Rbs - Round Up - 121109

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

The Round Up 12 November 2009 Issue No. 216 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

NWS (NWSKZI)

MINI Investment Buy – Leverage to growth

QBE (QBESZX)

SFI Investment Buy – Investor Update

Round Up Corner

NEW MINIs

Equities Move

Last

ASX 200

+23.4

SPI - yesterday

+34.0

Dow Jones

+44.3

% Move 4757.0

Range

Volume

+0.5%

+23 to +23

$5.5 bn(A)

4768.0

+0.7%

+18 to +46

28,172(A)

10291.3

+0.4%

-1 to +95

Avg

S&P 500

+5.5

1098.5

+0.5%

+1 to +12

Low

Nasdaq

+15.8

2166.9

+0.7%

+4 to +27

Avg

FTSE

+36.2

5266.8

+0.7%

u.c to +71

Avg

Commodities Move

Last

% Today

% Past Month

Oil-WTI spot

+0.2

79.3

+0.3%

+10.5%

Gold Spot

+11.7

1117.5

+1.1%

+6.4%

Nickel (LME)

+1.4

761.4

+0.2%

-10.1%

Aluminium (LME)

+0.3

87.6

+0.3%

+3.0%

Copper (LME)

+0.4

295.6

+0.1%

+4.8%

Zinc (LME)

+1.0

97.9

+1.0%

+7.2%

Silver

+0.2

17.5

+1.1%

-0.9%

Sugar

+0.8

22.1

+3.7%

+6.9%

Dual Listed Companies (DLC’s) Move

%Move

Last

AUD Terms

Diff to Aus

NWS (US)

0.03

0.00

+14.7 c

15.79

-15.6 c

RIO (UK)

75.00

0.02

+31.2 c

55.53

-1306.8 c

BLT (BHP UK)

46.50

0.03

+18.2 c

32.35

-674.8 c

BXB (UK)

0.25

0.00

+3.9 c

6.96

-5.6 c

American Depository Receipts (ADR’s) Move

%Move

Last

BHP (US)

0.97

0.01

AWC (US)

0.02

TLS (US)

0.00

ANZ (US)

0.27

WBC (US)

0.29

NAB (US) LGL (US)

AUD Terms

Diff to Aus

+72.6 c

39.04

-5.6 c

0.00

+6.2 c

1.67

-1.0 c

0.00

+15.1 c

3.25

-1.1 c

0.01

+21.4 c

22.98

+2.6 c

0.00

+122.9 c

26.43

+14.7 c

0.20

0.01

+28.3 c

30.37

+10.3 c

0.35

0.01

+31.9 c

3.43

+2.4 c

RMD (US)

-0.27

-0.01

+48.7 c

5.24

-1.3 c

JHX (US)

0.52

0.02

+34.6 c

7.43

-1.9 c

PDN (CAN)

-0.02

0.00

+4.1 c

4.22

-1.6 c

Overnight Commentary United States Commentary Another small and unconvincing bounce on the back of the China data. More good news from the Homebuilders and a handful of buy tickets amongst the growth names, has the Dow up 42pts, the S&P +0.5%(13 month highs) and the Nasdaq up 0.7%. Homebuilders - Toll Brothers followed on from Beazer yesterday, up 15% and leading the builders after saying orders had surged and cancellations slowed. The news got behind the rest of the group, Pulte up 6%, Lennar and KB Home up 5% and Dr Horton 4.8% higher. The sector up 6.5% on solid t/o. Usual Suspects - Post yesterdays China data, US investors dipped their toe back into some of the growth names. Intel, Cisco, Dupont , Boeing and Home Depot all posting modest gains and together accounting for most of the days gains. Financials - Playing a supporting role to the very measured push into the growth space, financials continued to track higher. For the 3rd consecutive session BofA vying for the Dow's top spot up over 2%, Wells, GS and BoNY also sitting on similar gains. Fed - Confirming what we already knew, Dallas President Richard Fisher said economic growth and inflation may persist below ideal levels into 2011, reterating the Fed accommodative stance on rates. Retail - Macy's down more than 8%(S&P's worst) after the 2nd largest department store chain in the US reported a 3Q loss and provided FY guidance that fell short of market expectations.

United Kingdom & Europe Commentary The FTSE closed just off 2009 intra day highs up 0.7% or 36pts with miners adding strength and positive eco news helping sentiment. The FTSE Eurofirst 300 was 0.4% higher, the DAX climbed 1% and the CAC was up 0.8%. UK Banks - HSBC up 0.9%, continued its move up after its 3Q update. Standard Chartered and Lloyds added 1.3% and 4.7%, respectively but Barclays fell 0.7% after its 3Q update the previous night and RBS finished down 1.7%. Euro Banks - A positive result from Credit Agricole, up 5.6%, lifted the sector with the bank reporting an improvement in net profit between second and unveiled a succession plan for when its CEO steps down next year. BNP was 1.6% higher, Deutsche Bank rose 1.5% and UniCredit rose 0.4% after saying there had been a slowdown in the number of impaired loans and an improvement in the balance sheet structure. Eco - The increase in the UK jobless claims came in at 12.9k vs 20 expected with the unemployment rate 7.8% vs 8% expected. Comments from the BoE also added weight with the Governor Mervyn King saying emergency action hasn't finished.

Retail - Sainsbury rose 3.2% as the grocer posted a forecast-beating 19% rise in 1H profit and said it saw signs of a pick-up in spending. Rumours of another bid from Qatar Investment did the rounds again after they sold half their VW stake whilst peers Tesco and Morrison were both up 1%.

Commodiites Commentary Miners - Strong factory output from China gave the sector a boost. BHP added 2.6%, Rio rose 2.5%, Anglo was up 1.4%, Xstrata climbed 2.7% with Randgold and Fresnillo soaring 6.1% and 5.9% respectively. Energy - Energy plays tracked crude higher. Shell was up 1.4%, BP added 0.7%, BG Group climbed 1.5% but Tullow fell 1.6%. In Europe Total rose 0.6%, Statoil added 1.35% and Repsol ended flat.

SPI Commentary The SPI traded up 34pts or 0.72% to 4768. Open at 4755 with a low of 4753 and a high of 4780. Volume 23,167. Overnight the SPI trading up 20pts to 4788

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

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

US Tuesday

AUS

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

US Wednesday

AUS US

Thursday

AUS

WMI consumer confidence Veterans’ Day holiday Employment and unemployment

US Friday

AUS 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 Investment Buy: News Corporation (NWSKZJ) – Strong leverage to growth NWS raised guidance for FY10 operating profit growth of 'high single to low double digit' which RBS research still believe is conservative. RBS Research have a +16% forecast which is underpinned by strong ongoing cable growth and an improving outlook in NWS’s key advertising markets. The stock remains cheap on an SOTP and peer multiple basis. Buy NWSKZJ

Source: IRESS

RBS forecast 16% operating profit growth in FY10 1Q10 operating profit was up 9% on the pcp and EPS of US$0.22 was ahead of Bloomberg consensus of US$0.18. The company raised its FY10 operating profit growth guidance from ‘high single digit’ to ‘high single to low double digit’. RBS Research still see the guidance as conservative and raise FY10F operating income growth to +16% (previously +11%) and EPS by 5% to US$0.85. Cable continues to outperform, TV imporving The cable division was again the standout in the period, with operating profit up 41%. We now forecast cable operating profit will grow 23% to US$2.05bn in FY10. Cable makes up half of operating income and underpins overall group earnings growth in FY10 and FY11. TV is showing encouraging signs, with NWS saying October pacings are flat on last year and November up ‘mid teens’. Newspapers were weak in the quarter, but the company said Australian newspaper trends are improving and newspaper operating profit should be down only marginally for the full year. Sky Italia and FIM were both weak, but should not detract significantly in the full year. Stock remains cheap News Corp trades on an EV/EBITDA of 6.0x CY2010F, below both US peers (Disney on 7.8x, Viacom 7.6x on Reuters estimates) and Australian domestic media stocks (TEN on 9.5x). RBSprice target of $19.92 RBS MINIs over NWS Security

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

NWSKZI

778.45

Long

1

1

MINI Long

NWSKZJ

1150.28

Long

1

1

MINI Long

NWSKZR

1981.63

Short

1

1

MINI Short

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

$62.85

$56.60

$

54.72

$

8.13

3.4%

WES

WESKZU

Short

$32.22

$29.01

$

27.98

$

4.24

3.7%

DJS

DJSKZP

Short

$6.78

$6.10

$

5.86

$

0.92

4.1%

RIO

RIOKZS

Short

$79.48

$71.57

$

68.73

$

10.75

4.1%

LGL

LGLKZP

Short

$3.96

$3.56

$

3.41

$

0.55

4.4%

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