Rbs - Round Up - 260809

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

The Round Up 26 August 2009 Issue No. 163 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

WOWKAF/WESKZT

MINI Pairs Trade – WOW enters hardware

TLS (TLSSZX)

MINI Trading Buy – Future Fund Selldown

Round Up Corner

Stocks reporting today – AOE,CMJ,HSP,WDC

Equities Move ASX 200

Last -20.3

% Move 4405.8

Range

Volume

-0.5%

-36 to +7

$5.4 bn(A)

SPI - yesterday

-24.0

4395.0

-0.5%

-51 to -5.u.c

25,897(L)

Dow Jones

+30.0

9539.3

+0.3%

-0 to +111

Low

S&P 500

+2.4

1028.0

+0.2%

+1 to +12

Avg

Nasdaq

+6.3

2024.2

+0.3%

+1 to +23

Low

FTSE

+20.6

4916.8

+0.4%

-37 to +27

Avg

Commodities Move Oil-WTI spot

Last

% Today

% Past Month

-2.98

71.39

-4.0%

+5.6%

Gold Spot

+3.50

945.05

+0.4%

-0.7%

Nickel (LME)

-10.80

878.80

-1.2%

+16.1%

Aluminium (LME)

-1.27

84.60

-1.5%

+4.2%

Copper (LME)

-5.53

285.70

-1.9%

+14.1%

Zinc (LME)

-0.33

82.62

-0.4%

+9.2%

Silver

+0.13

14.29

+0.9%

+2.8%

Sugar

+0.13

21.92

+0.6%

+18.9%

Dual Listed Companies (DLC’s) Move

%Move

Last

AUD Terms

NWS (US)

-0.01

-0.1%

12.87

RIO (UK)

-33.5 p

-1.3%

BLT (BHP UK)

-20.5 p

-1.2%

BXB (UK)

-12.5 p

-3.3%

£3.660

Diff to Aus

15.40

+11.0 c

£24.81

48.52

-987.8 c

£16.280

31.85

-595.4 c

7.16

-5.0 c

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

%Move -1.06

Last -1.7%

AUD Terms 62.85

37.60

Diff to Aus -19.7 c

AWC (US)

-0.15

-2.6%

5.53

1.65

-3.6 c

TLS (US)

+0.15

+1.1%

14.08

3.37

+2.0 c

ANZ (US)

+0.05

+0.3%

16.73

20.02

+21.9 c

WBC (US)

+0.03

+0.0%

98.72

23.63

+21.6 c

NAB (US)

+0.37

+1.7%

22.53

26.96

-2.1 c

LGL (US)

+0.99

+4.8%

21.60

2.58

+2.5 c

RMD (US)

+0.45

+1.0%

45.98

5.50

+6.2 c

JHX (US)

-0.67

-2.2%

29.35

7.02

+1.4 c

PDN (CAN)

-0.14

-3.3%

4.06

4.47

-15.7 c

Overnight Commentary United States Commentary US stocks rose as better then expected consumer confidence and home prices bolstered optimism that the recession is ending, although a weaker oil price dragged energy producers. The Dow finished up 30pts, and the S&P 500 up 0.2%. Eco - Consumer Confidence rose to 54.1 beating expectations of 47.9, and from 47.4 previously, the Richmond Fed Manufacturing Index was flat at 14, slightly less than the 16 forecast. House Price Index for June increased by 0.5% slightly better than the 0.4% expected. Retail - Stocks such as Macy's, Bed Bath & Beyond and Target benefitted from the better consumer confidence data, gaining 3.5%, 4.2% and 2.9% respectively. Homebuilders - Pulte Homes, the nation's biggest builder by market value, rose 3.5% as the Case-Schiller home-price YoY index is now down by the smallest amount since April 2008. Lennar added 2.7%, KB Homes rose 3.3% and DR Horton up 3%. Energy - The energy sector was a drag on indices as crude fell $3/barrel to around $71 after failing to break through a technical resistance level at $75. The price was also hindered by a report showing US stockpiles rose last week, the first increase in four weeks. Treasuries - Gains in Treasuries were led by the longer maturity debt as crude fell for the firsttime in six days and the White House said inflation will remain subdued. The Treasury sold a record-tying $42bn in two-year securites, the first of three auctions this week totalling $109bn in government notes

United Kingdom & Europe Commentary The FTSE 100 climbed again, up 0.4% or 21pts, as banks provided support. In Europe however banks were weaker early before markets went higher. The FTSE Eurofirst 300 was up 0.4%, the DAX climbed 0.7% and the CAC added 0.8% UK Banks - RBS was up 3.9% after rumours circled that it would buy shares back off the govt. Talks to sell some of RBS's Asian assets to Standard Chartered remain "in full swing" according to sources. Other banks were mixed though with Barclays and HSBC higher but Lloyds and Standard Chartered both fell. Euro Banks - Natixis requested that its shares be placed in a 24 hour trading halt leading to nervousness across the sector. BNP was off 0.6%, SocGen eked out a gain of 0.1%, Deutsche Bank fell 0.6%, Commerzbank was flat and UniCredit dropped 1.3%. Telcos - Market heavyweight Vodafone was a top blue chip riser, gaining 2.4% as a broker upgraded its strategy stance on the European telecoms sector to "overweight" and advised exposure to the British mobile telecoms stock. Cable & Wireless added 2.9%.

Beverages - Diageo added another 0.9% ahead of earnings tonight. Two brokers upgraded on hopes that sales have troughed and that there may be a capital return instead of potentially overpaying for Moet Hennessey. The broker notes also said that US wholesalers may have finished de-stocking.

Resources Commentary Miners - Questions remain over the growth outlook for China which saw weakness in the copper price lead the miners lower. BHP fell 1.2%, Xstrata dropped 1.1%, Chilean copper miner Antofagasta sank 3% whilst Anglo was flat. Rio fell 1.3% after Chinalco denied rumours it was in talks about a production deal and a broker took it off its buy list. Energy - Positive eco data out of the US helped the crude price during London trading. BP, Shell and BG Group were up between 0.9% to 1.6%. In Europe Total added 0.75%, Repsol climbed 1.5% but Statoil eased back 0.2%.

SPI Commentary The SPI traded down 24pts or 0.54% to 4395. Open at 4392 with a low of 4368 and a high of 4414. Volume 25,967. Overnight the SPI traded up 16pts to 4411

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

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 Pairs Trade: Woolworths (WOWKZF)/ Wesfarmers (WESKZT) – WOW enters hardware WOW yesterday announced to the market that they plan to enter the Australian hardware and home improvement market. This is a logical step in WOW’s domestic growth profile and RBS Research believe it could add $1.25 - $1.75 to WOW’s valuation. Given WES outeperformance over 2009 compared to WOW and the poteltial market share loss in their Bunnings business, we believe the way to trade the news is to go long WOW and short WES through WOWKZF and WESKZT

Source: IRESS

• • •

Woolworths’ intends to acquire, through a joint venture with US home improvement retailer Lowe’s, hardware wholesaler Danks for an enterprise value of A$87m (securing immediate scale, infrastructure and expertise), as well as establish a Big Box H&HI format (also via the JV), to compete directly with Bunnings. Investment and proceeds in the JV are to be split two-thirds Woolworths and one-third Lowe’s, and RBS Research estimate cA$3.5bn in sales and cA$330m in JV EBIT is possible should the company achieve its plan of 150 sites over five years RBS Research believe a successfully established big box format could enhance valuation $1.25 - $1.75 per share

RBS MINIs over WOW Security

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

WOWKZD

$20.1875

$

21.01

Long

1

1

MINI Long

WOWKZE

$18.5064

$

19.27

Long

1

1

MINI Long

WOWKZF

$23.6341

$

24.59

Long

1

1

MINI Long

WOWKZR

$37.1202

$

35.13

Short

1

1

MINI Short

WOWKZT

$34.2012

$

32.52

Short

1

1

MINI Short

RBS MINIs over WES Security

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

WESKZG

$12.7721

$ 14.63

Long

1

1

MINI Long

WESKZH

$10.5496

$ 12.20

Long

1

1

MINI Long

WESKZT

$29.6274

$ 27.24

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 when the stock went ex dividend 14c on Monday. 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 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 reported 1H09 normalised NPAT of A$44m, down 38% on the pcp and in line with recently issued guidance. Reported NPAT of -A$33m includes A$82.6m of abnormals largely associated with an impairment taken on ALL's investment in PokerTek and Elecktroncek, which had been flagged Fosters Group (FGL) NPAT A$725.5m, A$740.8m pre-SGARA (RBS: A$739.8m pre-SGARA). EBITS A$1165m (RBS A$1216.1m): despite A$25m lower corporate costs. Oil Search (OSH) - (USD) - NPAT of US$35.6m was ahead of consensus (US$28.7m) and RBS forecast (US$28.3m). OSH's interim result was solid, but the real story was news that the group is in talks to sell a 3.5% stake in PLNG. Not only should this crystallise some value, but we believe it will give the market renewed comfort in OSH's funding position. Suncorp Metway (SUN) - With much of the confusion surrounding this result already taken out by the early release, there were few surprises in the headline numbers. Looking closer at the Banking operations, the surprise would be that the non-core book is performing even worse than we'd thought, with B&DD charges at c450bp in non-core v RBS expectation of c350bp.

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 remain 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) - should benefit from a strong run in jackpots from its lotteries business, and 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 from acquisition synergies.

MINIs approaching stop loss Underlying

MINI Code

MINI Type

Strike

Stop Loss

Share Price

Approx. MINI Value

Share: Stop Loss

AMP

AMPKZP

Short

$6.74

$6.41

$

6.30

$

0.44

1.7%

NAB

NABKZT

Short

$31.08

$28.00

$

26.98

$

4.10

3.8%

WOW

WOWKZS

Short

$31.65

$29.93

$

XJO

XJOKZX

Short

$4,895.30

$4,655.00

CPU

CPUKZP

Short

$11.79

$10.72

28.63

$

3.02

4.5%

$ 4,405.80

$

4.90

5.7%

$

$

1.73

6.6%

10.06

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