Rbs Round Up 240809

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

The Round Up 24 August 2009 Issue No. 161 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 (CSLVZO)

Trading Update – Good result + Buyback

BSL (BSLKZI)

MINI Trading Buy – Buy the dips

TLS (TLSSZX)

Self Funding Buy – Future Fund Selldown

Round Up Corner

Stocks reporting this week

Equities Move ASX 200

Last -86.9

SPI - yesterday

% Move 4290.6

Range

Volume

-2.0%

-117 to +2

$10.0 bn(VH)

-70.0

4251.0

-1.6%

-97 to +27

42,741(H)

Dow Jones

+155.9

9506.0

+1.7%

-3 to +169

High

S&P 500

+18.8

1026.1

+1.9%

+2 to +20

High

Nasdaq

+31.7

2020.9

+1.6%

+5 to +33

Avg

FTSE

+94.3

4850.9

+2.0%

-21 to +102

High

Commodities Move

Last

% Today

% Past Month

Oil-WTI spot

+0.98

73.89

+1.3%

+14.2%

Gold Spot

+13.20

953.85

+1.4%

+0.6%

Nickel (LME)

+19.14

875.44

+2.2%

+21.6%

Aluminium (LME)

+1.01

85.91

+1.2%

+12.3%

Copper (LME)

+9.98

284.43

+3.6%

+16.4%

Zinc (LME)

+1.35

81.94

+1.7%

+10.7%

Silver

+0.25

14.18

+1.8%

+4.7%

Sugar

-0.13

21.84

-0.6%

+22.7%

Dual Listed Companies (DLC’s) Move

%Move

Last

AUD Terms

NWS (US)

+0.20

+1.6%

12.97

RIO (UK)

+63.0 p

+2.7%

BLT (BHP UK)

+28.5 p

+1.8%

BXB (UK)

+2.5 p

+0.7%

£3.563

Diff to Aus

15.52

+61.8 c

£23.98

47.35

-895.7 c

£15.910

31.42

-518.6 c

7.04

-1.4 c

American Depository Receipts (ADR’s) Move

%Move

Last

BHP (US)

+0.89

+1.4%

AWC (US)

+0.01

TLS (US)

-0.18

ANZ (US) WBC (US)

AUD Terms

Diff to Aus

63.06

37.72

+111.4 c

+0.2%

5.48

1.64

+4.4 c

-1.2%

14.71

3.52

+5.0 c

-0.33

-2.0%

16.17

19.35

+31.7 c

-1.17

-1.2%

96.15

23.01

+26.8 c

NAB (US)

-0.70

-3.1%

21.72

25.99

+30.7 c

LGL (US)

+0.46

+2.3%

20.86

2.50

+4.6 c

RMD (US)

+0.06

+0.1%

45.20

5.41

+1.8 c

JHX (US)

-0.43

-1.5%

28.08

6.72

+3.9 c

PDN (CAN)

-0.02

-0.5%

4.05

4.48

+4.1 c

Overnight Commentary United States Commentary US stocks rallied on Friday, their fourth consecutive gain, sending the S&P 500 to it's highest levels since October as existing home sales jumped above the 5m house level. Dow finishd up 155.9 pts and the S&P 500 gained 1.9% to 1,026, importantly the moves were on solid volume and closed around their highs. Eco - Existing Home Sales jumped to their highest level in almost two years, 5.24m vs 5.0m expected, and above the 4.89m in June. Importantly breaking through the above the 5m homes level it has been flirting with all year. Month-on-month sales increased 7.2%, better than the 2.1% increase forecast and last month's 3.6% improvement. Industrials - Comments from Fed Chairman Bernanke that the prospects for a return to growth in the near term appear good, added to feelings that the economy is stabilizing and helped give industrial names a boost. Merck rose 3.9%, Walt Disney gained 3.5%, Home Depot up 3.1% and GE put on 2.9%. Financials - Regions Financial gained 6.7% to top the S&P 100, Citi put on 4.9% and JP Morgan rose 2.9% as the financials were also caught up in the positivity from both Fed officials and housing prices. Resources - Oil hit its highest level this year and copper reaching 11-week highs on the back of better eco data in the US and across Europe. Caterpillar topped the Dow gainers up 4%, Exxon rose 2%, and Chevron up 1.6%, the three adding over 30pts between them. Treasuries - US Treasuries fell by between 10 and 13 basis points across the 2, 20 and 30 year maturities as Fed Reserve Chairman Bernanle said the global economy is "beinning to emerge" from recession.

United Kingdom & Europe Commentary All the right kind of records set on Friday. Crude year highs, Copper 11 week highs and the FTSE up 2% and along the way hitting it's highest level since October 2008. The moves even more pronounced across broader Europe, the DAX and CAC both finishing 3% higher. Airlines - British Airways topped the FTSE, up over 7% on what most put down to a short squeeze. Elsewhere, Easy Jet and Ryan Air up 4.1% and 2.2%, both moves on heavy turnover. Insurers - Legal & General up 5.6% and just behind BA on the FTSE leaderboard after one broker added the name to their high conviction list. Most of the other sector constituents came along for the ride, Aviva up 5.5%, Friends Provident 4.3% and Old Mutual finished 3.3% higher.

Eco - A better than expected result for German PMI, Manufacturing coming in at 49.0 vs 47.0 expected and July's 45.7, Services 54.1(up thru 50 signalling expansion) vs 48.6 expected and last months 48.1. Financials - 2nd to the cyclicals but one of the standout sectors across broader Europe. BNP up 6%, Credit Agricole 5.2%, Allianz up 3.6% and Deutsche Banks finished 3.3% higher. All 4 featuring in their corresponding top10's.

Resources Commentary Miners - Following a better night from the metals and a night punctuated by optimism around global growth, moves from the metal plays were good without being spectacular. Rio up 2.7%, Billiton 1.8% higher and the UK Mining sector finished 2.6% higher. Energy - Oil plays among the larger contributors to the FTSE's gains following the bounce from crude. Carin Energy, Royal Dutch and BP up 4%, 3 % and 2% respectively, together accounting for c20% of the days gains.

SPI Commentary The SPI traded down 71pts or 1.64% to 4250. Open at 4345 with a high of 4348 and a low of 4230. Volume 46,651. Overnight the SPI traded up 69pts to 4320.

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

New motor vehicle sales

US

US Wednesday

S&P/CS composite 20

AUS

Real construction work done

US Thursday

Consumer confidence, FHFA house price, durable goods orders

AUS

Real capital expenditure, real equipment investment, expected nominal capex

US Friday

New home sales, real GDP

AUS US

Personal income, personal consumption, core PCE deflator, Michigan consumer confidence

*Dates are indicative only and may change

Upcoming Dividends ExDivDate

Security

24-Aug-09

AMC

24-Aug-09 24-Aug-09

Description

Div (c)

Amcor Limited

17

BLD

Boral Limited

TLS

Telstra Corporation

24-Aug-09

WPL

25-Aug-09

ORG

25-Aug-09 26-Aug-09 26-Aug-09

Yield

Frk(%)

PayDate

6%

0

18-Sep-09

5.5

2.5%

100

28-Sep-09

14

8.07%

100

25-Sep-09

Woodside Petroleum

55

2.33%

100

5-Oct-09

Origin Energy

25

3.46%

100

23-Sep-09

WES

Wesfarmers

60

4.37%

100

1-Oct-09

QBE

QBE Insurance

62

5.49%

20

22-Sep-09

STO

Santos Limited

22

2.71%

100

30-Sep-09

26-Aug-09

UGL

United Group

35

4.39%

100

18-Sep-09

27-Aug-09

ASX

ASX Limited

74.5

4.78%

100

24-Sep-09

27-Aug-09

BEN

Bendigo & Adelaide Bank

15

4.93%

100

30-Sep-09

28-Aug-09

COH

Cochlear

95

2.92%

100

24-Sep-09

31-Aug-09

BHP

BHP Billiton

50.07

3.01%

100

25-Sep-09

3-Sep-09

NWS

News Corp

6

0.9%

0

14-Oct-09

Trading Update: CSL Limited (CSLVZO) – Strong result, buyback is back We have been bullish CSL under $30 and believe the stock is still cheap following the results announcement. Sales revenue grew by 30.0% to A$4.62bn and total revenue was up 32% to A$5.04bn. Normalised net profit after tax was A$1,020.4m (up 45.4% on the pcp). Reuters consensus NPAT was A$1019.3m, with a range of A$911m- 1,123m. CSL hopes to migrate most patients to Privigen, its liquid IVIG, with the aim of selling 10Mg of Privigen in FY10F. Given solid underlying demand, we continue to believe this is possible. CSL has also recommenced the on market buyback. Buy the dips. RBS research have a BUY with target price of $37.50

Source: IRESS

CSL has guided to FY10 NPAT of A$1,160m-1,260m in constant-currency terms. RBS have a FY10F NPAT forecast of A$1169.0m, which implies a growth rate of 14.6% on the pcp. RBS Research continue to believe CSL is a high-quality franchise. The next catalyst for the stock should be a 9 September US FDA decision whether to reimburse for HPV vaccination in boys.

RBS MINIs over CSL Security

ExPrc

Stop Loss

CSLKZG

$23.7313

$ 24.83

CSLKZH

$20.8377

CSLKZQ

$44.6296

CP

ConvFac

Delta

Description

Long

1

1

MINI Long

$ 21.80

Long

1

1

MINI Long

$ 40.21

Short

1

1

MINI Short

CSLKZV

$48.6188

$ 46.22

Short

1

1

MINI Short

CSLKZW

$40.6625

$ 36.64

Short

1

1

MINI Short

RBS Warrants over CSL Security

ExDate

ExPrice

CP

ConvFac

Delta

Description

CSLJZB

29-Oct-09

$

20.00

Call

1

1

HOT Instalment

CSLJZC

29-Oct-09

$

25.00

Call

1

1

HOT Instalment

CSLSZX

4-Feb-19

$17.9302

Call

1

1

Self Funding Instalment

CSLVZN

29-Oct-09

$

35.00

Call

4

0.07

Trading Call Warrant

CSLVZO

26-Nov-09

$

34.00

Call

4

0.11

Trading Call Warrant

CSLVZP

29-Oct-09

$

30.00

Put

4

-0.05

Trading Put Warrant

MINI Trading Buy: Bluescope Steel (BSLKZI) – Buy the pullback We believe the recent pullback in BSL is a buying opportunity. BSL FY09 reported NPAT loss of A$66m, closing the books on a very challenging six months. Whilst we expect continued uncertainty in demand, a return to profit in 2Q10 appears likely as domestic prices and production levels recover and this is what the market is beginning to focus on. We think earnings leverage and long-term value are both appealing. RBS Research has a buy recommendation with $3.55 target price. Buy BSLKZI..

Source: IRESS

Result well-guided, with cost savings a highlight The FY09 reported NPAT loss was A$66m with underlying NPAT of A$56m which was in line with RBS expectations. Also, the lack of a dividend for 2H09 should not have surprised, and we think a distribution is unlikely to be paid until at least 2H10 as earnings levels firm. Despite this, RBS Research believe news of achieved permanent cost savings of A$132m set the tone for the earnings recovery story to come into focus. Management forecasting small NPAT loss for 1H10 BSL has guided for a small reported NPAT loss in 1H10. However, with domestic price increases likely to be announced for 1 October, and the Port Kembla mills running at ~75% utilisation, we anticipate BSL returning to profit in 2Q10, with economic indicators stabilising RBS Research find the stock appealing at these levels given its earnings leverage to a steel market recovery and a reasonable 0.97x P/B (FY10F). RBS maintain Buy recommendation and target price of $3.55

RBS MINIs over BSL Security

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

BSLKZI

160.84

193

Long

1

1

MINI Long

BSLKZS

474.35

403

Short

1

1

MINI Short

Self Funding Instalment Buy: Telstra Corporation (TLSSZX) – Future Fund selldown TLS is set to go ex-dividend today. The dividend is $0.14 which will be fully franked. Last Friday TLS pulled back after the Future Fund offered 498mln TLS shares at $3.47, cum dividend. RBS Research consider the Future Fund selldown a good thign for shareholders despite the ongoing overhang. Use the pullback as a buying opportunity. Buy TLSSZX

Source: IRESS

Telstra Result points and fundamentals • • • • • • •

Broadband ARPU increased 6.5% to A$57.70. MBB SIOs doubled to 1.05m, helping lift mobile ARPU 4.8% to A$51.84. Sales of IP-based products also increased at double-digit rates. With the rate of PSTN erosion reducing in 2H09 (cf 1H09) the speed-driven revenue lines helped keep total revenue growth at 2.7%, a good rate given the economic slowdown. Maintaining comparable revenue growth in FY10 may be harder as unemployment rises, the A$ strengthens and Sensis sales face a tougher business environment. The company says achieving its FY10 targets ‘would give us significant excess free cashflow, and all the flexibility that brings’. We think there is enough flexibility to contribute to NBN Co, on the right terms, and still pay an extra 2cps in dividends fully franked. RBS Research valuation $4.85 with a target price of $4.30, which is 12.0x FY10F EPS of 35.6c. Key downside risks include further margin contraction, tougher regulation and lower access prices. Upside risks include faster sales recovery, better cost control and higher access prices. Regulatory issues may be clearer when proposed legislation is tabled, we think by September.

KEY BENEFITS of the new RBS self funding instalments include: * NO PUT PROTECTION COST * Simple, transparent and Cost-effective with a low interest rate of 7.51% per annum * 1 for 1 movement with the underlying share (delta 1) * No margin calls * Non-recourse loan - You can never lose more than your initial outlay * ATO product rulings - Perfectly suitable to be used in SMSF's * Listed - Can be sold at anytime * Can be exercised at any time - simply by paying back loan amount * RBS are the only product issuer in the market who can offer this product * Dividends and franking credit benefits as well as interest deductibility

RBS MINIs over TLS Security

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

TLSKZC

260.58

274

Long

1

1

MINI Long

TLSKZD

289.16

306

Long

1

1

MINI Long

TLSKZP

449.9

405

Short

1

1

MINI Short

RBS Warrants over TLS Security TLSJZB

ExDate

ExPrice

CP

ConvFac

Delta

Description

29-Oct-09

250

Call

1

0.88

HOT Instalment

TLSIZA

28-Jan-10

250

Call

1

0.95

HOT Instalment

TLSIZQ

14-Jun-10

250

Call

1

1

Rolling Instalment

TLSIZR

14-Jun-10

225

Call

1

1

Rolling Instalment

TLSSZX

4-Feb-19

193.88

Call

1

1

Self Funding Instalment

TLSSZZ

30-Jun-17

255.18

Call

1

1

Self Funding Instalment

RBS Round Up Corner: Stocks Reporting This Week RBS MINIs are a great way to trade company results this reporting season, from both a long or short view. Date

Code

Company

Y/E

24 Aug WOR WorleyParsons Jun 25 Aug ALL Aristocrat Leisure Dec 25 Aug FGL Foster's Group Jun 25 Aug OSH Oil Search Dec 25 Aug SUN Suncorp-Metway Jun 26 Aug AOE Arrow Energy Jun 26 Aug CMJ Consolidated Media Jun 26 Aug HSP Healthscope Jun 26 Aug WDC Westfield Group Dec 27 Aug CWN Crown Jun 27 Aug LGL Lihir Gold Dec 27 Aug TOL Toll Holdings Jun 27 Aug TTS Tatts Group Jun 27 Aug WOW Woolworths Jun 28 Aug SHL Sonic Healthcare Jun *Figures in table based on RBS Research forecasts

AUD AUD AUD USD AUD AUD AUD AUD AUD AUD USD AUD AUD AUD AUD

NPAT (pre abs)

(Abs)

Div

EPS

2H div

Long Product

409.2 40.9 739.8 15.2 462.0 -24.2 85.8 83.7 1047 247.0 152.3 296.7 292.7 1781 302.2

0.0 -5.0 -349.0 0.0 -414.0 0.0 0.0 -11.5 0.0 -610.7 -186.5 -28.8 0.0 0.0 0.0

86.0c 5.0c 27.0c 4.0c 40.0c 0.0c 16.5c 21.5c 47.5c 34.6c 0.0c 20.0c 20.8c 99.5c 54.0c

172.1c 30.4c 38.4c 8.4c 41.0c -3.3c 12.4c 33.2c 97.3c 34.6c 12.4c 43.7c 23.1c 145.3c 83.6c

48.0c 36.0c 15.0c 8.0c

WORKZD ALLKZI FGLKZD OSHKZD SUNKZM AOEKZA CMJKZC HSPSZX WDCKZG CWNKZG LGLKZI TOLKZH TTSSZX WOWKZF SHLSZX

6.0c 11.0c 95.0c 20.8c 0.0c 8.5c 10.6c 51.5c 32.0c

Short Product

OSHKZR SUNKZP

WDCKZR CWNKZP LGLKZP TOLKZP WOWKZS

Monday Worley Parsons (WOR) - Watching for lagging margin compression after the fall in oil prices from its peak.

Tuesday Aristocrat Leisure (ALL) - ALL has guided to 1H09 normalised NPAT of A$35m-45m, with Japan expected to be particularly weak in the period. Focus will be on an update on ALL's business transformation strategy. Fosters Group (FGL) - Downside risk to consensus on tough wine (domestic and UK/US) and increased beer competition. Cash flow likely to be the highlight. Oil Search (OSH) - (USD) Focus will be on newsflow on PLNG. Suncorp Metway (SUN) - Key focus will be bad debt deterioration in the bank.

Wednesday Arrow Energy (AOE) - Looking for consistent production/profitability from the established fields. Consolidated Media (CMJ) - Dividend will depend on a distribution from Foxtel. Healthscope (HSP) - Expect a good result driven by ongoing volume increases in pathology and demand growth in hospitals. Westfield Group (WDC) - Focus will be on status of construction yields, and an update on tenancy at Strathfield and Sydney City.

Thursday Crown Limited (CWN) - Expect Australian casino revenues to have remained relatively resilient in the six months to June (we forecast 5.6% growth in 2H09). Lihir Gold (LGL) - (USD) Focus will be on Ivory Coast expansion and the Million Oz project. Toll Holdings (TOL) - Expect 2H to be marginally down on the pcp, coming in slightly below original guidance. Tattersalls (TTS) - Tatts should benefit from a strong run in jackpots from its lotteries business, as well as relatively defensive earnings from wagering and gaming. Woolworths Limited (WOW) - Strong sales and margin, particularly in Australian F&L. All eyes will be on international acquisition commentary.

Friday Sonic Healthcare (SHL) - Expect a solid result driven by ongoing volume increases in domestic pathology and margin uplift generated from acquisition synergies.

MINIs approaching stop loss Underlying

MINI Code

MINI Type

Strike

Stop Loss

Share Price

Approx. MINI Value

Share: Stop Loss

QBE

QBEKZS

Short

$25.78

$23.23

$

23.12

$

2.66

0.5%

WPL

WPLKZX

Short

$54.05

$48.68

$

47.15

$

6.90

3.2%

COH

COHKZQ

Short

$69.42

$62.55

$

57.85

$

11.57

8.1%

CPU

CPUKZP

Short

$11.80

$10.72

$

9.91

$

1.89

8.2%

XJO

XJOKZX

Short

4,898.66

4,655.00

$

6.08

8.5%

4,290.60

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