movements positively impacting the cost base, we think there remains momentum behind the airlines. Buy QANKZJ

SFI Investment Buy: QBE Insurance Group (QBESZX) – Investor Update We believe the recent pullback in QBE is a buying opportunity. QBE has reiterated its FY09 guidance for an insurance margin of 17-18%. Management has also said it has additional debt capacity for cA$1bn in acquisitions. RBS Research have a target price of $26.11. Buy QBESZX

Source: IRESS

• • • • •

QBE reaffirmed its full-year FY09 guidance for an insurance margin of 17-18%. QBE says it has cA$1bn in debt capacity available for acquisitions with gearing currently only c30%. Bolt-on acquisitions appear to remain the most attractive, while management has not ruled out further agency purchases. QBE has said US and UK insurance markets remain soft, although they expect rates to harden in 2H10 QBE’s track record in underwriting and acquisition execution remains excellent. The company has reconfirmed its FY09 guidance and has a strong balance sheet with cA$1bn of debt capacity available for acquisitions. At A$22.15 the stock continues to trade at a discount to RBS price target of A$26.11. We see value in QBE at these levels Use the pullback to buy through QBESZX

RBS SFIs over QBE Security QBESZX

ExDate 4-Feb-19

ExPrc

CP

1140.01

ConvFac Call

Delta

1

Description 1

Self Funding Instalment

RBS MINIs over QBE Security QBEKZF

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

1219

Long

1

1

MINI Long

QBEKZK

1124.7

Long

1

1

MINI Long

QBEKZL

1792.43

Long

1

1

MINI Long

QBEKZR

3147.08

Short

1

1

MINI Short

QBEKZS

3376.24

Short

1

1

MINI Short

RBS Round Up Corner: NEW MINIs Listing . Security

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

BSLKZK

$

1.92

$

2.21

Long

1

1

MINIs

CWNKZH

$

6.40

$

7.68

Long

1

1

MINIs

MQGKZE

$

39.70

$

45.66

Long

1

1

MINIs

NWSKZJ

$

11.50

$

12.65

Long

1

1

MINIs

ORGKZD

$

12.70

$

13.97

Long

1

1

MINIs

MQGKZP

$

59.00

$

50.15

Short

1

1

MINIs

MQGKZT

$

64.00

$

54.40

Short

1

1

MINIs

RIOKZT

$

85.70

$

77.13

Short

1

1

MINIs

WDCKZT

$

14.60

$

13.14

Short

1

1

MINIs

LEIKZR

$

42.42

$

38.17

Short

1

1

MINIs

.

MINIs approaching stop loss Underlying

MINI Code

MINI Type

Strike

Stop Loss

Share Price

Approx. MINI Value

Share: Stop Loss

CBA

CBAKZQ

Short

$62.86

$56.60

$

55.46

$

7.40

2.1%

WDC

WDCKZH

Long

$10.61

$11.66

$

12.18

$

1.57

4.3%

SUN

SUNKZP

Short

$10.67

$9.61

$

9.14

$

1.53

5.1%

LGL

LGLKZP

Short

$3.96

$3.56

$

3.38

$

0.58

5.3%

TOL

TOLKZR

Short

$10.73

$9.12

$

8.65

$

2.08

5.4%

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