Rbs - Round Up - 250809

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

The Round Up 25 August 2009 Issue No. 162 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

Last

% Move

Range

Volume

ASX 200

+135.5

4426.1

+3.2%

u.c to +136

$5.4 bn(A)

SPI - yesterday

+168.0

4419.0

+4.0%

+83 to +174

31,884(A)

Dow Jones

+3.3

9509.3

+0.0%

-20 to +82

High

S&P 500

-0.6

1025.6

-0.1%

-4 to +10

High

Nasdaq

-2.9

2018.0

-0.1%

-9 to +15

Avg

+45.3

4896.2

+0.9%

u.c to +61

Low

FTSE

Commodities Move Oil-WTI spot

Last +0.13

% Today 74.02

% Past Month +0.2%

+8.7%

Gold Spot

-12.85

941.00

-1.3%

-1.1%

Nickel (LME)

+14.15

889.59

+1.6%

+17.5%

Aluminium (LME)

-0.05

85.87

-0.1%

+5.8%

Copper (LME)

+6.80

291.23

+2.4%

+16.4%

Zinc (LME)

+1.01

82.95

+1.2%

+9.6%

Silver

-0.02

14.16

-0.1%

+1.8%

Sugar

-0.05

21.79

-0.2%

+18.2%

Dual Listed Companies (DLC’s) Move

%Move

Last

NWS (US)

-0.11

-0.8%

RIO (UK)

+116.5 p

BLT (BHP UK)

+57.5 p

BXB (UK)

+22.3 p

AUD Terms

Diff to Aus

12.86

15.35

-27.3 c

+4.9%

£25.14

49.23

-974.6 c

+3.6%

£16.485

32.28

-589.6 c

+6.2%

£3.785

7.41

+0.3 c

American Depository Receipts (ADR’s) Move

%Move

Last

BHP (US)

+0.74

+1.2%

AWC (US)

+0.23

TLS (US)

-0.21

ANZ (US) WBC (US)

AUD Terms

Diff to Aus

63.80

38.07

+4.2%

5.71

1.70

-2.6 c

-1.4%

14.50

3.46

+10.1 c

+0.51

+3.2%

16.68

19.91

+9.6 c

+2.36

+2.5%

98.51

23.51

-21.8 c

NAB (US)

+0.44

+2.0%

22.16

26.45

-23.5 c

LGL (US)

-0.23

-1.1%

20.63

2.46

-2.8 c

RMD (US)

+0.33

+0.7%

45.53

5.43

-1.7 c

JHX (US)

+1.94

+6.9%

30.02

7.17

+2.5 c

PDN (CAN)

+0.12

+3.0%

4.17

4.62

-3.9 c

-11.1 c

Overnight Commentary United States Commentary With no major economic data and light trading volumes the US indices struggled for direction. Financials struggled after comments from SunTrust CEO, offset by energy names as crude held recent gains. Dow up 3.3 pts, while the S&P 500 gave up just 0.1%. Eco - The Chicago Federal National Activity Index for July continue to improve, although still below the flat reading that represents expansion, coming in at -0.74, from -1.82 in June. Energy - Energy stocks led the Dow gainers as crude rose to a 10-month high as stronger equities markets bolsted confidence that the economy will recover from the recession. Exxon Mobil gained 2% and Chevron Corp added 1.5% to put on 18 pts between them. Techs - Advanced Micro Devices topped the S&P 500, up 8.1%, after a broker upgrade to 'buy'. Dell Inc added 2% after its rating was raised to 'buy' on expectations that PC demand will pick up. Auto - Ford Motor group was the worst of the S&P 100, down 4.3%, as the "cash for clunkers" program for cars expires today. Financials - Regions Financial fell 2.7%, US Bancorp down 2.5% and Wells Fargo off 2.2% after SunTrust Banks CEO said lenders face more credit losses and commercial real estate may falter through 2010. The CEO said he "does not expect things to improvefor the banking industry for the very near future". Treasuries - Yields on two-year Treasuries fell the most in a month after the weekends comments from Bernanke led to speculation that rates would be kept low longer than anticipated, and as equities were unable to add to Friday's strong gains.

United Kingdom & Europe Commentary The FTSE 100 climbed to a 10 and a half month high, up 0.9% or 45pts, as optimism surrounds the pace of the global recovery. The FTSE Eurofirst 300 added 0.9% while the DAX and the CAC both rose 1%. UK Banks - Investors moved back into riskier assets out of defensives. RBS jumped 6.8%, Lloyds was up 6.3% while HSBC, Barclays and Standard Chartered rose between 0.8% and 2.9% Builders - Lafarge jumped 4.3% after having its target price raised. Holcim edged up 0.1% after it also had its target price lifted and continued its strong run after reporting better than expected numbers last week. Media - WPP, which reports on Wednesday, jumped 3.8% to be amongst the top performers after analysts said a rights issue was unlikely. Reed Elsevier's rights issue last week focussed attention on WPP's balance sheet. Reed Elsevier was up 2.2%.

Eco - UK business confidence turned positive for the first time in two years, according to the Institute of Chartered Accountants.

Resources Commentary Miners - The brighter growth outlook and corresponding demand for base metals helped the sector. BHP added 3.6%, Anglo climbed 3.3%, Xstrata was 4.3% higher and Rio jumped 4.9% after it was reported Chinalco would look to discuss a production deal. Energy - Crude continued its recent rally hitting a 10 month high helping the majors. Shell climbed 0.7%, Tullow was 1.7% higher and BP eked out a gain of 0.1%. Repsol rose 2.1% after a positive broker note, Statoil added 2.4% to continue its recent run and Total ended 0.8% higher. BG Group fell 2% after an offshore well in Brazil did not contain hydrocarbons.

SPI Commentary The SPI traded up 168pts or 3.95% to 4419. Open at 4338 with a low of 4334 and a high of 4425. Volume 33,621. Overnight the SPI trading down 22pts to 4397

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

New motor vehicle sales

US Tuesday

AUS 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

Description

Div (c)

Yield

Frk(%)

PayDate

25-Aug-09

ORG

Origin Energy

25

3.46%

100

23-Sep-09

25-Aug-09

WES

Wesfarmers

60

4.37%

100

1-Oct-09

26-Aug-09

QBE

QBE Insurance

62

5.49%

20

22-Sep-09

26-Aug-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

MINI Trading Buy: Telstra Corporation (TLSKZD) – Buy the dip Last Friday TLS pulled back after the Future Fund offered 498mln TLS shares at $3.47, cum dividend, and yesterday when the stock went ex dividend 14c. RBS Research consider the Future Fund selldown a good thing for shareholders despite the ongoing overhang. Use the pullback as a buying opportunity. RBS has upgraded TLS to a BUY with $4.50 target price. Buy TLSKZD for a bounce

Source: IRESS

Telstra Result points and fundamentals • Broadband ARPU up 6.5% to A$57.70. MBB SIOs doubled to 1.05m, helping lift mobile ARPU 4.8% to A$51.84 • Sales of IP-based products increased at double-digit rates. With the rate of PSTN erosion reducing in 2H09 (cf 1H09) the speed-driven revenue lines helped keep total revenue growth at 2.7%. • Maintaining comparable revenue growth in FY10 may be harder as unemployment rises, the A$ 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. • 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. RBS MINIs over TLS Security

ExPrc

Stop Loss

TLSKZC

260.58

TLSKZD

289.16

TLSKZP

449.9

CP

274

ConvFac

Delta

Description

Long

1

1

MINI Long

306

Long

1

1

MINI Long

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) - Headline NPAT of A$390.5m may have dissapointed IBES consensus but a fully franked DPS of 55c with an accelerated record and payment date accompanied exceptionally strong operating cash flow. The company is guiding for a decline in FY10 earnings

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 Share Price

Approx. MINI Value

Share: Stop Loss

Underlying

MINI Code

MINI Type

Strike

Stop Loss

WES

WESKZT

Short

$30.23

$27.24

$

26.10

$

4.13

4.4%

AMP

AMPKZP

Short

$6.75

$6.41

$

6.13

$

0.62

4.6%

NAB

NABKZT

Short

$31.09

$28.00

$

26.68

$

4.41

4.9%

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