This Material Has Been Produced By Rbs Sales And Trading

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

The Round Up 13 November 2009 Issue No. 217 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

DJS (DJSSZX)

SFI Investment Buy – Sales remain strong

NWS (NWSKZI)

MINI Investment Buy – Leverage to growth

QBE (QBESZX)

SFI Investment Buy – Investor Update

Round Up Corner

RBS Model Portfolio – Recovery Bias

Equities

ASX 200

Move

Last

% Move

Range

Volume

-9.1

4747.9

-0.2%

-9 to -9.u.c

$3.8 bn(L)

SPI - yesterday

-6.0

4762.0

-0.1%

-17 to +41

23,702(L)

Dow Jones

-93.8

10197.5

-0.9%

-120 to +30

Low

S&P 500

-11.3

1087.2

-1.0%

-14 to +3

Low

Nasdaq

-17.9

2149.0

-0.8%

-21 to +12

Avg

FTSE

+9.8

5276.5

+0.2%

-13 to +38

Avg

Commodities Move

Last

% Today

% Past Month

Oil-WTI spot

-2.6

76.7

-3.2%

+4.7%

Gold Spot

-13.5

1103.9

-1.2%

+4.4%

Nickel (LME)

-29.8

731.7

-3.9%

-14.0%

Aluminium (LME)

-0.7

86.9

-0.8%

+0.2%

Copper (LME)

-1.6

294.0

-0.5%

+3.5%

Zinc (LME)

-1.6

96.3

-1.6%

+2.7%

Silver

-0.4

17.2

-2.0%

-2.6%

Sugar

-0.0

22.1

-0.0%

+4.9%

Dual Listed Companies (DLC’s) Move

%Move

Last

AUD Terms

Diff to Aus

NWS (US)

-0.27

-0.02

+14.5 c

15.69

-9.7 c

RIO (UK)

-18.00

-0.01

+31.0 c

55.73

-1411.1 c

BLT (BHP UK)

-17.00

-0.01

+18.0 c

32.35

-720.0 c

1.25

0.00

+3.9 c

7.05

+6.1 c

BXB (UK)

American Depository Receipts (ADR’s) Move

%Move

Last

AUD Terms

Diff to Aus

BHP (US)

-1.03

-0.01

+71.6 c

38.79

-76.2 c

AWC (US)

-0.25

-0.04

+6.0 c

1.63

-3.6 c

TLS (US)

-0.07

0.00

+15.0 c

3.26

-2.0 c

ANZ (US)

-0.54

-0.03

+20.9 c

22.65

-28.9 c

WBC (US)

-3.81

-0.03

+118.9 c

25.77

-27.2 c

NAB (US)

-0.82

-0.03

+27.4 c

29.65

-42.8 c

LGL (US)

-1.00

-0.03

+31.0 c

3.36

-8.5 c

RMD (US)

0.05

0.00

+48.9 c

5.30

+4.4 c

JHX (US)

1.00

0.03

+35.6 c

7.71

+2.6 c

PDN (CAN)

-0.06

-0.01

+4.0 c

4.15

-8.3 c

Overnight Commentary United States Commentary A drop in the crude price after a larger than expected jump in inventories had the energy plays under pressure and together with a breather from the financials, explained most of the days fall. Heading into the closing bell, the Dow off 102pts, the S&P 1.2% lower and the Nasdaq down 0.9%. Techs - Cisco down 2.4% and one of the Dow's worst performers on news that Hewlett Packard plans to acquire 3Com, trumping Cisco's bid and in so doing, becoming the main supplier of networking and computer equipment. Financials - After a reasonably solid showing for most of the week, financials and in particular the banks, gave back some ground overnight. JP's down 2.4%,BofA down 2.1%, Capital One down 3.1%, Wells Fargo and Morgan Stanley both down 2%. Oils - Following the crude price lower, Chevron and Exxon both giving back around 1.5% and among the larger pt takers. Elsewhere, Baker Hughes down 4.6%(S&P100 worst), National Oilwell down 4%, Halliburton 3.5% lower and Devon Energy down 3%. Eco - Initial Jobless Claims marginally better than expected, 502K vs consensus at 510K. Continuing laims 5631K vs 5700K expected and down from 5749K last week. Monthly Budget for October -$176.4b vs -$165bln expected and a further detoriation on Septembers $155.5bln. Industrials - One of few highlights, Dow Chemicals nearly 7% higher and a clear standout on the S&P100. Gains followed mgmt flagging cost cutting and rising sales post the Rohh&Haas acquisition set to push earnings past consensus.

United Kingdom & Europe Commentary The FTSE hit 3 week highs, up 0.2% or 10pts, as merger talk lifted sentiment but weakness in the US kept gains low. The FTSE Eurofirst eked out a gain of 0.1% but the DAX fell 0.1% and the CAC was off 0.2%. UK Banks - The sector was generally higher with investors dropping their risk aversion. HSBC was up 0.9%, Lloyds rose 0.8%, Standard Chartered added 2%, Barclays climbed 0.3% but RBS was off 3% Euro Banks - Legislation to create an Irish 'Bad Bank' was passed overnight. Allied Irish Banks was off 2.3% whilst Bank of Ireland fell 1.8%. Deutsche Bank was off 0.8%, Commerzbank fell 1.6%, BNP dropped 1.2% and SocGen ended down 1.6%. Airlines - BA jumped 7.5% after it confirmed it was in talks with Iberia which soared 11.8%. Ryanair added 0.5%, Air France-KLM was up 3.4% and Lufthansa ended 1.6% higher.

Telco - A better than expected 2Q result from BT lifted that stock 3.7%. The company raised its FY revenue and dividend outlook after slashing costs in the period. Vodafone which reported strong 1H results on Tuesday was up 1.3% and Cable & Wireless climbed 1.4%. Auto - Peugeot jumped 7% at one stage before closing up 0.4% after saying it would break even in 2H. Renault added 2.4%, BMW climbed 0.5% but VW sank 5.1%.

Commodiites Commentary Miners - A touch of strength in the US dollar saw metal prices drift down. BHP ended 1% lower, Rio dropped 0.6%, Vedanta fell 0.5% and Eurasian Natural Resources was off 2% after releasing 3Q production numbers and saying the outlook was still uncertain. Energy - The sector continued to follow the oil price lower with crude falling below $77 after a bigger than expected rise in US inventories. BP fell 0.9%, Shell dropped 0.8%, BG Group was off 1% and Tullow ended down 1.8%. In Europe Total fell 0.5%, Statoil was off 0.7% but Repsol broke ranks again adding 0.2%.

SPI Commentary The SPI traded down 6pts or 0.13% to 4762. Open at 4788 with a high of 4809 and a low of 4751. Volume 25,803. Overnight the SPI traded down 33pts to 4729

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

RBA Gov Lowe speaks, ANZ job ads, investor home loans, owner occ housing finance

US RBA’s Broadbent speaks, NAB business confidence, NAB business conditions

US

US

WMI consumer confidence Veterans’ Day holiday Employment and unemployment

US

US

Trade balance, import prices, Michigan cons confidence

*Dates are indicative only and may change

SFI Investment Buy: David Jones (DJSSZX) – Sales remain strong DJS reported 1Q10 sales which support RBS Research belief that the company is on track to upgrade guidance after the Christmas trading period. RBS Research have a buy recommendation DJS, which is one of the favoured exposures in the consumer discretionary space. DJS should enjoy strong operational leverage as consumer spending rebounds through FY11F and FY12F. Play through DJSSZX

Source: IRESS

Buy before the upgrade DJS reported positive like for like sales contrasted with existing FY10 sales guidance of -3% to -5% underlying lfl sales growth. RBS forecast 2.0% lfl sales growth for FY10, believing the balance of risks suggests management will upgrade guidance to 5-10% underlying NPAT growth with the 2Q10 sales announcement in February. RBS target price remains at $6.40 post the sales update 1Q10A sales +4.5% total, +1.9% lfl (excluding one-offs) DJS reported headline sales for 1Q10A of A$452.1m, +4.5% pcp (+2.2% including one-offs; 1Q09A: -6.3%). More importantly, lfl sales for the quarter grew 1.9% (excluding the impact of the Bourke Street redevelopment), ahead of guidance for the full year of -3% to -5% growth Buy DJSSZX

RBS SFIs over DJS Security DJSSZX

ExDate 4-Feb-19

ExPrc

CP 169

ConvFac Call

1

Delta

Description 0

Rbs Feb19 169 I W

MINI Investment Buy: News Corporation (NWSKZJ) – Strong leverage to growth NWS raised guidance for FY10 operating profit growth of 'high single to low double digit' which RBS research still believe is conservative. RBS Research have a +16% forecast which is underpinned by strong ongoing cable growth and an improving outlook in NWS’s key advertising markets. The stock remains cheap on an SOTP and peer multiple basis. Buy NWSKZJ

Source: IRESS

RBS forecast 16% operating profit growth in FY10 1Q10 operating profit was up 9% on the pcp and EPS of US$0.22 was ahead of Bloomberg consensus of US$0.18. The company raised its FY10 operating profit growth guidance from ‘high single digit’ to ‘high single to low double digit’. RBS Research still see the guidance as conservative and raise FY10F operating income growth to +16% (previously +11%) and EPS by 5% to US$0.85. Cable continues to outperform, TV imporving The cable division was again the standout in the period, with operating profit up 41%. We now forecast cable operating profit will grow 23% to US$2.05bn in FY10. Cable makes up half of operating income and underpins overall group earnings growth in FY10 and FY11. TV is showing encouraging signs, with NWS saying October pacings are flat on last year and November up ‘mid teens’. Newspapers were weak in the quarter, but the company said Australian newspaper trends are improving and newspaper operating profit should be down only marginally for the full year. Sky Italia and FIM were both weak, but should not detract significantly in the full year. Stock remains cheap News Corp trades on an EV/EBITDA of 6.0x CY2010F, below both US peers (Disney on 7.8x, Viacom 7.6x on Reuters estimates) and Australian domestic media stocks (TEN on 9.5x). RBSprice target of $19.92 RBS MINIs over NWS Security

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

NWSKZI

778.45

Long

1

1

MINI Long

NWSKZJ

1150.28

Long

1

1

MINI Long

NWSKZR

1981.63

Short

1

1

MINI Short

SFI Investment Buy: QBE Insurance Group (QBESZX) – Investor Update We believe the recent pullback in QBE is a buying opportunity. QBE has reiterated its FY09 guidance for an insurance margin of 17-18%. Management has also said it has additional debt capacity for cA$1bn in acquisitions. RBS Research have a target price of $26.11. Buy QBESZX

Source: IRESS

• • • • •

QBE reaffirmed its full-year FY09 guidance for an insurance margin of 17-18%. QBE says it has cA$1bn in debt capacity available for acquisitions with gearing currently only c30%. Bolt-on acquisitions appear to remain the most attractive, while management has not ruled out further agency purchases. QBE has said US and UK insurance markets remain soft, although they expect rates to harden in 2H10 QBE’s track record in underwriting and acquisition execution remains excellent. The company has reconfirmed its FY09 guidance and has a strong balance sheet with cA$1bn of debt capacity available for acquisitions. At A$22.15 the stock continues to trade at a discount to RBS price target of A$26.11. We see value in QBE at these levels Use the pullback to buy through QBESZX

RBS SFIs over QBE Security QBESZX

ExDate 4-Feb-19

ExPrc

CP

1140.01

ConvFac Call

Delta

1

Description 1

Self Funding Instalment

RBS MINIs over QBE Security QBEKZF

ExPrc

Stop Loss

CP

ConvFac

Delta

Description

1219

Long

1

1

MINI Long

QBEKZK

1124.7

Long

1

1

MINI Long

QBEKZL

1792.43

Long

1

1

MINI Long

QBEKZR

3147.08

Short

1

1

MINI Short

QBEKZS

3376.24

Short

1

1

MINI Short

RBS Round Up Corner: RBS Model Portfolio – Recovery bias October saw the A$ rally, bond yields move higher, the RBA hike rakes and the equity rally abate toward month-end on the back of mixed economic data. Since then the market has recovered in November while the $A has remained strong. RBS Research believe the recovery story remains intact, although it won't be without its setbacks. RBS model portfolio retains a cyclical bias

Portfolio positioning Full market valuations mean that any bad news will see a significant market reaction, as was evidenced towards the end of October. A 12-month forward PE of 16.6x for the market is pushing towards a standard deviation of 1.5 above its longrun mean. Other valuation metrics also look full, which means we need earnings growth to sustain the market rally. Given modest expectations for 2010, the market may increasingly look to 2011 for guidance. Key portfolio positions • RBS Research key portfolio Overweight positions are Consumer Discretionary and Mining & Services, which reflect our recovery bias. We trim our overweight Banks call in the short term, but will be looking to re-establish that over the medium term. • Key Underweight positions are in defensive sectors such as Consumer Staples, Financials and Property.

MINIs approaching stop loss Underlying

MINI Code

MINI Type

Strike

Stop Loss

Share Price

Approx. MINI Value

Share: Stop Loss

CBA

CBAKZQ

Short

$62.85

$56.60

$

54.72

$

8.13

3.4%

WES

WESKZU

Short

$32.22

$29.01

$

27.98

$

4.24

3.7%

DJS

DJSKZP

Short

$6.78

$6.10

$

5.86

$

0.92

4.1%

RIO

RIOKZS

Short

$79.48

$71.57

$

68.73

$

10.75

4.1%

LGL

LGLKZP

Short

$3.96

$3.56

$

3.41

$

0.55

4.4%

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