Rbs - Round Up - 150909

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

The Round Up 15 September 2009 Issue No. 176 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

PDN (PDNKZJ)

Trading Update – Capital raising

WDC (WDCKZG)

MINI Investment Buy– Bottom of cycle?

CSR (CSRKZA)

MINI Trading Buy – A sweet trade

Round Up Corner

MINIs approaching stop loss

Equities Move

Last

% Move

Range

Volume

ASX 200

-65.0

4531.1

-1.4%

-77 to +

$0.0 bn(L)

SPI - yesterday

+46.0

4575.0

+1.0%

-16 to +52

11,747(L)

Dow Jones

+21.4

9626.8

+0.2%

-69 to +26

Avg

S&P 500

+6.6

1049.3

+0.6%

-8 to +7

Avg

Nasdaq

+10.9

2091.8

+0.5%

-15 to +11

Avg

FTSE

+7.4

5018.9

+0.1%

-58 to +9

Low

Commodities Move Oil-WTI spot

Last

% Today

% Past Month

-0.4

68.9

-0.6%

+2.0%

Gold Spot

-0.1

1000.1

-0.0%

+5.4%

Nickel (LME)

-11.1

767.3

-1.4%

-12.9%

Aluminium (LME)

-0.4

82.2

-0.5%

-4.4%

Copper (LME)

-1.9

282.8

-0.7%

+3.4%

Zinc (LME)

-2.5

83.5

-2.9%

+3.0%

Silver

-0.2

16.5

-1.2%

+12.4%

Sugar

+0.9

22.1

+4.0%

+0.4%

Dual Listed Companies (DLC’s) Move

%Move

Last

AUD Terms

Diff to Aus

NWS (US)

0.10

0.01

+13.8 c

16.03

+34.0 c

RIO (UK)

-13.50

-0.01

+26.1 c

50.12

-793.0 c

BLT (BHP UK)

-16.50

-0.01

+17.0 c

32.67

-517.0 c

BXB (UK)

-2.52

-0.01

+3.9 c

7.41

-9.3 c

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

%Move -0.48

Last -0.01

AUD Terms +66.1 c

38.36

Diff to Aus +51.6 c

AWC (US)

0.01

0.00

+5.7 c

1.65

+3.4 c

TLS (US)

-0.63

-0.01

+105.0 c

24.37

+27.8 c

ANZ (US)

-0.65

-0.03

+24.4 c

28.32

+22.2 c

WBC (US)

-0.64

-0.02

+26.0 c

3.02

-0.1 c

NAB (US)

-0.11

0.00

+45.8 c

5.31

+1.2 c

LGL (US)

-0.71

-0.02

+30.6 c

7.09

-2.8 c

RMD (US)

-0.09

-0.02

+4.2 c

4.48

+1.8 c

JHX (US)

-0.48

-0.01

+66.1 c

38.36

+51.6 c

PDN (CAN)

0.01

0.00

+5.7 c

1.65

+3.4 c

Overnight Commentary United States Commentary A possible trade dispute over tyre tariffs weighed on the US overnight but the Dow managed a gain of 0.2% to send it to 2009 highs with rumoured merger activity adding support. The S&P500 climbed 0.6% with the NASDAQ up 0.5%. Financials - Rumoured M&A activity boosted the sector with JP's up 2.9% Bank of New York Mellon climbed 1.2%, Wells Fargo added 1.7% but Citigroup fell 2% and BoA was flat. The S&P500 Financials added 1.5% as a group. Industrials - Not surprisingly US tyre manufacturers were stronger. Goodyear was up 2.95%, Cooper jumped 7.1% but Hankook, the largest overseas tyre manufacturer in China, sank 8.1%. Rubber futures slumped on the back of the tariff news. Industrials - General Electric was the best on the Dow up 4.6% after a broker wrote that the fall in the $US would boost earnings. Telcos - Sprint Nextel jumped 10.1% after a British newspaper reported Germany's Deutsche Telekom AG was considering a bid for its U.S. rival. Eco - Joseph Stiglitz, the Nobel-prize winning US economist, had added to concerns about the economy when he said in an interview on Sunday that underlying problems still lingered in the US banking system following the collapse of Lehman Brothers.

United Kingdom & Europe Commentary The FTSE closed up 0.2% or 7pts as banks and defensives added support with miners and energy stocks weighed with concerns over the amounts of speculative money in those sectors. The FTSE Eurofirst 300 fell 0.3% whilst the DAX and CAC both fell 0.1%. UK Banks - Banks added the most points to the index, rebounding from falls earlier in the session, with HSBC, Standard Chartered and Lloyds up between 0.3% and 1%. Moody's, however, said the credit outlook for British banks remains negative for the next 12-18 months, reflecting weakness in the domestic economic environment. Euro Banks - Concern over the ECB's new capital requirements and some profit taking saw weakness. Deutsche Bank was off 0.9%, Commerzbank fell 1.6%, BNP was 1.6% lower and SocGen ended the session down 2.4%. Food - Cadbury, which has soared this month after it rejected a bid approach from Kraft, advanced 1.4% on the possibility the U.S. company could go hostile with a higher bid or that Hershey could counter. Defensives - Vodafone put on 0.7%, while GlaxoSmithKline added 0.6% and Imperial Tobacco rose 0.3%. Defence companies also got a lift with BAE Systems and Cobham both gaining 2.1%.

Resources Commentary Miners - The sector was under pressure from weaker metal prices. Copper fell to 1 week lows as falling Chinese imports and the possibility of increased Chinese exports hurt the price. BHP fell 1%, Rio was off 0.5%, Vedanta dropped 1.9% and Antofagasta ended 0.8% lower. Energy - Energy stocks suffered as crude eased below $69 a barrel. BG Group, BP and Tullow Oil dropped between 0.1% and 2.3%. In Europe Total was off 0.3%, Statoil dropped 1.35% but Repsol added 1.4%

SPI Commentary The SPI traded down 69pts or 1.5% to 4529. Open at 4585 with a high of 4593 and a low of 4519. Volume 79,284. Overnight the SPI traded up 46pts to 4575.

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

US Dwelling commencements, RBA Board Minutes

US

PPI, retail sales, NY Fed Empire PMI, Business inventories

US

CPI, Current account balance, Industrial production RBA Bulletin, customs imports

US

NAHB survey, housing starts

US

Philadelphia Fed Index

*Dates are indicative only and may change

Upcoming Dividends ExDivDate

Security

Description

Div (c)

Yield

Frk(%)

PayDate

21-Sep-09

BBG

Billabong

18

4.3%

50

23-Oct-09

21-Sep-09

NCM

Newcrest Mining

15

0.44%

0

16-Oct-09

Trading Update: Paladin Energy (PDNKZJ) – Capital raising Last week PDN completed an institutional placement to raise A$419m. This represents ~15% of issued capital with an issue price of $4.60. The placement was well received by investors, however with the share price closing Friday below the issue price, we believe a buying opportunity has been presented. RBS Research expect the stock to rerate post issue as balance sheet concerns will be gone. RBS Research target price $5.61 with a BUY recommendation. Buy PDNKZJ

Source: IRESS

• • • •

PDN completed an institutional placement of ~15% of issued capital with a price of $4.60. PDN said that the funds will be used to advance M&A and other growth opportunities, progress Langer Heinrich Stage 3, expand exploration programs, and strengthen the balance sheet The raising will take PDN's net debt down to US$166m from US$520mln with gearing falling to 17% (previously 46%). RBS Research believe the placement should be well received by investors, and expect the stock to rerate post issue as balance sheet concerns are removed.

RBS MINIs over PDN Security

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

PDNKZI

135.29

156

Long

1

1

MINI Long

PDNKZJ

310.22

356

Long

1

1

MINI Long

MINI Investment Buy: Westfield Group (WDCKZG) – Bottom of devaluation cycle? Post result, WDC has maintained FY09 operating EPS guidance of 94-97cps, despite a cut in the FY10+ payout policy to 70-75%. With WDC arguably at the bottom of a challenging earnings and property devaluation cycle, RBS Research are more confident of a sector re-rating and upgrade to Buy. RBS target price $14.16. WDC is trading in an uptrending channel. Buy WDCKZG below $12.

Source: IRESS

RBS Research expect the level of cap rate expansion for WDC to ease materially and the NOI decline across the UK and US portfolios to cease in the 2H09. RBS see ongoing rerating from here as evidence mounts of a stabilisation and slow improvement in property markets and move to a Buy with a longterm positive disposition on quality property companies such as WDC. WDC reported negative revaluations of A$2.9bn across the portfolio which were not unexpected. The cut in the dividend payout from 100% of operational earnings to 70-75% would no doubt have caught those expecting an equity raising by surprise but we see this and the deferred development schedule positioning WDC well to respond to any upturn in the broader property market.

RBS MINIs over WDC Security

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

WDCKZG

650.83

716

Long

1

1

MINI Long

WDCKZR

1847.47

1662

Short

1

1

MINI Short

MINI Trading Buy: CSR Limited (CSRKZA) – A sweet trade Compared to the performance of sugar and other building materials stocks, CSR has been an underperformer of late. The sugar price has recently pulled back from multi decade highs, however RBS Research anticipate CSR has achieved FY10 average prices in excess of A$400/t, and an increasingly attractive hedge book over FY11+. Current signals also point to the earliest crushing season finish in 18 years. The divestment of CSR’s business is also in the pipeline which we believe will unlock value. The stock has pulled back to its uptrend line and looks to have found support at $1.90. Buy CSRKZA CSR Daily Chart

Source: IRESS

CSR is trading in a strong uptrending channel since hitting lows in March. The stock has recently pulled back to the lower end of the uptrend channel and appears to have found support at $1.90. Sugar price returns vs CSR returns

Source: IRESS

The chart above shows the returns on CSR vs the returns on sugar. It can be seen that there is a historical correlation with sugar and CSR, however this relationship has diverged in 2009 with sugar significantly outeprforming sugar.

CSR vs other builders and the S&P/ASX 200

Source: IRESS

The chart above compares recent returns of CSR and other building materials stocks. It can be seen that CSR has underperformed both JHX and BLD as well as the broader market. The reason for the divergence of sugar and CSR as shown on the previous page in 2008 was the weakness in building materials…. However this sector of the market has rallied, and CSR has been left behind. We believe that the underperformance of CSR in both sugar and building materials is set to converge with CSR outperforming. CSR also has an aluminium business and has also underperformed AWC. The sugar story is sweet

• • • • •

Current sugar prices around 21.60USc/lb are just below 28-year highs, up ~45% over the past 12 months. With dry weather in India and excess rain in Brazil curbing production from the world’s two biggest growers, the ISO estimates global demand may outstrip supply by 8.4Mt in 2009/10 (5% of consumption). CSR indicated an expectation of a minimum achieved price of A$380/t. Yet with implied raw sugar prices subsequently averaging A$525/t, RBS research now anticipate FY10 realised prices of A$403/t. In addition CSR appears poised to benefit from drier weather conditions and mill upgrades to complete the sugar cane crush in late October, the earliest in 18 years. RBS target price $2.15 with a buy recommendation

RBS MINIs over CSR Security

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

CSRKZA

100.69

Long

1

1

MINI Long

CSRKZP

299.35

Short

1

1

MINI Short

RBS Round Up Corner: MINIs approaching stop loss Underlying

MINI Code

MINI Type

Strike

Stop Loss

Share Price

Approx. MINI Value

Share: Stop Loss

XJO

XJOKZX

Short

4,882.58

4,646.00

$ 4,543.90

$

3.39

2.2%

ANZ

ANZKZV

Short

$25.44

$22.91

$

22.05

$

3.39

3.9%

LLC

LLCKZQ

Short

$11.56

$10.56

$

10.13

$

1.43

4.2%

WES

WESKZT

Short

$29.59

$26.65

$

25.36

$

4.23

5.1%

OSH

OSHKZS

Short

$7.49

$6.78

$

6.37

$

1.12

6.4%

SFI’s approaching stop loss Underlying

MINI Code

MINI Type

Strike

Stop Loss

AGK

AGKSZX

Long

$7.98

$9.06

Share Price $

13.49

Approx. MINI Value $

Share: Stop Loss

5.51

32.8%

TTS

TTSSZX

Long

$1.38

$1.64

$

2.56

$

1.18

35.9%

BSL

BSLSZW

Long

$1.76

$1.94

$

3.07

$

1.31

36.8%

WDC

WDCSZW

Long

$7.52

$8.25

$

13.06

$

5.54

36.8%

WBC

WBCSZV

Long

$14.03

$15.40

$

24.52

$

10.49

37.2%

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