Rbs - Round Up - 131009

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

The Round Up 13 October 2009 Issue No. 195 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

CSL (CSLKZG)

MINI Update – Getting back to buy zone

RMD (RMDKZD)

MINI Trading Buy – Acquisition of Narval

AGK (AGKKZE)

MINI Investment Buy – Reaches top of range

Round Up Corner

Strategy – Acquisition candidates

Equities Move ASX 200

Last -13.1

% Move 4739.8

Range -0.3%

Volume -16 to +33

$3.5 bn(L)

SPI - yesterday

+9.0

4758.0

+0.2%

-8 to +51

14,277(L)

Dow Jones

+20.9

9885.8

+0.2%

-16 to +67

Low

S&P 500

+4.7

1076.2

+0.4%

+ to +8

Low

Nasdaq

-0.1

2139.1

-0.0%

-11 to +17

Avg

+48.3

5210.2

+0.9%

u.c to +69

Low

FTSE

Commodities Move

Last

% Today

% Past Month

Oil-WTI spot

+1.4

73.2

+2.0%

+5.5%

Gold Spot

+6.6

1055.8

+0.6%

+5.0%

Nickel (LME)

+3.1

850.3

+0.4%

+10.8%

Aluminium (LME)

+1.7

86.7

+2.0%

+5.4%

Copper (LME)

+2.0

284.0

+0.7%

+0.4%

Zinc (LME)

+2.5

93.8

+2.7%

+12.3%

Silver

+0.0

17.8

+0.3%

+6.1%

Sugar

+0.4

21.1

+1.8%

-0.7%

Dual Listed Companies (DLC’s) Move

%Move

Last

AUD Terms

Diff to Aus

NWS (US)

-0.15

-0.01

+14.0 c

15.45

-11.6 c

RIO (UK)

44.50

0.02

+29.0 c

50.50

-1079.9 c

BLT (BHP UK)

15.50

0.01

+17.9 c

31.11

-678.1 c

BXB (UK)

22.00

0.06

+4.2 c

7.34

+5.4 c

American Depository Receipts (ADR’s) Move

%Move

Last

BHP (US)

0.12

0.00

AWC (US)

0.13

TLS (US)

0.10

ANZ (US)

-0.40

WBC (US)

-0.33

NAB (US) LGL (US)

AUD Terms

Diff to Aus

+68.9 c

37.95

+6.2 c

0.02

+6.9 c

1.90

-1.2 c

0.01

+14.5 c

3.20

-0.3 c

-0.02

+22.0 c

24.27

+6.2 c

0.00

+118.3 c

26.08

+24.5 c

-0.67

-0.02

+28.1 c

30.97

-3.6 c

0.48

0.02

+28.6 c

3.16

+1.6 c

RMD (US)

1.03

0.02

+46.8 c

5.16

-0.5 c

JHX (US)

0.82

0.02

+35.2 c

7.75

-9.6 c

PDN (CAN)

-0.23

-0.05

+4.5 c

4.75

+7.8 c

Overnight Commentary United States Commentary A slow day for the Columbus Day holiday but importantly the glass stayed half full. Six week highs from crude meant another reasonable day for Chevron and Exxon and together accounted for c70% of the Dow's 20pt gain. Elsewhere, the S&P up 0.4% and the Nasdaq flat. Financials - Ahead of a big week of 3Q earnings(JP's, GS, Citigroup, BofA and later in the week) the market started placing their bets. Wells and BofA amongst the bet up over 4% and 2% respectively, the banks index up 2.8% albeit on low t/o. Energy - Ongoing optimism around the health of the global economy pushed crude up through $73/brl and took the corresponding stocks with them. Chevron and Exxon both added 1.3%, Halliburton up nearly 3%, Nat Oilwell and Schlumberger both finished 2% higher. FX - Although the slip from the DXY index overnight was reasonably benign, the theme remains intact and central banks globally continue to snub the greenback. Already facing its roughest 2 month sell off in 20years, the latest batch of data shows nations reporting FX breakdowns put 63% of the new cash into Euro/Yen in the 2Q. Eco - Nothing overnight, but all on eyes on the tail end of the week. Starting Wednesday, Retail Sales, Fed Minutes, CPI, Weekly Jobless data, Philly Fed, Industrial Production and UoM Consumer Confidence.

United Kingdom & Europe Commentary The FTSE rose to 12 month highs, up 0.9% or 48pts, as increased optimism saw miners and energy stocks higher. The FTSE Eurofirst 300 was up 0.7%, the DAX climbed 1.2% and the CAC also added 1.2%. UK Banks - Heavyweight HSBC rose 0.2% and Standard Chartered was up 2% but Lloyds was off 2.5% after a source said up to 6 banks were ready to underwrite a £10bn rights issue. Barclays fell 1.2% after the FT said it would spin off a £4bn portfolio of complex credit assets and RBS dropped 0.5%. Euro Banks - Increased investor confidence saw the banks move higher. Deutsche Bank rose 2.1%, Commerzbank added 1.5%, BNP climbed 1.1%, SocGen was flat and UniCredit ended 1.6% higher. Insurers - Old Mutual, up 4.6%, was the best on the FTSE100 as analysts said it was trading at a discount to embedded value. Other insurers were higher with Aviva, Prudential and Standard Life up 0.5% - 2.3%. Electronics - Philips, Europe’s largest consumer electronics producer, was up 7.7% after reporting better than expected 3Q results. Positive sentiment helped Infineon, Europe's 2nd largest chip maker, jump 5%.

Commodiites Commentary Miners - Increased demand for the metals saw the sector higher. BHP rose 0.9%, Rio was up 1.6%, Anglo climbed 2%, Xstrata added 1.6%, Vedanta jumped 2.9% and Antofagasta ended the session 0.6% higher. Energy - Crude rose above $73 per barrel and a possible counterbid for Tullow's Ghanaian oilfield by CNOOC helped boost the sector. Tullow was 1.4% higher, BP rose 1.8%, Shell added 2.3% and Cairn Energy ended up 0.9%. In Europe Total was up 1.6%, Statoil climbed 1.1% and Repsol rose 1%.

SPI Commentary The SPI traded up 9pts or 0.19% to 4758. Open at 4800 with a high of 4800 and a low of 4741. Volume 14,046. Overnight the SPI trading up 19pts to 4777

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

US

Columbus Day holiday NAB Business confidence, NAB Business conditions

US Wednesday

AUS US

Thursday

AUS US

Friday

WMI consumer confidence Import price, retail sales RBA Governor speaks, RBA bulletin Business inventories, FOMC minutes, CPI, NY Fed Empire PMI

AUS US

Philadelphia Fed index, industrial production, Michigan consumer sentiment

*Dates are indicative only and may change

MINI Update: CSL Limited (CSLKZG) – Getting back to buy zone CSL pulled back last week as the market shifted away from defensive names and those exposed to a rising AUD/USD. Look to buy CSL below $31. RBS Research have a buy recommendation on the stock with a $36.30 target price. CSL is likley to continue to benefit from Swine flu vaccine orders and the share buyback continues which will support falls in the share price. Buy CSLKZG

Source: IRESS

CSL is trading in a pennant formation evidenced by the formation of higher lows and lower highs. The stock pulled back from the top of its pennant last week. Look to buy below $31. WHO says it could take years to downgrade swine flu It could take years for the World Health Organisation to downgrade the H1N1 (swine) flu from a pandemic to seasonal-like virus, the UN agency said over the weekend. The WHO moved its six-point pandemic alert level to the top level in June 2009. We believe that should the pandemic continue for another 2 or 3 years, governments across the world are likely to either expand their vaccination process or continue to stockpile the vaccine. This would be a potential boon for global H1N1 makers, including CSL. RBS Research are currently assuming the vaccine orders are one offs but should the size of the order continue into FY11, this would increase EPS and valuation.

RBS MINIs over CSL Security

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

CSLKZG

2362.05

Long

1

1

MINI Long

CSLKZH

2069.14

Long

1

1

MINI Long

CSLKZQ

4406.25

Short

1

1

MINI Short

CSLKZV

4803.67

Short

1

1

MINI Short

CSLKZW

4011.05

Short

1

1

MINI Short

MINI Trading Buy: ResMed (RMDKZD) – Acquisition of Narval RMD announced this week the acquisition of Laboratoires Narval (LN) for €8m cash. LN is based in France and manufactures and distributes a mandibular repositioning device (MRD). RBS Research believe this helps RMD expand its offering into the mild end of the OSA market. RMD plans to commercialise the device in EU markets. RBS has a buy recommendation on RMD with a $5.65 target price. RMD has recently pulled back to its medium trem uptrend. Buy RMDKZD

Source: IRESS

RMD acquires Laboratoires Narval RBS Research believe the strategic rationale for the acquisition is related to the potential for RMD to expand its offering from moderate to severe OSA into the mild end of OSA. Hence, with this acquisition RMD is closer to becoming a company that caters to the entire spectrum of OSA. RMD said it plans to commercialise this device in selected European markets. LN already sells into France, Canada, Spain and the UK. RBS target price is unchanged at $5.65. We continue to believe RMD is a quality franchise, with a number of near- and medium-term growth drivers. Near-term catalysts include next week’s US Medtrade conference, which may see the release of new products for the US market.

RBS MINIs over Security RMDKZD

ExPrc

Stop Loss 377.97

CP

ConvFac Long

1

Delta

Description 1

MINI Long

MINI Investment Buy: AGL Energy (AGKKZE) – Reaches top of range We called AGK a buy at $13.70 level at the bottom of its trading range, after RBS Research upgraded 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 stock has since rallied to the top of its trading range at $14.40. For short term trades we would be happy to lock in profit here and wait for a pullback to re-enter. 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: Acquisition Candidates As the global financial crisis continues to recede, RBS Research Strategy believe we are about to enter into an investment/M&A cycle in the market. Balance sheets are lowly geared, asset values are off their peaks and management will be starting to think of expansion rather than survival. We identify potential acquisition candidates.

Both corporate balance sheets and cash flows are strong Corporate cash flows remained robust in 2009 and we forecast growth will resume in 2010. Similarly, corporate Australia’s balance sheet is in good shape following 18 months of capital preservation and record equity issuance. Corporate Australia is therefore well placed to expand over the next 6-18 months.

MINIs approaching stop loss Underlying

MINI Code

MINI Type

Strike

Stop Loss

XJO

XJOKZW

Short

5,079.50

4,833.00

QAN

QANKZQ

Short

$3.40

$3.05

Share Price 4,739.80 $

2.97

Approx. MINI Value

Share: Stop Loss

$

3.40

2.0%

$

0.43

2.7%

ANZ

ANZKZW

Short

$27.89

$25.12

$

24.21

$

3.68

3.8%

SUN

SUNKZP

Short

$10.69

$9.63

$

9.05

$

1.64

6.4%

NAB

NABKZR

Short

$36.69

$33.03

$

31.01

$

5.68

6.5%

SFI’s approaching stop loss Underlying

MINI Code

MINI Type

Strike

Stop Loss

Share Price

BXB

BXBSZW

Long

$4.50

$5.18

$

BSL

BSLSZW

Long

$1.77

$1.95

LLC

LLCSZV

Long

$6.01

$6.90

AGK

AGKSZX

Long

$8.02

LEI

LEISZV

Long

$20.62

Approx. MINI Value

Share: Stop Loss

7.09

$

2.59

26.9%

$

3.02

$

1.25

35.4%

$

10.69

$

4.69

35.5%

$8.81

$

14.12

$

6.10

37.6%

$22.64

$

36.41

$

15.79

37.8%

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