Aus Tin 20106163

Equity | Australia
6 December 2011
Produced and issued by: RBS Equities (Australia) Limited
Daily Bulletin
IN BRIEF
A summary of todays research
2
AUSTRALIA
STRATEGY & ECONOMICS
Australia Strategy Short alpha mail Economics Comment Sales, inventories, profits & wages: Q3 2011
Alva DeVoy (+61 2 8259 5831) Kieran Davies (+612 8259 5171) 5 23
INDUSTRIALS
Toll Holdings (A$4.87) Buy TP A$5.42 Resources in focus Boral (A$3.81) Hold TP& A$3.91 The last downgrade? UGL Ltd (A$12.83) Hold & TP& A$14.07 A A$200m option - without expiry Australia Small/Mid Caps Weekly Informer #43, 2011 APN News & Media (A$0.750) Buy TP& A$1.20 2H11 comes up short Clough (A$0.740) Hold & TP& A$0.80 Overruns and margin pressure Ridley Corporation (A$0.98) Buy TP& A$1.26 Worth another look at this level
Mark Williams (+61 2 8259 6921) Andrew Scott (+61 2 8259 5847) Andrew Hodge (+61 2 8259 6608) Julian Guido (+61 2 8259 5838) Fraser McLeish (+61 2 8259 5543) Alexandra Clarke (+61 7 3334 4804) RBS Morgans Belinda Moore (+61 7 3334 4532) RBS Morgans 25 39 49 61 75 79 83
TP& EPS& DPS& TP& EPS&
Rec& TP&
Rec& EPS& TP& TP& EPS&
RESOURCES
Energy Resources of Aust (A$1.570) Sell TP& A$1.08 From hero to zero Precious Metals Review Gold ETFs exceed French reserves*
Lyndon Fagan (+61 2 8259 5870) Nick Moore (+44 20 7678 0555) 89 93
TP& EPS&
GLOBAL
Global Views Views and trade ideas pre/post EU Summit next week
Equity Research 99
EX DIVs
Code CPB MTS JHX SGT TGA 1H 1H 1H 1H 1H DPS 95.0c 11.5c 4.0c 6.8c 4.0c Frnkd 50% 100% 0% 0% 100% Ex date 7 Dec 9 Dec 12 Dec 16 Dec 21 Dec
Global Weekly Preview ECB to deploy new measures for banks, waiting for the EU summit Circuit Breaker All eyes on the summit* Ahead Of The Curve Taming the dragon* Global Action Pack
Jan Dubsky (+44 20 7085 9119)
101
Dylan Cheang (+65 6518 5936) James McCafferty (+852 3988 7190) RBS Research
111 121 135
1H = interim, 2H = final; SP = special Source: IRESS
TRADING ALERTs
Code (ST rec) Open Open date price Indictv close Exp date WOW (Buy) 27 Oct 24.0825.29-25.77 26 Dec Catalyst: November strategy day impact
DATABASE
Company financial forecasts Sector valuation aggregates Price performance
Thiva Nagaratnam (+61 2 8259 5373) 141 149 153
* Extract. For further details please refer to our website (http://research.rbsm.com/Research). RBS Equities (Australia) Limited
ABN 84 002 768 701, AFS Licence 240530
Level 29, RBS Tower, 88 Phillip Street Sydney NSW 2000, Australia http://research.rbsm.com
= ex-100 company
%&
= result = flashnote Rec = recommendation TP = target price = change in EPS or DPS of at least 5%, or any change in recommendation or target price.
Important disclosures can be found in the Disclosures Appendix.
IN BRIEF STRATEGY & ECONOMICS

Australia Strategy
Alva DeVoy (+61 2 8259 5831) 5 Top trade: we highlight the increasing short interest in ASX, up 40bp in the past month to 1.3% currently. In the near term, ASX faces softening volumes in equities trading and listings, and longer term there are numerous potential competitive threats. Our analyst, Richard Coles, prefers SUN.
Economics Comment
Kieran Davies (+612 8259 5171)
23
We have nudged up our preliminary forecast for Q3 GDP down from 1.0% to 0.8% ahead of key trade and public demand data Tuesday. Q3 GDP is due Wednesday and we have edged up our preliminary forecast down from 1.0 to 0.8% as inventories were weaker than we anticipated in the face of strong sales and profits growth. Profits beat our forecast, while sales were slightly stronger than we had anticipated. We will finalise our GDP forecast after net exports and public demand data are released on Tuesday. The market currently expects a 1% rise in GDP.
INDUSTRIALS
Toll Holdings (A$4.87) Buy TP A$5.42
Mark Williams (+61 2 8259 6921) 25 We expect greater focus from TOL on the resources opportunity going forward and, with a number of avenues to leverage off this growth, we think the outlook is positive. We expect contract announcements over the next 12 months as projects ramp up and on a FY12 P/E of 11x we think the share price will react positively.
Boral (A$3.81) Hold TP& A$3.91
Andrew Scott (+61 2 8259 5847)
39
We have lowered our forecasts for BLD by 12% over each of the next three years. We see clear longer term value in BLD but believe that the time to buy is as the downgrade cycle ends and upgrades begin. We suspect this point is drawing closer, but are not convinced it is here. Hold recommendation maintained.
UGL Ltd (A$12.83) Hold & TP& A$14.07
Andrew Hodge (+61 2 8259 6608)
49
The acquisition of DTZ trading assets brings a European property footprint to UGL but we believe there is much work ahead of the company to make this acquisition a success and we see nothing substantial until FY14. Given recent share price appreciation, we move our recommendation to Hold.
Australia Small/Mid Caps
Julian Guido (+61 2 8259 5838)
61
The Small Ords (+6.7%) underperformed the All Ords (+7.1%) by 47bp for the week, with the Small Resources up 8.8%. The Small Ords is at a premium to the S&P/ASX 100 at a PE relative of 110.8%, above the 99.7% eight-year average.
APN News & Media (A$0.750) Buy TP& A$1.20
Fraser McLeish (+61 2 8259 5543)
75
APN's update for 2011 EBIT of A$171m-173m is 7% below its previous guidance, but only 3% below the IBES consensus. Publishing remains weak, but revenue and market share in outdoor and radio are growing. Grab One is emerging as an area of hidden value. We think the stock is good value on 6x FY11F PE. Buy.
Clough (A$0.740) Hold & TP& A$0.80
Alexandra Clarke (+61 7 3334 4804)
79
Cost overruns and margin pressure on two EPC contracts sees CLO downgrade. The question remains can margins improve to deliver on full-year expectations? While a cleaner balance sheet, corporate activity and contract announcements could all act as catalysts, trading at 12.5x FY12 PE we move it back to Hold.
Ridley Corporation (A$0.98) Buy TP& A$1.26
Belinda Moore (+61 7 3334 4532)
83
Challenging operating conditions will now push the recovery in earnings out another year. We make large revisions to our forecasts. Assuming more normal conditions, we expect an earnings rebound in FY13. New strategic initiatives should support growth. Corporate activity is also a real possibility. Buy.
RESOURCES
Energy Resources of Aust (A$1.570) Sell TP& A$1.08
Lyndon Fagan (+61 2 8259 5870) 89 We have made material changes to our base case valuation of ERA, factoring in higher capex, rehabilitation costs, along with revised assumptions for Ranger 3 Deeps. We continue to think the outlook for the company remains too uncertain from an investment point of view, and maintain our Sell recommendation.
Precious Metals Review*
Nick Moore (+44 20 7678 0555)
93
Three cheers for the physically backed gold ETF universe, where combined holdings have exceeded yet another major national central banks reserves. Combined holdings of the 22 funds we monitor have risen to a record 2,450t, exceeding the gold holdings of Banque de France and coming within just 2t of Italys reserves. ETF holdings are now the 5th largest hoard of the yellow metal. It is clear that in spite of the gold price having largely moved in line with risk in recent weeks, interest in the yellow metal remains strong among certain investor classes. Over the course of November alone, combined gold ETFs holdings rose by nearly 100t. * Extract. For further details please refer to our website (http://research.rbsm.com/Research)
Daily Bulletin | 6 December 2011
IN BRIEF (contd) GLOBAL

Global Views
Equity Research 99 The ECB meets next Thursday (8 Dec) and the EU Summit will be held the following day (9 ec). Here are some thoughts from our European strategists on the Summit and how to rade the periphery and Germany pre/post-Summit.
Global Weekly Preview
Jan Dubsky (+44 20 7085 9119)
101
German Chancellor Merkel and French President Sarkozy will meet in Berlin on Monday, attempting to find a common position to shape the debate at the upcoming EU leaders summit, which begins on Thursday and continues on Friday. Merkel and Sarkozy will try to push an overhaul of the European Fiscal foundations but whether or not they will agree on a common and credible ground remains to be seen.
Circuit Breaker*
Dylan Cheang (+65 6518 5936)
111
Another week of Asian outflows, although this data does not capture the positive impact of recent policy easing. Regional markets and flows could trend higher from here until the EU summit on 9 December, which would be pivotal for the medium-term outlook of risky assets. Maintain 'risk on' for now but stay nimble.
Ahead Of The Curve*
James McCafferty (+852 3988 7190)
121
The cut in the RRR by the Chinese central bank this week indicates a softening of monetary policy. Inflation appears to be a lesser concern and CPI data on 8-9 December is likely to show a sub-5% figure. We remain bullish on Chinese equities.
Global Action Pack

Monday 5 December 2011
RBS Research
135
* Extract. For further details please refer to our website (http://research.rbsm.com/Research)
Daily Bulletin | 6 December 2011
Equity | Australia
5 December 2011
Produced by: RBS Equities (Australia) Limited
Australia Strategy
Short alpha mail
Top trade: we highlight the increasing short interest in ASX, up 40bp in the past month to 1.3% currently. In the near term, ASX faces softening volumes in equities trading and listings, and longer term there are numerous potential competitive threats. Our analyst, Richard Coles, prefers SUN.
Table 1 : RBS short-interest screen
Ticker Company name Short interest (bp) 871 625 1111 222 599 1074 334 248 476 183 Abnormal short level (bp) 781 529 969 172 517 927 226 142 394 28 Shorts chg 1w (bp) +21 +79 -8 +43 +1 +3 -8 +51 -4 +100 Shorts Borrowing chg 1m cost chg 1w (bp) (bp) +226 +15 +128 +74 +105 +43 +155 +135 +138 +54 +12.5 -4.0 +3.8 -2.2 -14.7 +0.5 -0.8 +17.4 -5.9 -0.1 Utility rate chg 1w (%) +4.5 +4.5 +1.5 +10.6 +2.2 +4.7 +3.9 -1.8 -0.4 +0.7
FLT WSA BBG OMH TRS MYR OST KCN TEN ILU
Flight Centre Western Areas NL Billabong OM Holdings The Reject Shop Myer OneSteel Kingsgate Ten Network Iluka Resources
Source: ASIC, Data Explorer, RBS
We chart a number of stocks that display an increasing level of short interest Additions this week include ASX Limited, Wesfarmers, Computershare, OM Holdings and Linc Energy. Stocks that continue to flag increasing short interest include Lynas Corp, Macquarie Group and Flight Centre. and a number of stocks that display a decreasing level of short interest These include James Hardie, Leighton Holdings, Boral, Boart Longyear, National Australia Bank, Commonwealth Bank, Carsales, Seek Limited, Fairfax Media, Bradken, Lend Lease, Worley Parsons, Oil Search, Tabcorp, Energy Resources of Australia, Mirvac Group, Mermaid Marine, Karoon Gas, Telecom Corporation and Gloucester Coal. Analysts
Alva DeVoy
+61 2 8259 5831 alva.devoy@rbs.com
RBS short-interest screen Table 1 highlights the top 10 stocks in the S&P/ASX 200 flagged by the RBS short-interest screen as of 5 December 2011. These are stocks with a combination of an abnormally high level of short interest, increasing short interest over the previous week and month, and changes in borrowing costs and utility rates.
Jonathon Brycki
+61 2 8259 6831 jonathon.brycki@rbs.com
Daniel Blake
+61 2 8259 5016 daniel.blake@rbs.com
Eben van Wyk, CFA

+61 2 8259 5492 eben.van.wyk@rbs.com
RBS Equities (Australia) Limited, ABN 84 002 768 701, AFS Licence 240530 Level 29, RBS Tower, 88 Phillip Street, Sydney NSW 2000, Australia http://research.rbsm.com
RBS short screen

This screen is based on RBSs quantitative analysis, which demonstrated that ASIC short-interest data, in combination with proprietary data from our equity finance team on utility rates and borrowing costs, provides a powerful tool to identify short-sell candidates (see Appendix 2). The screen combines our calculation of the abnormal level of short interest (the abnormal level of short interest is the difference between the current level and that expected given a stocks market cap and turnover), the one-week and one-month change in short interest, and the one-week change in borrowing costs and utility rates (the percentage of the available borrowing taken up by the market). Table 2 : RBS short screen, 5 December 2011
Ticker Company Weighted average* 2.46 1.90 1.90 1.74 1.64 1.61 1.51 1.49 1.48 1.45 1.32 1.14 1.01 1.01 1.00 0.97 0.89 0.69 0.68 0.66 0.65 0.63 0.60 0.59 0.58 0.57 0.56 0.55 0.54 0.54 Short interest (bp) 871 625 1111 222 599 1074 334 248 476 183 653 526 1194 322 103 231 14 262 21 504 106 130 108 626 306 436 102 120 63 89 Abnormal short level (bp) 781 529 969 172 517 927 226 142 394 28 355 436 1084 242 8 140 -54 176 -104 413 21 23 35 554 228 273 5 15 -23 -17 Shorts chg 1w (bp) +21 +79 -8 +43 +1 +3 -8 +51 -4 +100 +12 +22 -36 +1 +45 +22 +2 +12 +16 -5 +25 +21 +3 +7 +3 -93 +12 +13 +22 +18 Shorts chg 1m (bp) +226 +15 +128 +74 +105 +43 +155 +135 +138 +54 +101 +31 +50 +94 +91 +29 -3 +44 +19 +18 +54 +40 +43 -42 +39 +110 +42 +48 +43 +40 Borrowing cost chg 1w (bp) +12.5 -4.0 +3.8 -2.2 -14.7 +0.5 -0.8 +17.4 -5.9 -0.1 +0.3 -0.3 +0.9 +0.3 +15.6 -6.8 -41.4 -0.7 -80.3 -0.9 +33.1 +0.1 -0.4 -2.1 -3.3 +47.3 +2.0 +0.1 +1.8 +0.4 Utility rate chg 1w (%) +4.5 +4.5 +1.5 +10.6 +2.2 +4.7 +3.9 -1.8 -0.4 +0.7 -0.1 +1.8 -0.3 -0.2 -1.2 +5.4 +12.9 -0.5 -2.5 +0.1 +3.4 +0.9 +3.6 +0.5 -2.0 +15.5 +2.0 +0.1 -0.1 +0.8
FLT WSA BBG OMH TRS MYR OST KCN TEN ILU LYC BOQ FXJ MQA NWH GBG SMX IGO IPL HVN GRY ASX IRE WTF DLX BSL CQO GPT AUN CPU
Flight Centre Western Areas NL Billabong OM Holdings Reject Shop Myer OneSteel Kingsgate Ten Network Iluka Resources Lynas Corp. Bank of Queensland Fairfax Media Macquarie Atlas NRW Holdings Gindalbie Metals SMS Mgt & Tech. Independence Group Incitec Pivot Harvey Norman Gryphon Minerals ASX Ltd IRESS Wotif.com Duluxgroup BlueScope Steel Charter Hall Office GPT Group Austar United Computershare
* Weighted average metric is calculated using standard deviation from mean (z-score), with the following weights: Abnormal short level 30, shorts chg 1w 35, shorts chg 1m 35, borrowing cost chg 1w -30, utility rate chg 1w 30. Source: ASIC, Data Explorer, RBS
Australia Strategy | Analysis | 5 December 2011
Increasing short interest

Chart 1 : Wesfarmers
A$ 33.5 33.0 32.5 32.0 31.5 31.0 30.5 30.0 29.5 04-Oct 18-Oct WES (lhs) 01-Nov 15-Nov 29-Nov 2.40% 2.35% 2.30% 2.25% 2.20% 2.15% 2.10% 2.05% 2.00% 29.5 31.0 1.2% 30.5 1.1% 30.0 1.0% 0.9% 0.8% 18-Oct ASX (lhs) 01-Nov 15-Nov 29-Nov 32.0
Chart 2 : ASX Limited

A$ 1.5% 1.4% 1.3%
31.5
29.0 04-Oct
WES short interest (rhs)
ASX short interest (rhs)
Source: ASIC, IRESS, RBS
Chart 3 : Lynas Corporation

A$ 1.4 7.0%
Chart 4 : Computershare
A$ 9.0 1.0% 0.9% 6.5% 8.5 0.8%
1.3
1.2 6.0% 1.1 5.5% 1.0 0.5% 0.9 5.0% 7.0 0.4% 4.5% 18-Oct LYC (lhs) 01-Nov 15-Nov 29-Nov 6.5 04-Oct 18-Oct CPU (lhs) 01-Nov 15-Nov 29-Nov 0.3% 7.5 0.6% 8.0 0.7%
0.8 04-Oct
LYC short interest (rhs)
CPU short interest (rhs)
Chart 5 : OM Holdings
A$ 0.70 0.65 0.60 2.1% 0.55 0.50 0.45 0.40 1.6% 0.35 0.30 04-Oct 18-Oct OMH (lhs) 01-Nov 15-Nov 29-Nov 1.5% 1.4% 2.0% 1.9% 1.8% 1.7% 2.4% 2.3% 2.2%
Chart 6 : Linc Energy

A$ 2.2 2.1 2.0 1.9 1.8 1.7 1.6 1.5 1.4 1.3 1.2 04-Oct 18-Oct LNC (lhs) 01-Nov 15-Nov 29-Nov 1.20% 1.30% 1.35% 1.45% 1.50%
1.40%
1.25%
OMH short interest (rhs)
LNC short interest (rhs)
Increasing short interest

Chart 7 : Macquarie Group
A$ 26 25 24 23 22 1.3% 21 20 19 18 04-Oct 18-Oct MQG (lhs) 01-Nov 15-Nov 29-Nov 1.2% 16 1.1% 1.0% 0.9% 15 14 04-Oct 18-Oct FLT (lhs) 01-Nov 15-Nov 29-Nov 5.5% 5.0% 4.5% 17 6.5% 6.0% 1.8% 1.7% 1.6% 19 1.5% 1.4% 18 7.5% 7.0% 21 20
Chart 8 : Flight Centre

A$ 9.0% 8.5% 8.0%
MQG short interest (rhs)
FLT short interest (rhs)
Decreasing short interest

Chart 9 : James Hardie
A$ 7.5 6.5% 4.2
Chart 10 : Boral Limited

A$ 6.0%
7.0
6.0%
4.0 5.5% 3.8
6.5
5.5% 3.6 5.0%
6.0
5.0% 3.4 4.5%
5.5
4.5%
3.2
5.0 04-Oct 18-Oct JHX (lhs) 01-Nov 15-Nov 29-Nov
4.0%
3.0 04-Oct 18-Oct BLD (lhs) 01-Nov 15-Nov 29-Nov
4.0%
JHX short interest (rhs)
BLD short interest (rhs)
Chart 11 : Leighton Holdings

A$ 23.0 22.5 22.0 21.5 21.0 20.5 20.0 19.5 19.0 18.5 18.0 04-Oct 18-Oct LEI (lhs) 01-Nov 15-Nov 29-Nov 2.2% 2.0% 2.8% 2.6% 2.4% 3.4%
Chart 12 : Boart Longyear

A$ 3.6 3.4 3.2% 3.2 3.0% 3.0 2.8 2.6 1.0% 2.4 2.2 04-Oct 18-Oct BLY (lhs) 01-Nov 15-Nov 29-Nov 0.9% 0.8% 1.4% 1.3% 1.2% 1.1% 1.7% 1.6% 1.5%
LEI short interest (rhs)
BLY short interest (rhs)

Chart 13 : National Australia Bank
A$ 27 26 25 24 23 22 21 20 04-Oct 18-Oct NAB (lhs) 01-Nov 15-Nov 29-Nov 1.3% 1.2% 1.1% 1.0% 47 0.9% 46 0.8% 0.7% 0.6% 45 44 43 04-Oct 18-Oct CBA (lhs) 01-Nov 15-Nov 29-Nov 1.4% 1.2% 1.0% 1.6% 51 50 49 48 1.8%
Chart 14 : Commonwealth Bank

A$ 2.4% 2.2% 2.0%
NAB short interest (rhs)
CBA short interest (rhs)
Chart 15 : Carsales
A$ 5.2 5.1 7.0% 5.0 7.5%
Chart 16 : Seek Limited

A$ 6.5 6.3 6.1 5.9 6.5% 7.0%
4.9 4.8 4.7 4.6
6.0%
6.5%
5.7 5.5 5.5%
6.0%
5.3 5.1 5.0%
5.5% 4.5 4.4 04-Oct 18-Oct CRZ (lhs) 01-Nov 15-Nov 29-Nov 5.0%
4.9 4.7 4.5 04-Oct 18-Oct SEK (lhs) 01-Nov 15-Nov 29-Nov
4.5%
4.0%
CRZ short interest (rhs)
SEK short interest (rhs)
Chart 17 : Fairfax Media

A$ 1.00 16% 16% 0.95 15% 15% 14% 0.85 14% 13% 0.80 13% 12% 12% 0.70 04-Oct 18-Oct FXJ (lhs) 01-Nov 15-Nov 29-Nov 11%
Chart 18 : Bradken
A$ 8.5 2.2% 2.1% 2.0% 7.5 1.9% 7.0 1.8% 6.5 1.7% 6.0 1.6% 1.5% 18-Oct BKN (lhs) 01-Nov 15-Nov 29-Nov
8.0
0.90
0.75
5.5 04-Oct
FXJ short interest (rhs)
BKN short interest (rhs)

Chart 19 : Lend Lease
A$ 8.2 8.0 0.50% 7.8 27.5 7.6 7.4 7.2 7.0 0.20% 6.8 6.6 04-Oct 18-Oct LLC (lhs) 01-Nov 15-Nov 29-Nov 0.10% 25.0 24.5 24.0 04-Oct 18-Oct WOR (lhs) 01-Nov 15-Nov 29-Nov 0.30% 0.40% 27.0 2.6% 26.5 2.5% 26.0 25.5 2.4% 2.3% 2.2% 2.1% 0.60% 29.0 28.5 28.0
Chart 20 : Worley Parsons

A$ 3.0% 2.9% 2.8% 2.7%
LLC short interest (rhs)
WOR short interest (rhs)
Chart 21 : Oil Search

A$ 6.8 6.6 1.0% 6.4 6.2 6.0 0.8% 5.8 5.6 5.4 0.6% 5.2 5.0 04-Oct 18-Oct OSH (lhs) 01-Nov 15-Nov 29-Nov 0.5% 0.7% 0.9% 1.1%
Chart 22 : Tabcorp Holdings

A$ 3.1 3.0 1.6% 2.9 2.8 2.7 1.2% 2.6 2.5 2.4 0.8% 2.3 2.2 04-Oct 18-Oct TAH (lhs) 01-Nov 15-Nov 29-Nov 0.6% 1.0% 1.4% 1.8%
OSH short interest (rhs)
TAH short interest (rhs)
Chart 23 : Energy Resources of Australia

A$ 2.4 4.0% 3.5%
Chart 24 : Mirvac Group

A$ 1.35 1.2%
2.2
1.30 3.0%
1.1%
2.0 2.5% 1.8 2.0% 1.6 1.5% 1.4 1.15 1.0% 0.5% 18-Oct ERA (lhs) 01-Nov 15-Nov 29-Nov 1.10 04-Oct 18-Oct MGR (lhs) 01-Nov 15-Nov 29-Nov 1.20 1.25
1.0%
0.9%
0.8%
0.7%
1.2 04-Oct
0.6%
ERA short interest (rhs)
MGR short interest (rhs)
10

Chart 25 : Mermaid Marine
A$ 3.30 3.25 3.20 3.15 3.10 3.05 3.00 2.95 2.90 2.85 04-Oct 18-Oct MRM (lhs) 01-Nov 15-Nov 29-Nov 0.9% 0.8% 0.7% 4.5 0.6% 0.5% 0.4% 0.3% 3.0 0.2% 0.1% 0.0% 2.5 2.0 04-Oct 18-Oct KAR (lhs) 01-Nov 15-Nov 29-Nov 4.0 1.8% 3.5 1.7% 1.6% 1.5% 1.4% 5.5 5.0
Chart 26 : Karoon Gas

A$ 2.2% 2.1% 2.0% 1.9%
MRM short interest (rhs)
KAR short interest (rhs)
Chart 27 : Telecom Corporation

A$ 1.70 1.1% 1.0%
Chart 28 : Gloucester Coal

A$ 8.5 0.9%
1.65
8.0 0.9%
0.8%
1.60 0.8% 1.55 0.7% 1.50 0.6% 1.45 6.5 0.5% 0.4% 18-Oct TEL (lhs) 01-Nov 15-Nov 29-Nov 6.0 04-Oct 18-Oct GCL (lhs) 01-Nov 15-Nov 29-Nov 7.0 7.5
0.7%
0.6%
0.5%
0.4%
1.40 04-Oct
0.3%
TEL short interest (rhs)
GCL short interest (rhs)
11
Short interest as a proportion of free float

The ASIC short-interest data expresses shares sold short as a proportion of total shares on issue. We highlight an alternative measure of the magnitude of short interest in a stock by expressing shares sold short as a proportion of the free float (calculated using the index weight factor). Table 3 highlights the 30 stocks in the S&P/ASX 200 with the highest level of short interest as a proportion of their free float. Table 3 : Short interest proportion of free float
Ticker JBH FLT BBG FXJ WTF MYR DJS HVN TEN WSA PPT LYC CRZ TRS MMX APN GNS BOQ ALL RIO COH PDN MSB GWA CTX BSL SEK LEI BLD JHX Company JB Hi-Fi Flight Centre Billabong Fairfax Media Wotif.com Myer David Jones Harvey Norman Ten Network Western Areas NL Perpetual Lynas Corp. Carsales Reject Shop Murchison Metals APN Gunns Bank of Queensland Aristocrat Rio Tinto Cochlear Paladin Mesoblast GWA Group Caltex BlueScope Steel SEEK Leighton Boral James Hardie Short interest (% of total shares on issue) 20.2 8.7 11.1 11.9 6.3 10.7 9.7 5.0 4.8 6.3 6.9 6.5 5.6 6.0 4.6 4.0 5.7 5.3 4.6 5.2 5.1 4.6 2.7 4.0 2.3 4.4 4.4 2.1 4.2 4.1 Short interest (% of free float) 20.2 15.6 13.1 11.9 11.1 10.7 9.7 9.3 8.2 7.8 6.9 6.5 6.1 6.0 6.0 5.9 5.7 5.3 5.2 5.2 5.1 4.9 4.9 4.8 4.7 4.6 4.4 4.4 4.2 4.1 Difference 0.0% 6.9% 2.0% 0.0% 4.9% 0.0% 0.0% 4.3% 3.5% 1.6% 0.0% 0.0% 0.5% 0.0% 1.4% 1.9% 0.0% 0.0% 0.6% 0.0% 0.0% 0.3% 2.2% 0.8% 2.3% 0.2% 0.0% 2.3% 0.0% 0.0% Index weight factor 100% 56% 85% 100% 56% 100% 100% 54% 58% 80% 100% 100% 92% 100% 77% 68% 100% 100% 88% 100% 100% 93% 55% 84% 50% 95% 100% 49% 100% 100%
12
Table 4 highlights the 30 stocks where there is the largest difference between the ASIC-reported short interest (proportion of total shares on issue) and short interest as a proportion of the free float. Table 4 : Difference between short interest calculations
Ticker FLT WTF HVN TEN CTX LEI MSB BBG AQA APN ERA FMG OMH WSA PTM MMX GBG VBA FKP EWC SFR LNC TPM GWA AUN NUF AZT NVT GCL ALL Company Flight Centre Wotif.com Harvey Norman Ten Network Caltex Leighton Mesoblast Billabong Aquila APN Energy Resource Fortescue Metal OM Holdings Western Areas NL Platinum Asset Mgt Murchison Metals Gindalbie Metals Virgin Blue FKP Property Energy World Corp Sandfire Resources Linc Energy TPG Telecom GWA Group Austar United Comms Nufarm Aston Res Navitas Gloucester Coal Aristocrat Short interest (% of total shares on issue) 8.7 6.3 5.0 4.8 2.3 2.1 2.7 11.1 1.6 4.0 0.9 2.1 2.2 6.3 1.1 4.6 2.3 1.8 1.5 1.0 1.6 1.5 0.5 4.0 0.6 1.5 1.1 0.8 0.4 4.6 Short interest (% of free float) 15.6 11.1 9.3 8.2 4.7 4.4 4.9 13.1 3.5 5.9 2.8 3.9 3.8 7.8 2.6 6.0 3.6 3.0 2.6 2.0 2.6 2.4 1.3 4.8 1.4 2.3 1.8 1.4 1.0 5.2 Difference 6.9% 4.9% 4.3% 3.5% 2.3% 2.3% 2.2% 2.0% 2.0% 1.9% 1.9% 1.7% 1.6% 1.6% 1.5% 1.4% 1.3% 1.2% 1.0% 1.0% 1.0% 0.9% 0.8% 0.8% 0.7% 0.7% 0.7% 0.6% 0.6% 0.6% Index weight factor 56% 56% 54% 58% 50% 49% 55% 85% 45% 68% 32% 55% 58% 80% 43% 77% 64% 59% 60% 49% 63% 61% 37% 84% 46% 68% 62% 55% 37% 88%
13
RBS short-interest ratio

As an additional metric for presenting the level of short interest in a stock, we calculate a short interest-days-to-cover ratio. The calculation is the current number of short-sold shares divided by the 30-day average daily volume. This ratio provides an indication of how long (in days) it may take short sellers to cover their positions. Table 5 : RBS short interest ratio
Ticker TRS JBH FLT WTF APN WSA PPT GWA HVN DJS AQA CRZ PTM BOQ SEK FXJ OMH TOL ALL BBG MQA MYR DLX FKP JHX CFX MTS TEN IGO GNS Company The Reject Shop JB Hi-Fi Flight Centre Wotif.com APN Western Areas NL Perpetual GWA Group Harvey Norman David Jones Aquila Carsales Platinum Asset Mgt Bank of Queensland SEEK Fairfax Media OM Holdings Toll Holdings Aristocrat Billabong Macquarie Atlas Myer Duluxgroup FKP Property James Hardie CFS Retail Property Metcash Ten Network Independence Group Gunns RBS short interest days to cover ratio 29.4 22.8 22.0 21.7 19.8 19.3 19.2 15.8 15.6 15.5 15.1 15.0 14.9 13.8 13.6 12.9 12.7 11.4 11.1 11.1 10.9 10.1 9.6 9.5 8.9 8.9 8.6 8.5 8.3 8.1 Short interest (m shares) 1.6 19.9 8.7 13.3 25.5 11.2 2.9 12.1 53.4 50.9 6.1 13.1 6.1 11.9 14.9 280.3 11.2 22.9 25.0 28.3 14.9 62.8 11.3 18.7 18.1 67.6 28.2 49.8 5.3 48.5 30-day average daily volume (m shares) 0.1 0.9 0.4 0.6 1.3 0.6 0.1 0.8 3.4 3.3 0.4 0.9 0.4 0.9 1.1 21.7 0.9 2.0 2.3 2.6 1.4 6.2 1.2 2.0 2.0 7.6 3.3 5.9 0.6 6.0
Source: ASIC, Bloomberg, IRESS, RBS
14
10
S&P/ASX 200 sectors average short interest

Chart 29 : Diversified Resources (BHP and RIO)
3.7%
Chart 30 : Other Resources

2.3% 2.1%
3.2%
1.9% 1.7%
2.7%
1.5% 1.3% 1.1%

1.7% Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11
2.2%
Source: ASIC, RBS. Average short interest in: BHP, RIO.
Source: ASIC, RBS. Average short interest in: AGO, AWC, ERA, FMG, IGO, MGX, OZL, PDN, AQA, ILU, GBG, MIN, OMH.
Chart 31 : Gold
1.4%
Chart 32 : Steel
3.5%
1.2%
3.0%
1.0%
2.5%
0.8%
2.0%
0.6%
Source: ASIC, RBS. Average short interest in: NCM, KCN, PRU, RRL.
Source: ASIC, RBS. Average short interest in: BSL, OST, SGM.
Chart 33 : Energy
Chart 34 : Utilities
1.4%
0.8%
1.2%
0.7%
1.0%
0.6%
0.8%
0.5%
0.6%
0.4%
Source: ASIC, RBS. Average short interest in: OSH, STO, WPL
Source: ASIC, RBS. Average short interest in: AGK, APA, ORG, SKI, SPN, DUE, ENV, HDF
15
11
Chart 35 : Banks
2.3% 2.1%
Chart 36 : Insurance and Diversified Financials

2.2%
2.0%
1.9% 1.7% 1.5% 1.3% 1.1%

1.4% 1.6% 1.8%
0.9% 0.7% Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11

Source: ASIC, RBS. Average short interest in: ANZ, CBA, MQG, NAB, WBC, BEN, BOQ
Source: ASIC, RBS. Average short interest in: AMP, ASX, CPU, IAG, PPT, QBE, SUN
Chart 37 : Building Materials

4.0%
Chart 38 : Capital Goods

1.8%
3.5%
1.6%
3.0%
1.4%
2.5%
1.2%
Source: ASIC, RBS. Average short interest in: ABC, BLD, CSR, FBU, JHX
Source: ASIC, RBS. Average short interest in: BLY, DOW, GMG, LEI, LLC, MND, TSE, UGL, WOR
Chart 39 : Chemicals
1.3% 1.2% 1.1% 1.0% 0.9% 0.8% 0.7% 0.6% Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11
Chart 40 : Transport
1.8% 1.7% 1.6% 1.5% 1.4% 1.3% 1.2% 1.1% Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11
Source: ASIC, RBS. Average short interest in: ORI, NUF, IPL
Source: ASIC, RBS. Average short interest in: AIO, BXB, QAN, QRN, TOL, VBA
16
12
Chart 41 : Retail Discretionary

12%
Chart 42 : Retail Staples

2.4%
2.2%
10%
2.0%
8%
1.8%
6% Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11
Source: ASIC, RBS. Average short interest in: BBG, DJS, HVN, JBH, MYR
Source: ASIC, RBS. Average short interest in: MTS, WES, WOW
Chart 43 : Food and beverages

3.3%
Chart 44 : Gaming
2.0%
2.8%
1.8%
2.3%
1.6%
1.8%
1.4%
1.3%
1.2%
Source: ASIC, RBS. Average short interest in: CCL, GFF
Source: ASIC, RBS. Average short interest in: ALL, CWN, TAH, TTS, EGP
Chart 45 : Media
4.7%
Chart 46 : Telecommunications
2.2%
2.0% 4.2% 1.8%
3.7%
1.6%
1.4% 3.2% 1.2%
Source: ASIC, RBS. Average short interest in: APN, AUN, CMJ, FXJ, NWS, SEK, TEN, SWM, CRZ, SXL
Source: ASIC, RBS. Average short interest in: TEL, SGT, TLS
17
13
Chart 47 : Healthcare
2.3%
Chart 48 : Infrastructure
1.6% 1.4% 1.2%
2.1%
1.9% 1.0% 1.7% 0.8% 1.5% 0.6% 1.3% 0.4% 0.2% Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11
1.1% Jun-11
Source: ASIC, RBS. Average short interest in: ANN, COH, CSL, PRY, RHC, RMD, SHL
Source: ASIC, RBS. Average short interest in: AIX, MAP, MQA, TCL
18
14
Short-squeeze candidates
RBS quantitative research by Eben van Wyk (New alpha in big shorts, 5 November 2010) demonstrated that, on average, a significant one-week increase in borrowing cost (volumeweighted average stock borrowing fee, VWAF) and utility rate (the percentage of available borrowing taken up by the market) pre-empts a period (one to two months) of outperformance, possibly the result of a short squeeze. As such, the combination of these metrics may provide a useful contrarian short-term indicator for heavily shorted stocks. The definitions used to categorise a significant weekly increase in the borrowing cost and utility rate are more than 5bp and more than 1, respectively. On average, stocks with a significant increase in borrowing cost (more than 5bp in a week) were shown to outperform their sectors in excess of 50bp in the next month. Table 6 highlights stocks that experienced an increase in the borrowing cost of more than 5bp over the previous week. Table 6 : Significant increase in one-week borrowing cost
Ticker BSL GRY OGC TPI DTE GNC KCN SDL WEC NWH MSB FLT MMX FWD JBH RRL AAD MCC PRU Company BlueScope Steel Gryphon Minerals OceanaGold Corp. Transpacific Industries Dart Energy GrainCorp Kingsgate Sundance Resources White Energy Company NRW Holdings Mesoblast Flight Centre Murchison Metals Fleetwood JB Hi-Fi Regis Resources Ardent Leisure Macarthur Coal Perseus Mining Borrowing cost -1w (bp) 23.2 38.3 224.1 39.4 9.2 5.0 55.6 51.2 226.9 29.8 336.4 68.7 177.7 55.2 267.0 63.1 30.6 36.6 59.1 Borrowing cost (bp) 70.5 71.4 255.2 66.7 36.1 24.4 73.0 68.3 243.9 45.5 351.1 81.1 187.3 64.6 275.9 71.7 39.1 42.7 64.3 1w change (bp) +47.3 +33.1 +31.1 +27.4 +26.9 +19.4 +17.4 +17.1 +17.0 +15.6 +14.7 +12.5 +9.7 +9.3 +8.9 +8.6 +8.5 +6.1 +5.2
Source: Data Explorer, RBS
In instances when an increase in the borrowing fee (more than 5bp in a week) coincided with an increase in the utility rate (more than 1), a stock outperformed its sector by an average of 167bp over the following two months. Table 7 highlights stocks that experienced a combined increase in the borrowing cost and utility rate of more than 5bp and more than 1, respectively, in the previous week. Table 7 : Significant increase in one-week borrowing cost and utility rate
Ticker Company Borrowing Borrowing cost cost -1w (bp) (bp) 23.2 38.3 5.0 51.2 336.4 68.7 70.5 71.4 24.4 68.3 351.1 81.1 Borrowing cost chg 1w (bp) +47.3 +33.1 +19.4 +17.1 +14.7 +12.5 Utility rate -1w (%) 41.3 9.1 2.3 2.4 93.5 71.7 Utility rate (%) 56.8 12.5 4.4 3.9 95.5 76.3 Utility rate chg 1w (%) +15.5 +3.4 +2.2 +1.5 +2.0 +4.5
BSL GRY GNC SDL MSB FLT
BlueScope Steel Gryphon Minerals GrainCorp Sundance Resources Mesoblast Flight Centre
Source: Data Explorer, RBS
19
15
S&P/ASX 200 average and index-weighted short interest

Chart 49 : S&P/ASX 200 average short interest
Index 2.0% 1.9% 1.8% 1.7% 4,600 1.6% 1.5% 1.4% 1.3% 1.2% 1.1% Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 4,000 3,800 Dec-11 S&P/ASX 200 (rhs) 4,400 4,200 5,000 4,800
2 week MA average short interest (lhs)
Average short interest (lhs)
Source: ASIC, Bloomberg, RBS
Chart 50 : S&P/ASX 200 index-weighted short interest

Index 1.6% 5,000 1.5% 1.4% 1.3% 1.2% 1.1% 4,200 1.0% 0.9% 0.8% Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 4,000 3,800 Dec-11 S&P/ASX 200 (rhs) 4,800 4,600 4,400
2 week MA average short interest (lhs)
Average short interest (lhs)
Source: ASIC, Bloomberg, RBS
Chart 51 : S&P/ASX 200 average short-sold volume as a proportion of total volume

5,000 10%
4,800 15% 4,600
4,400
20%
4,200 25% 4,000
3,800 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11
30%
S&P/ASX 200 (LHS)
Short volume ratio 5 day centred moving average (RHS, inverted)
Source: ASIC, ASX, Bloomberg, RBS
20
16
Appendix 1 RBS 130/30 Model Portfolio

Table 8 : RBS 130/30 Model Portfolio November/ December 2011
Sector Ticker Company Portfolio weight (%) 22.9 ANZ NAB CBA Materials and Mining BHP NCM RIO LYC IPL OZL RRL AQA Industrials JHX BLY QAN AIO BKN AMC SKE MND BXB BLD Consumer Disc AUN NWS JBH CWN DJS BBG TAH Consumer Staples WOW CCL GFF Energy ORG OSH STO Insurance & Div Fins Healthcare SHL CSL Property LLC Utilities SKI Telcos TLS IT Total
Source: IRESS, RBS
S&P/ASX 200 weight (%) 24.7 5.3 5.2 7.5 25.7 11.6 2.7 2.9 0.2 0.5 0.4 0.1 0.1 6.8 0.3 0.2 0.4 0.5 0.1 0.9 0.2 1.0 0.3 3.7 0.1 0.8 0.2 0.3 0.2 0.1 0.2 9.1 3.0 0.6 0.1 7.4 1.5 0.7 1.2 5.9 3.4 0.4 1.6 6.5 0.4 1.5 0.1 4.1 3.9 0.6 100
Price (A$) Active weight 17 November 2011 (%) -1.8 2.7 2.2 0.0 8.3 0.0 3.8 2.1 3.3 3.5 3.0 2.9 -3.1 10.8 3.2 2.8 1.2 2.6 3.4 3.6 2.0 3.3 -4.0 -4.3 0.3 2.9 2.2 3.8 2.7 -3.2 -3.1 -3.2 -4.5 3.6 0.4 -3.1 4.1 6.2 5.1 -3.2 -5.9 -5.0 1.0 -4.6 -4.0 2.1 -4.5 -3.1 3.4 3.6 -0.6 3.19 1.26 7.33 11.54 31.5 14.52 6.34 13.14 24.84 12.02 0.55 1.15 17.09 15.91 3.06 3.18 4.4 3.72 37.04 36.62 68.07 1.25 3.25 11.13 3.4 6.77 5.82 6.48 3.33 1.69 1.57 7.52 7.23 1.97 19.12 6.81 6.82 20.58 24.34 48.61
Banks ANZ Banking Group National Australia Bank Commonwealth Bank BHP Billiton Newcrest Mining Rio Tinto Lynas Corporation Incitec Pivot OZ Minerals Regis Resources Aquila Resources James Hardie Industries Boart Longyear Qantas Airways Asciano Group Bradken Amcor Skilled Group Monadelphous Group Brambles Boral Austar United Comms News Corporation JB Hi-Fi Crown David Jones Billabong International Tabcorp Holdings Woolworths Coca-Cola Amatil Goodman Fielder Origin Energy Oil Search Santos
8.0 7.4 7.5 34.0 11.6 6.5 5.0 3.5 4.0 3.4 3.0 -3.0 17.6 3.5 3.0 1.6 3.0 3.5 4.5 2.0 3.5 -3.0 -4.0 4.0 3.0 3.0 4.0 3.0 -3.0 -3.0 -3.0 4.6 6.6 1.0 -3.0 11.5 7.7 5.8 -2.0 0.0 -1.6
Sonic Healthcare CSL Ltd Lend Lease Corporation Spark Infrastructure Telstra Corporation
1.4 -3.0 2.5 2.5 -3.0 -3.0 7.5 7.5 0.0 100
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17
Appendix 2 New alpha in big shorts

RBS quantitative research by Eben Van Wyk (New alpha in big shorts, 5 November 2010) demonstrated that ASIC short-interest data, borrowing costs and utility rates (as provided by the RBS Equity Finance team) can be used to successfully predict medium-term stock performance. ASIC short-interest data ASIC standardised the reporting of short positions in ASX-listed securities and products earlier this year. The new ASIC guidelines ensure that short sellers cannot net-off long and short positions when they are held in different capacities within an organisation. All outstanding short positions must now be reported to increase the transparency of short-sale activity, and we suggest this could enhance the information value of the data. The short interest reporting changes took effect on 17 January 2011. Chart 52 : Large increase in short interest
Cumulative event return 1.5% 1.3% 1.1% 0.0% 0.9% 0.7% 0.5% 0.3% 0.1% -0.8% -0.1% -0.3% -0.5% t-12 t-10 t-8 t-6 t-4 t-2 t0 t2 t4 t6 t8 t10 t12 -1.0% -1.2% t-12 t-10 t-8 t-6 t-4 t-2 t0 t2 t4 t6 t8 t10 t12 -0.2% -0.4% -0.6%
Chart 53 : Large increase in utility rate

Cumulative event return 0.4% 0.2%
# weeks surrounding event
Chart 54 : Large increase in borrowing fee

Cumulative event return 0.2% 0.0%
Chart 55 : Large increase in borrowing fee and utility rate

Cumulative event return 1.0%
0.5% -0.2% -0.4% -0.6% -0.5% -0.8% -1.0% -1.2% -1.5% -1.4% -1.6% t-12 t-10 t-8 t-6 t-4 t-2 t0 t2 t4 t6 t8 t10 t12 -2.0% t-12 t-10 t-8 t-6 t-4 t-2 t0 t2 t4 t6 t8 t10 t12 -1.0% 0.0%
Contact details: RBS Equity Finance Peter Pittar Head of Equity Financing and Collateral Trading: +61 2 8259 2014 Jeff Brewer Director, Equity Financing: +61 2 8259 6828 Contact details: RBS Quantitative Research Eben van Wyk Director, Head of Quantitative Research: +61 2 8259 5492
22
18
Australia/NZ Strategy and Economics | Australian Alert
5 December 2011 Market reaction*

Before AUD ASX-200 30D cash futures 90D BB futures 3Y bond futures 10Y bond futures Odds 25bp move at next RBA mtg Change in cash priced for next yr 1.0242 4,311 4.33 4.55 3.28 4.03 -97% -137bp After 1.0235 4,314 4.33 4.55 3.27 4.03 Total company profits -97% -137bp Small business profits Wages bill % qoq % qoq % qoq +6.7 +0.1 +2.3 +7.3 +3.4 .. +3.5 na na +3.0 na na +4.8 +1.3 +1.8 Real business sales Real business inventories Real business inventories
Sales, inventories, profits & wages: Q3 2011: Sales strength met by inventory run-down
Kieran Davies and Felicity Emmett Key facts
Unit % qoq % qoq q ppc Previous +1.0 +2.5 +0.8 Revised +0.6 +1.6 +0.7 RBS na +1.2 -0.6 Market na +1.2 na Actual +1.2 -1.1 -1.1
Source: ABS, Bloomberg, Dow Jones, RBS and Reuters
* 15 minutes before and after release Futures yields are from the nearest contract Source: Bloomberg and RBS
Real business sales

% qoq Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 -0.9 1.1 0.2 0.6 1.2 % yoy 2.3 0.9 0.6 0.9 3.1
We have nudged up our preliminary forecast for Q3 GDP down from 1.0% to 0.8% ahead of key trade and public demand data Tuesday. Q3 GDP is due Wednesday and we have edged up our preliminary forecast down from 1.0 to 0.8% as inventories were weaker than we anticipated in the face of strong sales and profits growth. Profits beat our forecast, while sales were slightly stronger than we had anticipated. We will finalise our GDP forecast after net exports and public demand data are released on Tuesday. The market currently expects a 1% rise in GDP. Company profits were substantially stronger than expected on a GDP basis, up almost 7% in Q3. The headline measure of company profits rose by 4.8% (RBS: +3.5%; market: +3%) after an upwardly-revised rise of 6.7% in Q2 and is 8.8% higher than a year ago. The rise was driven by strength in mining (up 5% to contribute 1.8pp to total growth) as the sector continues to recover from natural disasters. Construction (up 21.7% / 1.1pp contribution) and wholesale trade (8.7% / 0.6pp) were also very strong. The weakness was centred in transport (5.8% / -0.4pp) and manufacturing (-3% / -0.3pp). Converting total profits to a GDP basis by excluding the finance sector and holding gains on inventories, profits surged by 6.8% after a 10.5% rise in Q2. Business sales picked up to 1.2%, which was the largest increase since the end of 2009. Real business sales rose by 1.2% after a downwardly-revised 0.6% rise in Q2 (initially estimated as a 1% rise). Sales are up 3.1% over the past year. Mining and wholesale trade together accounted for much of the increase in total sales (0.4pp contributions each). Mining rose by 6.2%, which was the fastest growth since mid-2010 and suggests that the coal sector in Queensland is recovering from severe flood damage earlier this year. Wholesale trade rose by 2.2%, which was the largest rise since the end of 2009. More interesting was the 1.3% increase in manufacturing sales, which was the largest rise since early 2010 and was propelled by a surge in metals manufacturing, albeit from a low level (just over half of the manufacturing sub-sectors rose, with the weakness concentrated in petrol refining and furniture). Other stand-outs were retail trade (up 1.7% in Q3) and construction (up 1.5%), where the latter was a much smaller increase than implied by the Capex and Construction Work Done reports. The weakness was concentrated in transport (-3.3%), finance (-1.9%) and administration (-4%).
Important disclosures can be found in the Disclosures Appendix
Real business inventories

% qoq Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 -0.6 0.3 0.0 1.6 -1.1 qoq ppc -0.1 0.4 -0.1 0.7 -1.1
Source: ABS and RBS
(profits are on the next page)
Economics Kieran Davies +612 8259 5171 kieran.davies@rbs.com Felicity Emmett +612 8259 5835 felicity.emmett@rbs.com
www.rbsm.com/strategy
23
The Royal Bank of Scotland
Non-financial company profits

% qoq Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 -3.2 -3.6 -0.2 7.4 4.4 % yoy 24.9 13.9 8.4 0.1 7.9
Source: ABS and RBS
The industry detail suggests that the drop in inventories was largely an unintended run-down in stocks as sales were strong. Most of the subtraction from GDP growth came from wholesale trade(-0.6pp), where inventories fell by a sharp 1.8% as sales accelerated to 2.2%. This was followed by mining (-0.3pp) on a small run-down in inventories as sales boomed by 6%, and retail (-0.2pp), where inventories fell a sharp 1.6% as sales picked up to 1.7%. Manufacturers added slightly to GDP (0.1pp) as they increased their inventories for the first time this year as sales rose by 1.3%. The wages bill rose at a solid rate of 1.8%. After picking up to 2.3% in Q3, the wages bill increased by 1.8%, which was in line with growth in the preceding couple of quarters. Over the past year, the wages bill is up 7.8%. This indicator forms part of the GDP measure of wages, although growth in the two series has diverged over recent quarters. Even so, with soft employment, this suggests that the wage rate has continued to grow at a strong pace. Small business profits up a solid 1.3%. Small business profits rose by 1.3% in Q3 after an upwardly-revised increase of 3.4% in Q2 (previously estimated at 0.1%). Note, however, that this series has little relationship to its GDP equivalent.
Sales, profits and wages were all strong as inventories fell sharply
Real business sales & GDP (% qoq) 3 Sales 2
1.0 0.5 1.5 Real business inventories (q ppc to GDP) GDP measure
1
0.0
0
-0.5
-1
GDP
-1.0
-2
-1.5 -2.0
Survey measure
-3 05 06 07 08 09 10 11
05
06
07
08
09
10
11
Wages bill (% qoq) 5 4 3

10 20
Non-financial company profits (% qoq)
Adjusted survey measure
Survey measure
15
2 1 0
0 5
-1 -2 -3 05 06 07 08 09 10 11 GDP measure
-5 GDP measure -10 05 06 07 08 09 10 11
Source: ABS and RBS
24
Australia/NZ Strategy and Economics
Business inventories subtracted 1.1pp from Q3 GDP. Real business inventories subtracted 1.1pp from Q3 GDP (RBS: -0.6pp; market: n/a), which was the biggest subtraction since the economy contracted in Q4 2008. It followed a downwardly revised 0.7pp contribution in Q2. The miss was due to extensive revisions to inventories in recent history, where inventories fell by 1.1% in Q3 (RBS & market: +1.2%) after a downwardly-revised 1.6% increase in Q2, which was previously estimated as a 2.5% rise.
Equity | Australia | Transportation
5 December 2011
Toll Holdings
Buy
Target price
Resources in focus
We expect greater focus from TOL on the resources opportunity going forward and, with a number of avenues to leverage off this growth, we think the outlook is positive. We expect contract announcements over the next 12 months as projects ramp up and on a FY12 P/E of 11x we think the share price will react positively.
Key forecasts
FY10A EBITDA (A$m) 616.6 295.2 262.6 37.48 -13.1 25.00 5.13 13.00 6.89 8.71 9.70 FY11A 638.7 309.8 269.0 38.08 1.59 25.00 5.13 12.80 6.84 6.37 7.88 FY12F 724.7 309.4 309.4 42.67 12.10 27.00 5.54 11.40 6.41 5.70 8.72 FY13F 828.0 356.9 356.9 48.60 13.90 31.00 6.37 10.00 5.91 5.71 9.08 FY14F 929.7 404.7 404.7 54.47 12.10 33.00 6.78 8.94 5.41 5.17 9.37
A$5.42
Price
A$4.87
Short term (0-60 days)
n/a
Market view
Underweight
Price performance
(1M) Price (A$) Absolute (%) Rel market (%) Rel sector (%)
Dec 08 10 9 8 7 6 5 4 TOL.AX S&P/ASX200 Dec 09
Reported net profit (A$m) Normalised net profit (A$m)

(3M) 4.70 3.6 2.5 8.8
Dec 10
(12M) 6.24 -22.0 -14.9 -9.6
4.63 5.2 2.6 7.7
Normalised EPS (c) Normalised EPS growth (%) Dividend per share (c) Dividend yield (%) Normalised PE (x) EV/EBITDA (x) Price/net oper. CF (x) ROIC (%)
1. Pre non-recurring items and post preference dividends Accounting standard: IFRS Source: Company data, RBS forecasts
year to Jun, fully diluted
New CEO to focus on resources With Brian Kruger formally taking over as CEO on 1 January 2012, we expect he will look to put his own stamp on the company. We do not expect wholesale strategy changes, but think he will place greater focus on growth areas in the business. Toll Global Resources (TGR) is one division which we think tends to get overlooked by the market, yet which contributes 20% of TOLs EBITA and has significant growth opportunities ahead of it. We forecast an EBITA CAGR of 8% over the next five years, which we think is achievable given the growth opportunities we have identified in this report. Multiple opportunities to leverage off resource industry growth The Australian mining logistics market is worth approximately A$7bn and with A$230bn of resource projects in the pipeline, we expect the market to grow strongly. TGR has multiple leverage points to this growth across the coal, iron ore, and oil & gas markets. We estimate TGR could realistically grow its organic revenue by 50% through FY17, lifting group EBITA by A$70m (a 10% CAGR). Additionally, we estimate TOL generates a further A$20m from resources related work in its other domestic transport businesses that should benefit as well. LNG the likely target for acquisitions
Market capitalisation
A$3.46bn (US$3.54bn)
Average (12M) daily turnover
A$16.62m (US$17.28m)
Sector: BBG AP Transport Part of: ASX/S&P 50 Leaders RIC: TOL.AX, TOL AU Priced A$4.87 at close 2 Dec 2011. Source: Bloomberg
Analysts
Mark Williams
+61 2 8259 6921 mark.williams@rbs.com
We think there are potential acquisition opportunities that would bolster TOLs resource offering, particularly in the growing LNG industry; however, price is likely to be an obstacle for some of the more attractive players. We therefore expect TOL to focus more intently on the organic opportunities noted above. Opportunity in a re-rate candidate; maintain Buy While the general macro environment will remain a key earnings driver, on a 11x FY12 P/E we dont think TOL gets the credit it deserves from its resources exposure. TOL is currently trading at a 25% discount to global peers and a 20% discount to the ASX 200 Industrials, which we think undervalues the exposure to this higher growth sector. Maintain Buy. Important disclosures can be found in the Disclosures Appendix.
Michael Newbold, CFA

+61 2 8259 5663 michael.newbold@rbs.com
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Kruger to focus on resources

With Brian Kruger officially taking over from Paul Little as CEO on 1 January 2012, we expect him to refocus the markets attention on some of the growth areas within the business. We are not expecting wholesale strategy changes for the company (the Board has already approved a five-year strategy) and so do not expect Kruger to alter the global freight-forwarding strategy. However, we do believe there are areas that Kruger will place greater focus and energy on, that will be long-term growth drivers for the company.
With a strong pipeline of opportunities, we think the new CEO will focus on resources
One area of long-term opportunity is the TGR division that currently contributes 20% of TOLs earnings (EBITA). With a strong pipeline of LNG, coal and iron ore projects due to commence over the next 5-10 years, we expect growth to outpace TOLs other divisions. With the markets focus on the macro uncertainties impacting general freight volumes, we think this is a division that provides TOL some earnings protection at the bottom of the cycle, but also has strong growth prospects going forward. We estimate a potential uplift to TGRs revenue of A$650m pa by FY17, implying an EBITA contribution of A$70m. We currently forecast a A$510m increase in revenue and A$52m increase in EBITA.
In the short-term, limited share price downside in our view

Over the past 12 months, TOL has de-rated to a P/E level (11x FY12F) 25% below its long-term historical average and a 20% discount to the ASX 200 Industrials (historically in line). While most of this reflects concerns about the performance of TOLs international businesses, additional elements including the transition to a new CEO have also added uncertainty. With TOLs exposure to the growing resource sector and with the majority of TOLs earnings still coming from Australia, we see opportunity in an out-of-favour stock. While the retail environment has been subdued for the past 12 months, the recent downward move in the official cash rate, and potential for more to come, has the ability to positively impact the retail trading environment. During the previous three cash rate cycles in which downward movements have occurred (July 1996-July 1997; February 2001-February 2002; September 2008-September 2009), TOLs share price has moved positively over the 12 months following the initial cash rate cut on each occasion. While the correlation between interest rate movements and the TOL share price isnt particularly strong because of M&A activity in TOL over the years, we think it is another element that suggests downside risk is limited in the short term. Chart 1 : TOL share price rose 94% between July 1996 and July 1997 Chart 2 : TOL share price rose 116% between February 2001 and February 2002
8% 7% 6% A$3.50 5% 4% 3% 2% 1% 0% A$0.25 A$0.20 A$0.15 A$0.10 A$0.05 A$0.00 5% 4% 3% 2% A$1.00 1% 0% A$0.50 A$0.00 1% 0% Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 OCR TOL (RHS) A$3.00 A$2.50 A$2.00 A$1.50 2% 5% 4% A$4.00 3% A$3.00 A$2.00 A$1.00 A$0.00 A$5.00 A$4.50 A$4.00 6% A$0.30 6%
Chart 3 : TOL share price rose 23% between September 2008 and September 2009
8% 7% A$9.00 A$8.00 A$7.00 A$6.00 A$5.00
8% 7%
A$0.40 A$0.35
May-96Aug-96 Nov-96 Feb-97May-97Aug-97 OCR TOL (RHS)
Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 OCR TOL (RHS)
Source: RBA, IRESS
Source: RBA, IRESS
Source: RBA, IRESS
Toll Holdings | Investment View | 5 December 2011
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Summary of Toll Global Resources (TGR)

TGR provides fully integrated supply chain, transportation and supply base solutions to customers in the oil & gas, mining, and energy industries. As with all TOL divisions, it is a collection of businesses that TOL intends will offer services to customers in all aspects of the resource project lifecycle. Combined with TOLs other divisions, TOL has the capability to offer niche services at mine site, or provide a full suite of transport services if required. Figure 1 : Resource project life-cycle
Source: TOL
TGR has multiple leverage points to the resources industry
TGR is split into five divisions, with Mining Services contributing the most to revenue on our estimates. Toll Mining Services services the Australian mining industry in SE Australia and Western Australia, providing bulk haulage of commodities and specialised chemicals, onsite logistics and stockpile management. Activities vary, including hauling lead and zinc concentrates from BHPs Cannington Mine to storage facilities, hauling raw coal to the coal handling preparation plant (CHPP) for Wesfarmers (Curragh) and Whitehaven Coal, pit management and maintenance services for Xstrata Coals Oaky Creek mine, and the transportation of Ammonium Nitrate for Orica. The acquisitions of Mitchell Corp in May 2011 provides a strong presence in WA with customers including BP, Origin, Shell, BHP and Newcrest Mining. Competitors include BIS Industries, Giacci and mining companies themselves. Toll Energy services the Australian oil & gas sector predominantly through its network of supply bases in WAs NW Shelf, the Timor Sea and Bass Strait. TOLs operation of the Barrow Island supply base for Chevrons Gorgon LNG project (A$60m p.a. revenue) is a key project for this division. Competitors include Agility, Linfox, Mermaid Marine (also a supply base partner in Broome) and project and construction management companies (eg, Bechtel). Toll Marine Logistics provides bulk vessel chartering and other logistics services to customers in SE Asia and Northern Australia. Predominantly provides barges for coal companies operating in Indonesia (Arutmin, Banpu, Indonesia Power) as well as servicing the sand and scrap steel markets in the region. The acquisition of Perkins provides a link into Northern Australia and provides an ability to sell vessel services into major Australian projects including Gorgon and Curtis Island. In 2011 TOL was awarded a contract by Bechtel to operate two roll-on, roll-off vessels between Gladstone and Curtis Island to support the QCLNG project. Competitors include PT Rig Tenders, Jaya Hodlings, Seaswift and Swire Shipping. Toll Remote Logistics provides remote logistics services to miners, government and defence organisations in the Asia-Pacific region. Provides camp construction and camp management services in remote locations (eg, BHP in Ethiopia), as well as aviation support and fuel services. Contracts are held with the Australian Defence Force in Timor and the Australian Federal Police in the Solomon Islands, although both have seen a reduction in recent times. TOPS (Toll Offshore Petroleum Services) services the SE Asian regions offshore oil and gas companies through its supply base in Singapore. TOPS offers a one-stop resource centre for oilfield services, equipment and supplies, with blue-chip customers including Schlumberger, Weatherford, Technip, Swire, and Panalpina.
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Chart 4 : Estimated TGR revenue split (FY12F)
TOPS 8% Remote Logistics 15%
Energy 20%
Marine Logistics (Perkins) 15%
Mining Services 42%
*FY12F revenue of A$977m Source: RBS estimates
Financial performance solid and expected to improve

Toll Global Resources accounts for 20% of Group EBITA
TGR accounts for 11% of TOL Group revenue (FY12F) but 20% of Group EBITA (pre-corporate expenses). As a capital intensive business, TGR possesses the highest margins within the group. Revenue has grown 29% over the last two years, while EBITA has been flat as weather events (particularly in FY11) impacted asset utilisation. We expect EBITA to improve as weather conditions normalise and drilling and production volumes pick-up. Table 1 : Global Resources financial summary
(A$m) Revenue EBITA - associates EBITA inc assoc EBITA margin (pre assoc) Revenue growth EBITA growth
Source: Company data, RBS forecasts
FY09A 608.0 82.1 6.0 88.1 13.5%
FY10A 695.5 88.5 5.8 94.3 12.7% 14.4% 7.8%
FY11A 784.2 85.9 2.7 88.6 11.0% 12.8% -2.9%
FY12F 977.1 110.2 2.8 113.0 11.3% 24.6% 28.3%
FY13F 1065.0 125.1 2.9 128.0 11.8% 9.0% 13.6%
FY14F 1128.9 135.5 3.0 138.4 12.0% 6.0% 8.3%
FY15F 1196.7 143.6 3.0 146.6 12.0% 6.0% 6.0%
TGR was significantly impacted by weather in FY11, so we expect a recovery in FY12 assuming a more normal wet season. Not only were mining operations in Queensland and New South Wales impacted by weather, but an extended monsoon season impacted Toll Marine Logistics in Indonesia. FY12 earnings will also benefit from an additional 10 months from the Mitchell acquisition (completed in May 2011). On an EBITA margin basis, TGR is well ahead of the other divisions given the capital intensity of the business. We expect margins to recover from the 11% low recorded in FY11 as asset utilisation improves in FY12. ROIC also suffered in FY11 as earnings declined and invested capital rose due to the ongoing TOPS investment (A$88m) and additional fleet and equipment required to service new contracts. ROIC should improve as capex for TOPS winds down from FY13 and additional earnings are generated from the redevelopment.
Where are the opportunities for TOL?

A$230bn of resource projects provides significant opportunity for TOL
With a number of different businesses, TOL appears well positioned to benefit from the significant growth expected in the Australian resources industry. The Bureau of Resources and Energy Economics (BREE) has identified A$232bn worth of resource projects in the advanced stage of development, with Queensland and Western Australia accounting for A$216bn. As a logistics provider, TOL can expect to capture only a small sliver of the pie, but the number of projects nevertheless represents a significant opportunity.
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TOL has multiple businesses to leverage off the resources growth
TOLs Mining Services division should benefit from the increased mining activity across coal, iron ore and other bulk commodities, providing haulage and on-site services to customers. TOLs Energy and Marine Logistics divisions should benefit from an increase in oil and gas activity (particularly LNG) through its supply bases and vessel operations. We do note the long lead-time on new projects coming to fruition and with many of the LNG, iron ore and coal projects not commencing for 5-10 years, we see growth in this division occurring over numerous years.
We estimate a potential A$650m increase in revenue
Putting together the estimated opportunities in LNG, coal and iron ore, we estimate a potential uplift to TGRs revenue of A$550m pa by FY17. This excludes the potential growth from Remote Logistics, TOPS and Marine Logistics Asian operations, which could conservatively add a further A$50m-100m pa. This therefore gives us a high level of confidence in our forecasts, which already assumes reasonably strong revenue growth in TGR of 6.6% pa (an additional A$510m pa) to FY17. With a small margin increase we are forecasting a A$52m pa increase in EBITA (8% CAGR). If TOL captures the growth that we estimate is realistically available, TOL could increase revenue by A$650m and EBITA by A$70m.
LNG opportunities for Toll Energy and Marine Logistics

Significant number of LNG projects coming on line
The next decade will see significant growth in LNG production and export in Australia as new projects come on line. Our RBS Energy analysts are expecting 95mtpa of additional LNG capacity to be installed by 2020, with potential for expansion in excess of that.
Chart 5 : Projected Australian LNG exports to 2035

200 180 160 140 120 100 80 60 40 20 0 2010 2012F 2014F 2016F 2018F 2020F 2022F 2024F 2026F 2028F 2030F 2032F 2034F Mtpa LNG production
LNG projects likely
Expansionary opportunities
Source: RBS forecasts
Australia currently operates two LNG facilities. Woodsides Pluto project, with an annual output of 4.3Mtpa is scheduled to start in 2012 with the possibility for expansion. Late in 2009, the Gorgon project in Western Australia received the go ahead. Furthermore, three Queensland-based LNG projects utilising coal seam gas (CSG) were sanctioned in late 2010 and early 2011, and the world first Floating LNG project (Shells Prelude) was sanctioned in May 2011. Potential future projects (see table below) mean that Australian LNG export capacity could exceed 55Mtpa by 2015 and 116Mtpa by 2020, potentially overtaking Qatar (depending on how long it maintains its self-imposed moratorium of 77Mtpa). We believe there is a very high likelihood that Australia will see further increases in LNG exports with more CSG projects coming online, the most likely being Shells Arrow project, the potential for Shells second FLNG, Sunrise, and expansions of Pluto, namely trains 3, 4 and 5, Gorgon trains 4-5, and Wheatstone trains 4-5, among others.
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Table 2 : LNG liquefaction plants under construction

Country and plant Australia (> 75%) probability Pluto T1 (NW Shelf, WA) Pluto T2 (NW Shelf, WA) QCLNG T 1&2 (Curtis Island, QLD) GLNG T 1&2 (Curtis Island, QLD) APLNG T1 (Curtis Island, QLD) Gorgon T1-3 (NW Shelf, WA) Shell CSG Pty Ltd (Curtis Island, QLD) Wheatstone T1&2 (NW Shelf, WA) Prelude (FLNG) (NW Shelf, WA) Ichthys (NW Shelf, WA) Browse T 1-3 (NW Shelf, WA) Greater Sunrise (NW Shelf, WA) Australia expansionary Pluto T 3&4 QCLNG expansion GLNG expansion APLNG expansion Shell CSG expansion Gorgon T 4-5 Wheatstone T3 Browse T4-5 Scarborough/Thebe
Source: Company data, RBS
FID taken
RFSU
Proposed capacity (Mtpa) 94.7 4.3 4.3 9.8 7.8 9.0 15.0 8.0 8.6 3.5 8.2 12.0 4.2 ~8.0` ~5.0 ~4.0 ~4.0 ~4.00 ~10.0 ~5.0 ~6.0
Yes No Yes Yes Yes Yes No Yes Yes No No
2012 2014 2014 2015 2016 2015 2016 2017 2017 1H 2019 2019
No No No No No No No No No
TOLs role
TOL has multiple businesses to supply the LNG industry
There is a significant amount of logistics work related to projects of this magnitude. Opportunities for TOL in relation to these projects can come in the form of: International logistics contracts (through Toll Global Forwarding) Domestic (mainland) logistics contracts (through Toll Mining Services) Supply bases (through Toll Energy) Provision of vessels (through Marine Logistics) Aviation support services (through Remote Logistics) Camp accommodation and facilities management (through Remote Logistics) In our view, TOL lacks the global scale (at least at this point) to be a realistic competitor for the international logistics contracts. Incumbent global freight forwarders, like Schenker (awarded the Gorgon international logistics component) and Panalpina are more likely to benefit in our view. The most likely opportunities therefore relate to operating new supply bases required for the inbound receipt and processing of materials, supplying vessels for transporting materials between the mainland and islands, and ancillary support services.
We estimate LNG project opportunities could add A$380m in revenue
TOLs specific involvement for each project will no doubt vary. However, if we assume that TOL wins an equivalent piece of the logistics task as it did with the Gorgon project, then we estimate there is a A$380m pa revenue opportunity for TOL over the next five years.
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Chart 6 : Estimated potential TOL revenue contribution from LNG projects

A$m 400 350 300 250 200 150 100 50 0 2012F 2013F 2014F 2015F 2016F 2017F+
Pluto T1 Pluto T2 North-west shelf projects Gladstone LNG projects QCLNG Gorgon Prelude, Ichthys, Browse, Sunrise GLNG APLNG, Shell CSG
Wheatstone
Estimated potential TOL revenue contribution
* Project bubbles indicate RFSU (Risk First Start Up) date. Logistics contracts estimate to commence 2-3 years prior to RFSU Source: RBS estimates
Gorgon provides a good example of the logistics opportunities

TOL's Barrow Island supply base for Gorgon generates A$60m revenue pa
For the Gorgon project, TOL was awarded the Barrow Island supply base and transport logistics contract for an extendable three-year period (commencing in 2010), contributing revenue of A$60m pa. If Gorgon is expanded there may be additional opportunities for TOL, although the major logistics task providers are unlikely to change. There may be opportunities for TOL to provide some vessels for use through its Marine Logistics division, although Mermaid Marine has the main contract in this regard so short-term opportunities may be limited. Gorgon project logistics components (relevant to TOL): International logistics DB Schenker (A$600m over five years) Barrow Island supply base Toll Holdings (A$180m over three years, extendable) Mainland (Dampier) supply base Mermaid Marine (A$100m over three years, with one year option) Mainland transport and logistics services Agility/Linfox (about A$250m) Air transport Cobham Aviation Services (A$170m over six years)
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Figure 2 : Gorgon project map
Source: Chevron Australia
Gladstone LNG projects yet to materially award logistics contracts

Gladstone LNG projects are still to award the majority of the logistics contracts
The Gladstone LNG projects are individually smaller than Gorgon, but cumulatively are more than twice as large. QCLNG (BG) is the first LNG project expected to commence exports from Curtis Island in 2014, with GLNG and APLNG to follow soon afterwards. Bechtel is the main contractor for all three developments. So far, TOL has secured a role with QCLNG providing two roll-on rolloff (RORO) vessels during the peak construction phase through its Marine Logistics division. As the project ramps up we expect that additional work may be available for TOL to secure. Additionally, as the GLNG and APLNG projects progress, we would expect TOL to secure additional work in the region over the next 12-24 months. Figure 3 : Potential Gladstone LNG sites
Source: Queensland Government
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Coal & iron ore opportunities for Toll Mining Services

The coal export industry is expected to grow at 6% pa
In our Alpha Navigator report, Transport: Carrying the energy load (3 October 2011), we identified an expected 230mtpa increase in Australian coal exports over the next 10 years. Driving that growth is significant demand for thermal coal from Asia (particularly India), as well as ongoing demand for metallurgical coal. Mine expansions and greenfield developments in QLDs Surat and Galilee basins are expected to deliver the increased production. While TOL also has exposure to the Indonesia coal market through its Marine Logistics division (vessels used to transport coal), we think there are more significant opportunities in Australia for TOL to pursue. Chart 7 : RBS vs ABARES Australian coal export forecasts
Mt 600
500
400
300
200
100
0 2010 2011F 2012F 2013F 2014F 2015F NSW 2016F 2017F 2018F 2019F 2020F 2021F
Queensland
ABARE Total Exports
Source: ABARES, RBS forecasts
and significant growth expected in iron ore
Likewise for iron ore, we expect production to broadly double over the next 10 years as the large miners in the Pilbara (BHP, Rio Tinto, Fortescue) expand production and junior miners in the Yilgarn and mid-west regions commence operations. Chart 8 : RBS Australian iron ore production forecasts
Mtpa 900 800 700 600 500 400 300 200 100 0 2011F 2012F 2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020F
TOLs role
TOL's Mining Services provides services to the miners
TOLs Mining Services division primarily provides haulage for bulk commodities, hydrocarbons, and dangerous goods. TOL estimates it currently has approximately 5% of the mining logistics market. As production of coal, iron ore, and other bulk commodities increase, we expect TOL to benefit from an increase in demand for its services. Although many miners perform the work inhouse, TOLs client base of large high-quality customers suggests the company may be able to secure more work as those customers expand their operations. Examples of activities TOL currently provides: Haulage of raw coal from mine to preparation plant Wesfarmers (Curragh), Whitehaven Coal
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Pit management and waste removal Xstrata Coal Haulage of various bulk commodities BHP (Cannington), BC Iron, Rio Tinto, Newcrest Haulage of hydrocarbons BP, Origin, Shell, ROC Oil, Arc Energy Haulage of Ammonium Nitrate Orica, Dyno, EDI Downer
As mining activity increases, TOL has a secondary exposure to AN haulage
Not only does an increase in mining production generate opportunities for TOL to haul commodities at or around the mine site, but increased mining activity also requires greater amounts of ammonium nitrate to be transported to the mines. TOL does a significant amount of transportation work for Orica and Dyno Nobel so we see the growth in mining operations providing a second derivative benefit to TOL in the form of increased transport work for Orica and Dyno. We therefore see multiple ways for TOL to benefit from an increase in mining production volumes: Increased bulk haulage at mine site as production levels increase Increased haulage of ammonium nitrate to cater for growth in mining activity Increased hydrocarbon haulage as oil & gas activity expands in Western Australia Assuming TOLs mining services division grows in line with the projected volume growth of the coal and iron ore industries (about 7% pa), we estimate the revenue uplift could equate to an additional A$160m pa by FY17.
Resources benefits other parts of TOL as well

In addition to direct resources work, we estimate TOL generates approximately A$350m in revenue from ancillary work
TOLs Australian domestic logistics divisions also benefit from activity in the resources sector. We estimate the revenue benefit to be in the range of A$300m-350m, implying an EBITA contribution of approximately A$20m. Toll SDF generates approximately A$200m in revenue from carrying out logistics work related to the resource sector, primarily through its NQX business in North Queensland. This relates to transportation of goods to mine site, inventory management, and haulage of pipelines and equipment to support new LNG site construction. With the expected growth of resource projects in Queensland over the next decade and beyond, we expect NQX to grow strongly from this base. Toll Domestic Forwarding also generates approximately A$50m in revenue from direct resources related work. However, we estimate there may be anotherA$50m-100m in revenue generated from general freight volumes that service towns and regions supporting the resources industry. In total we estimate work related to the resources industry accounts for 15% of TOL Group revenue, but 27% of EBITA given the higher margins earned in the capital intensive TGR division.
Chart 9 : Contribution of resource related revenue to TOL
Chart 10 : Contribution of resource related EBIT to TOL
TGR 11%
TSDF 2% TDF/Other 1% TGR 23% TSDF 3% TDF/Other 2%
Non-resource 86%
Non-resource 72%
Source: Company data, RBS estimates
Source: Company data, RBS estimates
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10
Potential M&A activity likely to focus on LNG opportunities

Potential M&A activity would likely be focused on LNG opportunities
Given TOLs acquisitive nature, we think they will continue to look for potential acquisitions to bolster the TGR division. The most recent acquisition of Mitchell gave TOL an expanded presence in the WA bulk commodity and hydrocarbon haulage market, although we think there is scope to grow some of TOLs other offerings, particularly in relation to targeting the growing pipeline of LNG projects. In this regard, we think the Toll Energy and Toll Marine Logistics businesses could be a focus for management. The supply bases that TOL operates in its energy business are important to the offshore oil & gas industry, although TOLs supply bases are typically only storage facilities. Given TOLs preference to be a value-adding integrated logistics provider, we think there may be opportunities to become further integrated into the supply chain. The growing number of LNG projects will also require more vessels for transporting materials between mainland locations and LNG construction sites.
MIO and MRM are potential candidates...
While at the bigger end of the potential acquisition range, the types of companies we think TOL might look at in this regard include Miclyn Express Offshore (MIO.AX) and Mermaid Marine (MRM.AX). MIO provides vessel operations, while MRM provides supply base and vessel operations. Although MIO would provide additional scale to TOLs vessel operations, we think TOL would be less attracted to a pure vessel operator given it already has some of its own operations (including Perkins). MIO also has significant international operations that we dont think fits as seamlessly into TOLs existing operations. On the other hand, MRM possesses both supply base capabilities as well as vessel operations, which we think would potentially complement TOLs offering: Supply bases located in Dampier and Broome, complementing the Toll Energy business. While TOL also has a supply base in Dampier, MRM has an integrated facility with wharf access that we think would be attractive to TOLs strategy of being an integrated logistics provider. TOL and MRM run the Broome supply base as a JV. Vessel operations, owning and operating over 30 vessels, complementing the Toll Marine Logistics business.
...and both are more profitable than TOL
Both MIOs and MRMs business are more profitable than TGR, generating higher margins and higher ROA. While TGR is a more diversified business than either, we think the better returns generated by MIO and MRM make these types of businesses all the more attractive to TOL. Table 3 : Comparison of TGR vs Mermaid Marine and Miclyn Express (FY11A)
TOL Global Resources Revenue EBIT - margin ROA
Source: Company data
MRM Group 289.1 69.8 24.1% 16.4% Dampier supply base 61.4 30.4 49.5% 28.1% Vessels 211.7 42.6 20.1% 17.8%
MIO Group 167.2 61.0 36.5% 13.7%
784.2 88.6 11.3% 8.6%
But acquisition price on either likely to be too high for TOL
Acquisition price a likely sticking point TOL sees its acquisition sweet spot in the A$200m-400m range, which typically enables it to fund the acquisition through existing balance sheet facilities and to make the acquisition EPS accretive from year 1. Acquisition of either MIO or MRM would be well above TOLs ideal acquisition range given MIOs current market cap of A$510m and MRMs market cap of $675m. A 30-40% premium on either indicates an acquisition price of around A$700m for MIO and A$900m for MRM. As an example of the financial impact on TOL, we have run some assumptions for an acquisition of MRM. On a fully debt funded basis, the acquisition could be 4% EPS accretive for TOL, assuming a 6% funding cost. However, TOLs balance sheet would struggle to fully fund it through cash and debt with gearing rising to 44% (from 30%). An equity raising of more than A$150m (ie, more than 17% equity funded) would make the transaction EPS dilutive on our estimates, unless additional synergies could be found (we assume cost synergies of A$5m, 2% of MRMs operating costs). We therefore think that while businesses like MRM would be attractive for TOL, the acquisition focus is likely to be at the lower end of the range, as well as focusing on organic growth opportunities.
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11
Table 4 : TOL/MRM potential acquisition financials

TOL FY12F EBITDA EBIT Int PBT Tax NPAT Shares EPS - EPS accretion Gearing - ND/ND+E - ND/EBITDA (x) - Int cover (EBIT/Int) (x) 30% 1.8 11.3 44% 2.8 5.3 41% 2.6 5.9 35% 2.3 7.1 31% 2.0 8.6 724.7 472.1 (41.7) 430.4 (115.9) 314.5 714.1 0.44 MRM FY12F 105.2 82.2 (9.7) 72.5 (19.5) 53.0 TOL/MRM (acquisition funding) 100% debt 834.7 559.1 (105.4) 453.7 (127.0) 326.7 714.1 0.46 4% 80% debt, 20% equity 834.7 559.1 (94.6) 464.5 (130.1) 334.5 764.1 0.44 -1% 50% debt, 50% equity 834.7 559.1 (78.4) 480.7 (134.6) 346.1 839.1 0.41 -6% 25% debt, 75% equity 834.7 559.1 (64.9) 494.2 (138.4) 355.8 901.6 0.39 -10%
*Calculations assume cost synergies of A$5m (2% of MRMs operating costs) * Equity raising assumes TOL issues equity at a 25% discount to its share price (A$3.60 for the purposes of our calculations) Source: RBS estimates
Valuation
We think TOL looks attractive on historically cheap multiples given the growth in resources
On an 11x FY12F P/E, TOL is currently trading 25% below its historical average P/E of 15x and at a 20% discount to the ASX 200 Industrials. TOL is also trading on a 25% discount to global peers, which given TOLs exposure to the resources industry and strong growth potential ahead of it, we think undervalues the stock. The generally subdued economic environment is weighing on TOLs earnings; however, with multiples at historically low levels, we think the downside is limited. We have maintained our target price at A$5.42, based on a 12.5x FY12F P/E multiple. We believe this is a reasonable mid-cycle type multiple for TOL given it represents a 10-15% discount to TOLs historical average and the ASX200 Industrials.
Chart 11 : TOL 1-year forward P/E

(x) 30
Chart 12 : TOL vs ASX 200 Industrials

30%
20% 25 10% 20 0% 15
-10% -20%
10
-30% 5 00 01 02 03 04 05 06 07 08 09 10 11 -40% 02 03 04 05 06 07 08 09 10 11
1 yr fwd P/E (x)
Long-run ave
Source: Datastream
Source: Datastream
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12
Table 5 : Global peer comparisons

Ticker RBS Div Yield EV /EBIT Recom (%) (x) EV/ EBITDA (x) 6.3 P/S (x) P/E (x) P/B (x) P/CF (x) Gearing 2 YR FWD (ND/ND+E) EPS CAGR 13.3% 13.0%
Toll Holdings Freight Forwarding & Logistics Expeditors UTI Worldwide Kuehne & Nagel Panalpina DSV Deutsche Post (DHL) Mainfreight Average Express Nippon Express TNT Express FedEx UPS Freightways Average
TOL AU
Buy
5.6
10.0
0.4
11.2
1.2
6.1
EXPD US UTIW US KNIN VX PWTN SW DSV DC DPW GR MFT NZ Hold Buy Hold Buy
1.3 0.5 2.8 2.5 0.5 6.8 3.0 2.5
11.0 8.1 15.8 9.2 10.6 8.1 9.4 10.3
10.3 6.0 12.3 7.4 8.8 5.3 7.5 8.2
1.3 0.3 0.7 0.3 0.5 0.2 0.5 0.5
20.8 13.2 21.6 16.3 13.2 8.9 12.0 15.1
4.0 1.3 4.9 2.2 2.8 1.2 2.5 2.7
18.3 n/a 15.2 13.4 9.3 4.7 9.2 11.7
11.1% 21.1% 3.8% 8.1% 5.7% 3.6% 14.3% 9.7%
-163.6% -2.0% -108.9% -155.8% 38.2% -8.4% 13.5% -55.3%
9062 JT TNTE NA FDX US UPS US FRE NZ Sell
3.5 1.8 0.7 3.1 5.0 2.8
12.0 12.1 7.0 10.2 10.8 10.4
5.3 6.7 4.4 8.3 9.1 6.7
0.2 0.4 0.6 0.9 1.3 0.7
12.3 22.3 11.2 14.9 14.3 15.0
0.6 1.0 1.4 6.8 2.9 2.6
3.8 7.5 5.1 9.7 10.9 7.4
n/a 77.1% 14.9% 12.9% 13.2% 29.5%
31.4% 2.7% -4.4% 45.7% 47.9% 24.6%
* Priced as at December 2 2011 Source: RBS forecasts (where recommendation exists); Bloomberg (all others)
37
13
TOL financial summary

Year to 30 Jun (A$m) Incom e statem ent Divis ional s ales T otal revenue EBITDA Depreciation EBITA Amortisation/impairment EBIT Associate inc ome EBIT(incl ass ociate profit ) Net interes t expense Pre-tax profit Income tax expense After-tax profit Minority interests NPAT Significant items NPAT pos t abnorm als Division al sales revenue Global Expres s Domestic Forwarding Specialised & Dom F reight Global Logistics Global Res ources Global Forwarding Division al EB IT Global Expres s Domestic Forwarding Specialised & Dom F reight Global Logistics Global Res ources Global Forwarding Other Cash flow statem en t EBITDA Change in working capital Net interes t (pd)/rec T axes paid Other oper c ash items Cash flow from ops (1) Capex (2) Disposals /(acquisitions) Other investing cash flow Cash flow from invest (3) Incr/(dec r) in equity Incr/(dec r) in debt Ordinary dividend paid Preferred dividends (4) Other financing cash flow Cash flow from fin (5) Forex and dis c ops (6) Inc/(decr) cas h (1+3+5+6) Equity FCF (1+2+4) Balance sheet Cash & deposits T rade debtors Inventory Investm ents Goodwill Other intangible assets Fixed as sets Other assets T otal assets Short-term borrowings T rade payables Long-term borrowings Prov is ions Other liabilities T otal liabilities Preference s hares Share capital Other reserv es Retained earnings Other equity T otal equity Minority interest T otal shareholders' equity T otal liabilities & SE AIFRS 2010A 6944.0 6967.3 616.6 -232.5 384.1 0.0 384.1 21.6 405.7 -37.4 368.3 -100.2 268.1 -5.5 262.6 32.6 295.2 2010A 1790.2 1067.1 1046.5 1264.1 695.5 1066.1 2010A 122.1 64.5 60.9 88.5 82.5 14.3 -48.7 2010A 616.6 -36.6 -36.0 -137.7 -14.6 391.7 -385.7 -393.5 1.3 -777.9 0.2 200.3 -124.4 0.0 0.0 76.1 -10.7 -320.8 6.0 2010A 580.4 1041.5 49.1 188.3 1599.3 159.3 1749.2 325.2 5692.3 113.4 801.6 1404.2 50.1 596.0 2965.3 0.0 2901.9 -32.3 -160.7 -5.2 2703.7 23.3 2727.0 5692.3 AIFRS 2011A 8224.5 8253.2 638.7 -243.3 395.4 0.0 395.4 16.0 411.4 -35.4 376.0 -101.9 274.1 -5.1 269.0 40.8 309.8 2011A 2140.2 1097.1 1201.1 1357.3 784.2 1635.0 2011A 132.0 57.1 67.2 80.0 80.1 26.8 -47.8 2011A 638.7 -31.7 -30.7 -77.0 40.7 540.0 -506.5 -192.4 2.0 -696.9 0.2 219.6 -134.1 0.0 0.0 85.7 2.9 -68.3 33.5 2011A 496.5 1129.3 48.4 111.7 1683.5 165.4 1973.0 242.7 5850.5 920.6 881.6 595.8 22.1 626.8 3046.9 0.0 2946.3 -117.3 -55.6 -4.8 2768.6 35.0 2803.6 5850.5 AIFRS 2012F 9108.4 9137.1 724.7 -269.0 455.7 0.0 455.7 16.4 472.1 -41.7 430.4 -115.9 314.5 -5.1 309.4 0.0 309.4 2012F 2151.1 1130.0 1273.2 1449.9 977.1 2117.6 2012F 143.4 59.5 71.8 85.2 103.6 40.6 -48.5 2012F 724.7 42.3 -41.7 -115.9 9.9 619.2 -453.8 -305.7 0.0 -759.5 0.0 305.7 -135.4 0.0 0.0 170.3 0.0 30.1 165.4 2012F 526.6 1201.6 53.6 433.9 1654.7 152.1 2199.9 242.7 6465.0 320.6 1001.3 1501.5 22.1 636.7 3482.3 0.0 3004.3 -117.3 60.4 -4.8 2942.6 40.1 2982.7 6465.0 AIFRS 2013F 9955.8 9984.5 828.0 -294.0 534.0 0.0 534.0 16.8 550.8 -54.6 496.2 -134.2 362.0 -5.1 356.9 0.0 356.9 2013F 2231.3 1163.9 1330.5 1552.8 1065.0 2602.7 2013F 164.4 64.1 78.3 95.8 118.7 61.7 -49.0 2013F 828.0 -23.5 -54.6 -134.2 10.4 626.1 -506.0 -197.6 0.0 -703.6 0.0 197.6 -157.5 0.0 0.0 40.1 0.0 -37.4 120.1 2013F 489.2 1313.0 58.6 648.2 1625.9 139.9 2452.9 242.7 6970.4 320.6 1094.2 1699.1 22.1 647.2 3783.2 0.0 3071.8 -117.3 192.3 -4.8 3142.0 45.2 3187.2 6970.4 AIFRS 2014F 10802.6 10831.3 929.7 -319.5 610.2 0.0 610.2 17.1 627.3 -64.9 562.5 -152.7 409.8 -5.1 404.7 0.0 404.7 2014F 2370.5 1198.8 1390.3 1610.9 1128.9 3093.5 2014F 187.4 69.0 84.0 100.4 129.9 89.0 -49.5 2014F 929.7 -23.5 -64.9 -152.7 11.0 699.6 -564.2 -102.4 0.0 -666.5 0.0 102.4 -169.6 0.0 0.0 -67.2 0.0 -34.2 135.4 2014F 455.0 1424.4 63.5 767.7 1599.7 128.6 2735.0 242.7 7416.7 320.6 1187.0 1801.5 22.1 658.1 3989.3 0.0 3144.5 -117.3 354.7 -4.8 3377.1 50.3 3427.4 7416.7 Closing pr ice (A$) Valuation m etrics Preferred methodology DC F valuation inputs Rf Rm -Rf Beta CAPM (Rf+Beta(Rm-Rf)) E/EV*Ke+D/EV*Kd(1-t) Equity (E/EV) Debt (D/EV) Interes t rate T ax rate (t) WACC 4.87 DCF 5.25% 6.00% 0.88 10.5% 60.0% 40.0% 5.25% 30.0% 7.8% Pr ice target (A$) Val'n (A$) 10-year rate Margin Kd Ke NPV cash flow (A$m) Minority interest (A$m) Net debt (A$m) Investm ents (A$m) Equity market value (A$m) Diluted no. of shares (m) DC F valuation (A$) Mu ltiples Enterprise value (A$m) EV/Sales (x) EV/EBIT DA (x) EV/EBIT (x) PE (normalised) (x) PEG (normalised) (x) At target price EV/EBIT DA (x) PE (normalised) (x) 2011A 4421.4 0.5 6.8 10.7 12.6 2.5 2011A 7.4 14.2 2012F 4697.1 0.5 6.3 9.9 11.2 2.2 2012F 6.9 12.7 2012F 5.3 8.1 8.9 3.0 6.7 12.1 22.3 3.7 2012F 729.4 43.3 42.7 27.0 62.5 5.5 2012F 10.7% 10.5% 13.5% 15.2% 15.2% 15.0% 12.1% 2012F 37.0 8.0 5.0 3.4 15.3 1295.6 43.4 10.9 8.7 2012F 1.1 7.8 8.9 2013F 4932.0 0.5 5.8 9.0 9.9 2.0 2013F 6.4 11.1 2013F 4.9 7.5 8.3 2.8 5.9 9.8 16.2 2.7 2013F 738.6 49.3 48.6 31.0 63.0 6.4 2013F 9.3% 8.9% 14.3% 17.2% 17.2% 15.3% 13.9% 2013F 37.1 8.3 5.4 3.6 16. 8 1530.5 48.0 9.8 9.1 2013F 1.1 7.9 8.7 $ 5.42 5.49 5.25% 0.0% 5.25% 10.5% 5292.5 40.1 1295.6 21.1 3977.9 725.1 5.49 2014F 5068.6 0.5 5.4 8.1 8.8 1.7 2014F 5.8 9.9 2014F 4.5 6.8 7.1 2.4 5.2 8.4 13.4 2.2 2014F 746.9 55.3 54.5 33.0 59.9 6.8 2014F 8.5% 8.2% 12.3% 14.3% 14.3% 13.4% 12.1% 2014F 37.5 8.6 5.6 3.7 17.8 1667.0 48.6 9.4 9.4 2014F 1.0 7.9 8.7
Co mparable company data (x) Deutsche Post DHL EV/EBITDA Year to 31 Dec EV/EBIT PE PEG T NT Express EV/EBITDA Year to 31 Dec EV/EBIT PE PEG Per share data No. shares EPS (c ps) EPS (normalised) (c) Div idend per share (c ) Div idend payout ratio (% ) Div idend yield (% ) Growth ratios Sales growth Operating cost growth EBITDA growth EBITA growth EBIT growth NPAT growth Normalised EPS growth Operating perform ance Asset turnover (% ) EBITDA margin (%) EBIT margin (% ) Net profit margin (% ) Return on net assets (% ) Net debt (A$m) Net debt/equity (% ) Net interest/EBIT cover (x) ROIC (% ) Intern al liqu idity Current ratio (x) Receivables turnover (x) Payables turnover (x) 2011A 710.3 43.9 38.1 25.0 65.8 5.1 2011A 18.4% 19.9% 3.6% 2.9% 2.9% 2.4% 1.6% 2011A 35.6 7.8 4.8 3.3 14.1 1019.9 36.4 11.2 7.9 2011A 0.8 7.6 9.0
38
14
Equity | Australia | Construction Materials
5 December 2011
Boral
Hold
Target price
The last downgrade?

We have lowered our forecasts for BLD by 12% over each of the next three years. We see clear longer term value in BLD but believe that the time to buy is as the downgrade cycle ends and upgrades begin. We suspect this point is drawing closer, but are not convinced it is here. Hold recommendation maintained.
Key forecasts
FY10A EBITDA (A$m) 502.8 -90.5 144.5 24.10 8.78 13.50 3.54 15.80 8.00 4.98 4.73 FY11A 477.2 167.7 173.5 24.00 -0.41 14.50 3.81 15.90 7.01 7.65 4.80 FY12F FY13F FY14F
A$3.91 (from A$4.04)

Price
A$3.81
n/a
553.8 & 672.3 & 793.6 & 538.2 & 241.8 & 329.5 & 178.2 & 241.8 & 329.5 & 24.35 & 32.46 & 44.25 & 1.45 16.00 4.20 15.60 7.76 6.59 % 6.30 33.30 17.00 4.46 11.70 6.37 6.39 % 6.21 36.30 20.00 5.25 8.61 5.40 5.17 % 7.60
Price performance
Dec 08 7 6 5 4 3 2 Dec 09

(3M) 3.46 10.1 9.0 25.4 (12M) 4.82 -21.0 -13.8 -11.5
3.68 3.5 1.0 10.0
Use of %& indicates that the line item has changed by at least 5%. 1. Pre non-recurring items and post preference dividends Accounting standard: IFRS Source: Company data, RBS forecasts
Dec 10
Downgrades to our earnings forecasts

BLD.AX
S&P/ASX200
A$2.84bn (US$2.90bn)
A$17.31m (US$18.00m)
Sector: BBG AP Construction Part of: ASX/S&P 100 RIC: BLD.AX, BLD AU Priced A$3.81 at close 5 Dec 2011. Source: Bloomberg
We have lowered our FY12 adjusted profit forecast by 12% to A$178.3m. These downgrades are a result of: 1) the closure of the Galong lime kiln; 2) revisions to timing for the Wagners acquisition and the removal of the flyash operations following the ACCC restrictions; 3) changes following recent AGM commentary, 4) adjustments for RBS house currency forecast changes; and 5) minor downgrades to the Thailand construction materials business following recent flooding. Recent data suggests a traditional deep cycle trough is likely Our FY12 adjusted profit forecast is now below consensus estimates of ~A$185m. We note that our forecast for 133k starts in the year ended June 2012 is below the consensus range of 136k-140k. Published leading indicators continue to suggest that we are unlikely to see an improvement in housing starts for some time. While the November rate cut provided some encouragement, our channel checks and discussions with home builders indicate that further rate cuts are required before traffic levels increase. Value emerging but Hold maintained We see attractive longer-term value for BLD, as highlighted by our A$4.69 DCF valuation. However, near-term conditions remain challenging. We believe that the time to buy BLD is when the cycle of earnings downgrades has ceased and when earnings improvement has begun. While we believe that this may prove to be the last downgrade, this is far from certain at this stage as both our forecasts and consensus rely on material earnings improvement in FY12. With this in mind we maintain our Hold recommendation. Our price target has reduced to A$3.91 due to our forecast downgrades and updated peer multiples.
Analysts
Andrew Scott
Australia +61 2 8259 5847 andrew.g.scott@rbs.com
Niraj Shah, CFA

Australia +61 2 8259 5836 niraj.shah@rbs.com
Andrew Hodge
Australia +61 2 8259 6608 andrew.hodge@rbs.com
39
Our forecast changes

Having gained confidence in our forecasts for a downturn in domestic residential construction, we have put through fairly broad-based downgrades to our earnings forecasts for BLD. Specifically, we believe that it will be increasingly challenging for the building products business to reverse a multi-year trend of declining profitability. Beyond this, downgrades reflect a later-than-expected contribution from the Wagners business, the recent shutdown of the groups Galong lime kiln and impact from recent rains and flooding on the Thailand business. As a result of the forecast downgrades (discussed in more detail below), we have lowered our FY12 group profit forecasts by 12% to A$178m. This implies 3% growth vs the pcp. We realise this is below the Bloomberg consensus forecast for A$185m. In part, this reflects our belowconsensus forecast for Australian residential construction. For FY13, we expect an adjusted profit of A$242m, which is below the consensus estimates of A$248m. The expected earnings growth in FY13 is driven by our forecasts for a recovery in Australian residential construction and ongoing improvement in the US. Table 1 : Changes in forecasts
FY12F A$m Revenue Australian Construction Mats Cement Division Building Products USA Asian Plasterboard CRB/Other Total revenue EBIT Australian Construction Materials Cement Division Building Products USA Asian Plasterboard CRB/Other Other Total EBIT incl assoc. Net interest expense Tax expense Minorities NPAT Adj EPS Adj (cps) DPS (cps)
FY13F Chg 5.9% -10.3% -0.7% 5.8% 0.0% 0.0% 1.6% Old 2,662.4 840.2 1,100.4 523.6 629.2 289.8 6,045.6 New 2,959.1 733.3 1,092.9 531.5 629.2 289.8 6,235.8 Chg 11.1% -12.7% -0.7% 1.5% 0.0% 0.0% 3.1% Old 2,807.0 910.2 1,210.4 648.1 692.1 318.6 6,586.4
FY14F New 3,121.3 793.3 1,202.0 633.1 692.1 318.6 6,760.5 Chg 11.2% -12.8% -0.7% -2.3% 0.0% 0.0% 2.6%
Old 2,430.3 762.0 1,034.3 463.1 314.6 266.4 5,270.6
New 2,572.7 683.5 1,026.9 490.1 314.6 266.4 5,354.2
245.2 90.9 58.0 -76.0 39.5 7.5 -21.0 344.2 -106.0 -38.0 -3.0 203.2 28.2 16.0
234.4 82.1 52.9 -87.7 39.5 7.5 -21.0 307.7 -108.5 -24.4 -3.4 178.2 24.4 16.0
-4.4% -9.6% -8.8% 15.5% 0.0% 0.0% 0.0% -10.6% 2.4% -35.8% 14.7% -12.3% -13.5% 0.0%
300.7 103.1 64.7 -50.6 76.1 9.6 -21.0 482.7 -137.3 -71.2 -1.4 275.6 38.0 17.0
278.8 90.1 63.7 -68.5 76.1 9.6 -21.0 428.8 -140.6 -50.0 -3.5 241.8 32.5 17.0
-7.3% -12.6% -1.6% 35.5% 0.0% 0.0% 0.0% -11.2% 2.4% -29.8% 146.6% -12.3% -14.7% 0.0%
335.2 117.1 101.5 -10.0 86.5 13.7 -21.0 623.1 -138.9 -108.9 2.4 372.9 51.5 20.0
298.4 102.2 88.3 -9.8 86.5 13.7 -21.0 558.5 -139.0 -87.9 2.0 329.5 44.2 20.0
-11.0% -12.7% -13.0% -2.2% 0.0% 0.0% 0.0% -10.4% 0.0% -19.2% -18.6% -11.6% -14.0% 0.0%
Value emerging but Hold maintained

Notwithstanding downgrades to our earnings expectations, we see attractive longer-term value for BLD as highlighted by our A$4.69 DCF valuation. However, as discussed in detail below, nearterm conditions remain challenging as the business faces both cyclical and structural headwinds. We believe that the time to buy BLD is when the cycle of earnings downgrades has ceased and when upgrades have begun. While we believe that this may prove to be the last downgrade, this is far from certain at this stage as both our forecasts and consensus rely on material earnings improvement in FY12. With this in mind we maintain our Hold recommendation.
Boral | Investment View | 5 December 2011
40
Leading indicators & channel checks support cautious macro outlook

In recent months we have gained comfort around expectations of a deep cycle trough for the year ending June 2012. Published leading indicators suggest that the decline in starts seen through 2HFY12 is likely to persist. Building approvals, which tend to lead housing starts by three to six months have declined in five of the last six months. Finance approvals, which have declined in four of the last six months, also suggest we are unlikely to see a recovery in starts for some time. Chart 1 : Building approvals chg vs pcp
80%
Chart 2 : Finance approvals chg vs pcp

100% 80% 60%
60%
40%
40%
20%
20%
0%
0% -20% -40% -60%
-20%
-40%
-60% Oct-87 Oct-91 Oct-95 Oct-99 Oct-03 Oct-07 Oct-11
Sep-79 Sep-83 Sep-87 Sep-91 Sep-95 Sep-99 Sep-03 Sep-07 Sep-11
Source: ABS, RBS
Source: ABS, RBS
While we believe that the November rate cut is broadly encouraging for the outlook of residential construction, in isolation we believe it is unlikely to provide an inflection point for housing activity. Our recent survey of home builders revealed that the decision has had little impact on traffic levels thus far and convinced us that further rate cuts were needed to increase activity levels. Even then, the benefit of this is only likely to be evident in late-January or early-February. Chart 3 : We remain comfortable calling a traditional, deep-cycle trough
180,000 Starts (MAT) 133k traditional, deep cycle trough for YE Jun'12 160,000
140,000
120,000
100,000 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13
We therefore remain comfortable calling a traditional deep cycle trough of 132.5k starts for the year ending June 2012. Company-compiled consensus forecasts are for starts of 136-140k for the year to June. In our view, housing starts with a one quarter lag is a more relevant driver of underlying demand. On this basis, we expect 137k starts for FY12. We expect a similarly challenging near-term environment within the non-residential construction segment.
41
Table 2 : Our non-residential construction forecasts

Australia - June YE Construction Work Done ($bn) % chg
FY09 33.7 5.4%
FY10 32.5 -3.7%
FY11 30.5 -6.0%
FY12F 28.1 -8.0%
FY13F 29.5 5.0%
FY14F 32.1 9.0%
Building Products
We have downgraded our forecast earnings for the Building Products business by 9% for FY12. More so than the BLDs other businesses, this segment is exposed to the domestic residential and commercial construction markets. In his AGM address, MD Selway stated: In building products, volumes and plant utilisation have been affected by our significant exposure and continued softness in residential housing which commenced in the second half of 2011. Comparatively, the first half results this year are likely to be similar to the second half of last year. We agree that the macro environment was unsupportive in 2HFY11 and continued to deteriorate in FY12. This is evident in published data on the production of domestic plasterboard. For 1H FY12 to-date, production of plasterboard has declined 7.9% vs the pcp to 52,951 sq m. For the calendar year to date, volumes declined 3.5% vs the pcp. While this clearly indicates deteriorating conditions for plasterboard, we believe this also provides a useful indicator for BLDs suite of building products. Chart 4 : Plasterboard production trending lower an indicator for Building Products
'000 m2 (MAT)
156,000 151,000 146,000 141,000 136,000 131,000 126,000 121,000 116,000
Dec-98
Source: ABS
Dec-00
Dec-02
Dec-04
Dec-06
Dec-08
Dec-10
Beyond underlying demand conditions, our key concern has been the multi-year trend of declining profitability. Since FY07 the Building Products business has consistently delivered lower returns at any given level of housing starts. The chart below shows starts (with a one-quarter lag) and BLDs Building Products ROFE. Here the comparison between the 5.5% ROFE at 166k starts in FY11 and the 15.8% ROFE at 162k starts in FY05 is instructive.
42
Chart 5 : Our key concern - lower profitability at a given level of starts

20% 18% 16% 14% 12% 2002 10% 8% 6% 4% 2% 0% 120,000 130,000 140,000 150,000 160,000 170,000 180,000 2009 2012 where to next? 2001 2007 2010 2011 2008 2006
ROFE
RBS forecast 137.5k YEM 2012 2005
2004
2003
Housing Starts
In particular, profitability within the Clay & Concrete products segment is a key concern. MD Selway advised that the group has implemented plans to close brick operations in QLD and NSW and rationalise the groups east coast masonry footprint. While this is encouraging, we remain of the view a reversal of the trend and a rapid improvement in profitability is unlikely as construction activity slows in FY12. Beyond this, we believe it will take some time to restore profitability even as the market recovers in FY13 and FY14. We have reduced our forecast earnings for BLD in FY12 by 9%. Our forecasts, beyond that have declined to reflect a more gradual recovery in margins.
Construction Materials
The 4% decline in our FY12 forecast earnings for the Construction business reflects a later than anticipated contribution from the Wagners acquisition. We had previously expected BLD would get a share of the businesss earnings through FY12. However, with ACCC clearance not achieved until 8 November just prior to a seasonally quiet period in December and January as well as exclusion of the flyash joint venture from the transaction, we have reduced our FY12 forecast earnings. We have also lowered our forecast contribution from the property business, in line with management guidance that FY12 property earnings were likely to be broadly in line with the pcp. Against this, we expect the underlying environment to remain relatively supportive with engineering construction activity to partially offset a deteriorating residential and commercial construction market. In particular, we note MD Selways comments: In construction materials we expect to benefit from major project work which should deliver improved revenue and earnings in the full year with a bias to the second half. The benefit of the segments exposure profile is evident in published data on pre-mixed concrete production in Australia. For 1H12 to-date, production volumes for pre-mixed concrete totalled 8,384 cu m, a 1% increase relative to the pcp.
43
Chart 6 : Australian pre-mixed concrete production - MAT

27,000 26,000 25,000 24,000 23,000 22,000 21,000 20,000 19,000 18,000 17,000 Dec-98 Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 '000 m3 (MAT)
Cement
We have downgraded our FY12 earnings forecasts by 10%, largely reflecting the impact of the closure at BLDs kiln at Galong during the 1H. This followed BlueScopes closure of a furnace in October 2011. BLD advised that the annualised impact of the closure would be A$13m before mitigation with two months impacted in 1H12. Our downgrades also reflect relatively modest reductions for our forecast contribution from Thailand due to heavy rains and flooding. We note the following outlook commentary from management:: In cement, volumes have remained broadly flat in Australia while Asia has experienced a solid start despite flooding in Thailand. On balance we expect an improved first have result from cement when compared to the second half of FY11, however it will be necessary to factor in the closure of Galong in our full year outlook.
US
In part, the 15% downgrade to our forecasts for the US business reflect our currency forecast revisions with our FY12 AUD/USD forecasts declining from 1.06 to 1.01. We continue to expect the business to breakeven in FY14/FY15 as US housing moves past the 1m start mark. We note MD Selways comments during the 1Q trading update: We expect a broadly similar result in the first half of 2012 when compared to the second half of last year, followed by an improvement in the full year performance, underpinned by restructuring and closure of excess capacity. Chart 7 : Expected recovery - off a historically low base
2,500 2,300 2,100 1,900 1,700 1,500 1,300 1,100 900 700 500 Dec-60 Dec-66 Dec-72 Dec-78 Dec-84 Dec-90 Dec-96 Dec-02 Dec-08 Dec-14 Dec-20
44
Recommendation & valuation

Our A$3.91 price target and valuation Our A$3.91 12-month price target has declined from A$4.04 as a result of downgrades to our forecast earnings and updated peer multiple. Our price target is set in line with our average valuation, which is an equally-weighted average of our DCF, sum-of-the-parts and PE relative valuations. This is consistent with the approach we use across our coverage universe and we believe it accurately captures both short- and long-term valuations as well as valuations relative to the Australian market and listed materials peers. Our A$4.69 DCF valuation Our DCF valuation is based on explicit cash flows to 2020. The key components are as follows: A long-term growth rate of 2.5%; A geared beta of 1.25 (ungeared beta of 1.00); and A WACC of 10.1%. Our A$2.92 PE relative valuation Our PE relative valuation places BLDs FY12F earnings on a 10% discount to the S&P/ASX Industrials ex Financials, as shown in the table below. We believe the 10% discount is appropriate due to the inherent cyclicality of BLDs earnings. Table 3 : Our PE relative valuation
2012F RBS EPS () Industrials ex fin multiple Appropriate Discount (for inherent cyclicality of BLD's earnings) Discounted PE (x) Implied share price
Source: Bloomberg, RBS forecasts
24.4 13.3 10% 12.0 $2.92
Our A$4.12 sum-of-the-parts valuation Our sum-of-the-parts valuation is based on an average EV/EBITDA multiple for a selection of comparable companies for each division applied to each of BLDs businesses, as shown in the following table. We use RBS analysts' forecasts for those stocks under coverage. For all other stocks, we use Bloomberg consensus estimates. Table 4 : Our sum-of-the-parts valuation
FY12F EBITDA Const Mats Building Prods LBGA Cement USA CRB Corporate/other Total EV Add QEU at 10x sustainable EBIT Add associates at 10x PE Less liabilities & committed capex Total equity value Per share
Source: Bloomberg, RBS forecasts
Peer multiple 6.9 7.4 7.4 6.9 0.0 6.0 7.0
Implied value 2,270.1 686.1 396.4 868.7 0.0 65.9 -154.2 4,133.0 350.0 424.0 1,838.3 3,068.7 A$4.12
326.8 92.6 53.5 125.1 11.0 -21.9 587.0
45
Risks to our recommendation We see the following upside risks to our Hold recommendation and A$3.91 target price: Successful delivery of benefits from the recent strategy review and subsequent internal initiatives; A faster-than-anticipated rebound in US housing activity, which sees the US losses erased more quickly; Significant industry pricing improvement as a result of increased pricing discipline; and The completion of an accretive acquisition that is received favourably by the market. We see the following downside risks: A reversal of the current strong AUD/USD exchange rate that will see BLDs US losses increase and the value of the largely US debt boost gearing levels; Increased competitive activity as a result of declining market activity; and A more prolonged downturn than we currently forecast in either the US or Australian construction markets.
46
BLD financial summary

Year to 30 Jun (A$m) Income statement Divisional sales Total revenue EBITDA Associate income Depreciation EBITA Amortisation/impairment EBIT EBIT(incl associate profit) Net interest expense Pre-tax profit Income tax expense After-tax profit Minority interests NPAT Significant items NPAT post abnormals Divisional sales revenue Australian Construction Materials Cement Building Products USA CRB/Other Asian Plasterboard Discontinued Operations Total Divisional EBIT Australian Construction Materials Cement Building Products USA CRB Asian Plasterboard Discontinued Operations Other Total Cash flow statement EBITDA Change in working capital Net interest (pd)/rec Taxes paid Other oper cash items Cash flow from ops (1) Capex (2) Disposals/(acquisitions) Other investing cash flow Cash flow from invest (3) Incr/(decr) in equity Incr/(decr) in debt Ordinary dividend paid Preferred dividends (4) Other financing cash flow Cash flow from fin (5) Forex and disc ops (6) Inc/(decr) cash (1+3+5+6) Equity FCF (1+2+4) Balance sheet Cash & deposits Trade debtors Inventory Investments Other intangible assets Fixed assets Other assets Total assets Short-term borrowings Trade payables Long-term borrowings Provisions Other liabilities Total liabilities Share capital Other reserves Retained earnings Other equity Total equity Minority interest Total shareholders' equity Total liabilities & SE AIFRS 2010A 4950.6 4976.4 502.8 20.3 -252.6 250.2 0.0 250.2 270.5 -97.0 173.5 -27.8 145.7 -1.2 144.5 -235.0 -90.5 2010A 2266.2 706.3 1212.6 363.7 293.8 0.0 108.0 4950.6 2010A 201.0 87.9 100.7 -103.7 6.3 0.0 0.0 -21.7 270.5 2010A 502.8 109.3 -101.5 -11.7 -39.8 459.1 -179.9 44.7 -1.5 -136.7 0.7 -224.1 -42.4 0.0 0.0 -265.8 -0.1 56.5 279.2 2010A 157.0 783.7 548.5 294.1 277.6 2785.1 363.4 5209.4 8.9 640.9 1330.7 471.9 130.9 2583.3 1724.0 -38.9 938.4 0.0 2623.5 2.6 2626.1 5209.4 AIFRS 2011A 5056.1 5131.6 477.2 42.4 -245.0 232.2 0.0 232.2 274.6 -63.7 210.9 -39.7 171.2 2.3 173.5 -5.8 167.7 2011A 2419.9 732.4 1157.4 431.2 285.5 0.0 29.7 5056.1 2011A 203.9 95.9 84.5 -99.0 7.6 0.0 0.0 -18.3 274.6 2011A 477.2 13.9 -43.6 -21.5 -66.0 360.0 -345.0 -73.3 36.6 -381.7 479.8 9.7 -47.9 0.0 2.6 444.2 -9.0 413.5 15.0 2011A 561.2 784.1 596.1 240.2 255.9 2894.9 335.6 5668.0 163.4 702.8 903.2 486.2 256.0 2511.6 2261.3 -159.5 1007.0 0.0 3108.8 47.6 3156.4 5668.0 AIFRS 2012F 5354.2 5473.0 553.8 33.1 -279.2 274.5 0.0 274.5 307.7 -108.5 199.2 -24.4 174.8 3.4 178.2 395.0 573.2 2012F 2572.7 683.5 1026.9 490.1 266.4 314.6 0.0 5354.2 2012F 234.4 82.1 52.9 -87.7 7.5 39.5 0.0 -21.0 307.7 2012F 553.8 -34.4 -108.5 -24.4 37.9 424.4 -443.3 -842.0 0.0 -1285.3 0.0 970.6 -108.2 0.0 0.0 862.3 0.0 1.4 -18.9 2012F 561.2 818.5 575.7 38.2 449.9 3764.5 859.3 7067.3 163.4 682.3 1858.0 486.2 256.0 3445.9 2261.3 -159.5 1472.0 0.0 3573.8 47.6 3621.4 7067.3 AIFRS 2013F 6235.8 6354.6 672.3 37.5 -281.0 391.4 0.0 391.4 428.8 -140.6 288.2 -50.0 238.3 3.5 241.8 0.0 241.8 2013F 2959.1 733.3 1092.9 531.5 289.8 629.2 0.0 6235.8 2013F 278.8 90.1 63.7 -68.5 9.6 76.1 0.0 -21.0 428.8 2013F 672.3 -78.7 -140.6 -50.0 41.0 444.0 -440.1 0.0 0.0 -440.1 0.0 118.9 -122.9 0.0 0.0 -4.0 0.0 0.0 4.0 2013F 561.2 909.0 639.3 38.2 449.9 4123.6 527.5 7248.7 163.4 757.8 1845.1 486.2 256.0 3508.5 2261.3 -159.5 1590.9 0.0 3692.7 47.6 3740.3 7248.7 AIFRS 2014F 6760.5 6879.3 793.6 47.6 -282.8 510.8 0.0 510.8 558.5 -139.0 419.4 -87.9 331.5 -2.0 329.5 0.0 329.5 2014F 3121.3 793.3 1202.0 633.1 318.6 692.1 0.0 6760.5 2014F 298.4 102.2 88.3 -9.8 13.7 86.5 0.0 -21.0 558.5 2014F 793.6 -63.9 -139.0 -87.9 45.7 548.4 -321.9 -43.2 0.0 -365.0 0.0 -45.6 -137.8 0.0 0.0 -183.4 0.0 0.0 226.5 2014F 561.2 982.4 691.0 38.2 449.9 4205.9 565.2 7493.8 163.4 819.0 1842.1 481.2 256.0 3561.8 2261.3 -159.5 1782.6 0.0 3884.4 47.6 3932.0 7493.8 Stock Code Recommendation Price target (A$) Closing price (A$) Projected Return Shares on Issue BLD Market Cap Valuation Summary DCF (Beta 1.25, RF Rate 5.25%, LTG 2.5%, WACC 10.07% MRP 6%, kd 7.25%, ke 12.76%) Sum of the Parts PE Relative Average Valuation Multiples PE (pre-goodwill) (x) EV/EBIT (x) EV/EBITDA (x) At target price EV/EBITDA (x) PE (pre-goodwill) (x) Comparable company data (x) Adelaide Brighton Year to 31 Dec 2011A 15.9 12.2 6.4 2011A 7.2 16.3 2012F 15.6 10.9 5.7 2012F 7.9 16.1 2012F 8.3 10.8 12.1 1.3 4.0 6.3 12.6 0.8 2012F 744.7 78.3 24.4 16.0 66 4.3 4.26 2012F 5.9% 4.8% 16.0% 18.2% 15.0% -14.3% -37.4% 11.4% -1.6% n.m. n.m. 14.8% 18.2% 2.7% 2.7% 1.5% 1.5% 2013F 11.7 7.8 4.7 2013F 6.5 12.0 2013F 7.2 9.0 10.2 1.1 3.5 5.1 10.2 0.6 2013F 744.7 32.5 32.5 17.0 52 4.6 4.42 2013F 16.5% 15.9% 21.4% 42.5% 19.0% 9.7% 20.3% 21.9% 28.4% 92.8% n.m. 0.0% 42.5% 35.7% 35.7% 33.3% 33.3% BLD Hold 3.91 3.81 2.6% 744.7 2837.4 A$ per share $4.69 $4.12 $2.92 $3.91 2014F 8.6 6.0 4.0 2014F 5.5 8.8 2014F 6.2 7.7 8.7 0.9 2.9 4.0 7.6 0.5 2014F 744.7 44.2 44.2 20.0 45 5.4 4.68 2014F 8.4% 7.3% 18.0% 30.5% 7.0% 13.4% 38.7% 85.8% 43.1% 13.7% n.m. 0.0% 30.5% 36.3% 36.3% 36.3% 36.3%
CSR Ltd Year to 31 Mar
Per share data No. shares EPS (cps) EPS (normalised) (c) Dividend per share (c) Dividend payout ratio (%) Dividend yield (%) NTA/share Growth ratios Sales growth Operating cost growth EBITDA growth EBITA growth Divisional EBIT growth Australian Construction Materials Cement Building Products USA CRB Asian Plasterboard Discontinued Operations Other EBIT growth NPAT growth Pre-goodwill NPAT growth Pre-goodwill EPS growth Normalised EPS growth Key assumptions Australian Housing Starts Australian Housing Starts % ch Australian Non-Res Spend % ch Australian Eng & Infra spend % ch US housing starts US housing starts % ch US Non-Res spend % ch US Engineering Spend % ch AUD/USD Exchange Rate Balance sheet debt metrics Net debt (A$m) Gearing (ND/E) (%) Gearing (ND/ND+E) (%) Net interest/EBIT cover (x) ND/EBITDA Return metrics ROA (%) ROE (%) ROIC (%)
EV/EBITDA EV/EBIT PE PEG EV/EBITDA EV/EBIT PE PEG 2011A 718.7 23.2 24.0 14.5 60 3.9 4.04 2011A 2.1% 2.9% -5.1% -7.2% 1.4% 9.1% -16.1% 4.5% 20.6% n.m. n.m. 15.7% -7.2% 20.1% 20.1% -0.4% -0.4%
157,482 -4.4% -6.0% 4.0% 570 -3.8% -1.7% -0.6% 0.995 505.4 16.0 13.8 4.3 1.1
132,530 -15.8% 0.0% 1.0% 675 18.5% -0.2% -1.9% 1.013 1460.2 40.3 28.7 2.8 2.6
154,638 16.7% 8.9% 8.2% 844 25.0% 3.1% 0.2% 1.090 1447.3 38.7 27.9 3.1 2.2
174,741 13.0% 1.9% -8.3% 1,026 21.6% 5.1% 4.3% 1.065 1444.3 36.7 26.9 4.0 1.8
5.0 6.1 4.8
4.8 5.3 6.3
6.0 6.7 6.2
7.6 8.7 7.5
47
Equity | Australia | Capital Goods
5 December 2011
Change of recommendation
UGL Ltd
A A$200m option - without expiry
The acquisition of DTZ trading assets brings a European property footprint to UGL but we believe there is much work ahead of the company to make this acquisition a success and we see nothing substantial until FY14. Given recent share price appreciation, we move our recommendation to Hold.
Key forecasts
FY10A EBITDA (A$m) 282.2 144.5 151.1 91.22 -0.25 64.00 4.99 14.10 8.44 9.26 10.90 FY11A 303.1 158.5 164.4 98.80 8.32 70.00 5.46 13.00 7.68 14.20 12.20 FY12F 164.4 171.7 102.7 3.93 71.50 5.57 12.50 7.16 7.91 13.10 FY13F 193.2 199.1 118.7 15.60 82.50 6.43 10.80 5.88 8.71 & 14.00 FY14F 223.1 228.9 136.2 14.70 94.00 7.33 9.42 5.23 6.61 & 15.50
Hold (from Buy)

Target price
A$14.07 (from A$14.63)

Price
A$12.83
n/a
337.4 % 404.2 % 444.3 %
Price performance
Dec 08 18 16 14 12 10 8 6 Dec 09

(3M) 11.83 8.5 7.3 19.2
Dec 10
(12M) 14.59 -12.1 -4.1 6.0
12.67 1.3 -1.2 5.5
Use of %& indicates that the line item has changed by at least 5%. 1. Pre non-recurring items and post preference dividends Accounting standard: AIFRS Source: Company data, RBS forecasts
DTZ provides a footprint but as a turnaround

UGL.AX
S&P/ASX200
A$2.15bn (US$2.20bn)
A$9.04m (US$9.41m)
Sector: BBG AP Eng & Mach Part of: ASX/S&P 100 RIC: UGL.AX, UGL AU Priced A$12.83 at close 5 Dec 2011. Source: Bloomberg
Its early to be making a snap judgement as to the likely success of this acquisition or otherwise. In this very early stage of thinking, we believe there are some positives and negatives for UGL in acquiring DTZ. The positives are the fill-in of the European footprint, purchase of assets from a distressed seller and solid exposure to Asian markets. We believe the negatives are a function of purchasing a business in decline and the associated turnaround, the high transactional nature of this business, which increases the earnings volatility of the group, and fickle nature of owning a business where the senior staff are highly paid, but own the customer relationships and can often take those relationships if they leave. We have margin improvement factored slower than management expectations In the next couple of years, we believe this will be a cost story rather than a revenue one. We believe margin improvement will take longer than a couple of years and believe ultimately that transaction velocity is required to reach double-digit EBIT margin. At this stage, we believe it will take longer for management to achieve its aim of double-digit EBIT margin than its initial estimate of 24 months. EPS revisions: FY12 +0.3%, FY13 +1.2%, FY14 +3.2%. Recommendation reduction relates to share price premium rather than the acquisition It is not our view that DTZ is a bad business nor CRE a poor industry; however, the volatility attached to the earnings stream is significantly higher than that of the broader UGL business. UGL Equis, in five years, has already shown us this, with a US$10m EBIT contribution in peak years and US$5m losses in its worst year. On that basis, we believe the multiple applied to DTZ should be lower than that for the broader UGL business, which has been more reliable and steady through time. We have downgraded to a Hold recommendation more to do with recent share price appreciation than any issues with the transaction. We see limited scope for the company to beat current IBES consensus forecasts for FY12 and therefore little for catalysts to rerate from this point. Important disclosures can be found in the Disclosures Appendix.
Analysts
Andrew Hodge
+61 2 8259 6608 andrew.hodge@rbs.com
Tony Sherlock
+61 2 8259 5548 tony.sherlock@rbs.com
Andrew Scott
+61 2 8259 5847 andrew.g.scott@rbs.com
49
Forecast revisions
Changes to our forecast are highlighted in the table below. We revise our forecasts to include the impact of the DTZ acquisition. Table 1 : UGL forecast revision
FY12F Old Sales (A$m) EBITA (A$m) Net interest (A$m) NPAT - underlying (A$m) NPAT - reported (A$m) EPS (underlying) ps DPS ps
FY13F Chg 6.8% 1.7% 15.3% 0.3% 0.3% 0.3% 0.0% Old 4656 293.9 23.2 196.7 190.9 117.3 81.5 New 5166 306.7 31.9 199.1 193.2 118.7 82.5 Chg 11.0% 4.3% 37.8% 1.2% 1.2% 1.2% 1.2% Old 5040 324.5 19.6 221.8 216.0 132.0 91.0
FY14F New 5571 344.7 28.4 228.9 223.1 136.2 94.0 Chg 10.5% 6.2% 44.9% 3.2% 3.3% 3.2% 3.3%
New 4544 264.7 27.1 171.7 164.4 102.7 71.5
4253 260.4 23.5 171.2 163.9 102.4 71.5
Further capital required to get up and running The DTZ business deal does not include working capital at the time of the acquisition, with UGL required to invest between 30m and 40m over a couple of years. UGL will also invest around A$10m to extend the rollout of its GPS system to the 4,700 DTZ employees. Table 2 : Forecast total investment for DTZ
A$m Cash consideration for 100% of DTZ Consideration for cash in DTZ business additional capital investments required in DTZ Est. cost of extending UGL software rollout to DTZ Est acquisition costs Est. working capital requirement in FY12 Forecast DTZ investment in FY12 Estimated Working capital requirement FY13+ Forecast cumulative investment in DTZ
Source: UGL, RBS forecasts
119.0 20.0 10.0 5.0 22.7 176.7 22.7 199.5
Key takeaways
Turnaround tough work and longer to deliver We think UGL management will make progress in turning this business around. However, we remain of the view it will take longer than management has conveyed with a loose expectation of about two years. We believe they will get there but it will take longer. This view is based on three factors. We think CRE is somewhat similar to investment banking and broking. In general, there is a cost hurdle and profitability problems are generally fixed by greater revenues by continued cost cutting. Added to this, our experience shows cultures are very slow and difficult to turn around and a culture involving nearly 5,000 people spread over 143 offices would be particularly difficult to change, in our view. Although restructuring costs when they occur are likely to be taken below the line, we think they should be thought of as either part of the purchase price or above the line as they will be an integral part of delivering the early gains and more importantly they are already being factored in by management as part of the delivery process for higher margins. We think these gains are likely to happen over the next two years, but believe we will need to see transactional velocity return to global markets to see the business deliver double-digit EBIT margin. Large players pushing into the FM market We think the desire of large companies to recapture more of their customers margin by self performing or at least direct managing FM makes sense as transactional activity does not provide the earnings base it has previously. However, we believe this brings some pressure to UGL, either by competition lowering margins or a risk of lost customers as JLL and CBRE take back work UGL already performs on their behalf. We think this will add another competitive dimension to the global landscape over the next three years making the competitive environment tougher. UGL Ltd | Investment View | 5 December 2011
50
Global footprint but not across FM and transactional The acquisition of DTZ provides the European footprint UGL management has long discussed as an important part of its business plan. However, the acquisition is different to what we had expected based on previous discussions with management. We believed an FM-based acquisition was more likely although those have proven notoriously difficult to find. Although this does fill the footprint for global exposure, we believe it is worth noting just how different DTZ is in business type to Premas, KFPW and Unicco. As such, we believe it will be a longer process to leverage the benefit of the global model. We think the company will get there but it is neither a quick nor simple process. To further highlight that thinking, when UGL purchased what was at the time Unicco, it was a very strong north-eastern US business with modest exposures in other parts of the country. Four years later, the company is making progress with improvement in other regions and national (US) contracts but the business remains very skewed to the Massachusetts area rather than as a truly national business. We think it will take at least five years to really leverage DTZ into the US and FM into Europe.
DTZ overview
The current DTZ business is the result of a long-term growth-by-acquisition strategy of the DTZ, with the business expanding from the UK into Europe in 1993, into Asia in 1999 and throughout China, India, USA and Middle East during 2004-2009. While there is some overlap between the geographic footprint of UGL and DTZ (predominantly in Asia), we do not expect it to result in significant operational overlap given UGL mainly provides facilities management services (FM) and DTZ services are mainly in corporate real estate (CRE). Following the acquisition, FM will continue to be the dominant revenue stream, comprising 72% of FY11 pro forma revenue. DTZ has 4,700 full-time staff. It provides a competitor to the top-tier players, but remains smaller than market-leading corporates: Jones Lang Lasalle (JLL) with 40,000 employees, CB Richard Ellis with 31,000 employees, Savills with 20,000 employees and Cushman and Wakefield with 13,000 employees. DTZ grew through its recent history with a series of acquisitions. The following table lists the most recent of those transactions back to FY04.
UGL Ltd | Investment View | 5 December 2011
51
Table 3 : DTZ timeline of acquisitions and disposals

Purchase Transaction Date FY11 Nov-2010 Aug-2010 Aug-2010 FY10 Nov-2009 Oct-2009 Oct-2009 May-2009 FY08 Nov-2007 Jul-2007 Jul-2007 Jul-2007 FY07 Dec-2006 May-2006 Aug-2006 FY06 Nov-2005 Aug-2005 FY05 Apr-2005 Mar-2005 FY04 Nov-2003 Jul-2003 Jun-2003
Source: DTZ
Deferred Total GBP (m) 2.8 0.2 19.1 Comments 10% of Edmund Tie & Co following exercise of put option, 50% paid via shares 33% balance of DTZ Barnicke Quebec ltd 20% balance of DTZ Asset Management Europe, with maximum GBP19.1m (incl. deferred consideration) Remaining 20% stake in DTZ Sweden Sale of 100% of NZ operations, resulting loss of GBP1.2m Closure of Russian operations, resulting in loss of GBP3.2m Sale of 50% interest in DTZ Rockwood LLP for nominal sum 100% of JJ Barnicke (Canada) Further 50% of DTZ Sweden Donaldsons, UK property consultancy with 690 staff Harlow Property Consultants, Sydney, Specialising in industrial and logistics 70% balance of DTZ Pacific Holdings (China, HK, Taiwan), incl 1,900 staff 50% of Rockwood Realty Associates, USA (total price incl. deferred consideration GBP29.5m) Additional 26% of DTZ New Zealand Other (incl. 100% of equity in Portuguese business, 100% equity in N.Asia business) 51% of Edmund Tie and Company Holding (ETCH), Singapore, includes put option for balance 100% of Grosvenor Hickey Tindale, Australian specialist agency practice 30% of DTZ Sweden Hodnett Martin Smith, deferred consideration payable up to April 2009 49% balance of DTZ Iberica Balance of DTZ Asset Management (France) Balance of DTZ Jean Thouard from local management
price consideration GBP (m) 2.8 0.2 5.5 GBP (m) 0.0 0.0 13.6
0.7
0.0
0.7 -1.2 -3.2 0.0
11.1 3.3 20.1 0.4 23.3 24.3 0.4 1.1 2.5 1.9 1.2 4.3 0.6 5.3 0.1
0.8 0.0 7.3 0.3 0.0 5.2 0.0 0.0 0.0 0.8 0.3 4.3 0.0 1.6 0.0
11.9 3.3 27.3 0.7 23.3 29.5 0.4 1.1 2.5 2.7 1.5 8.5 0.6 6.9 0.1
52
Table 4 : DTZ financials

FY03 Apr-03 GBPm Revenue UK & Ireland CEMEA Asia Pacific Americas Total EBITDA (pre-exceptional items) EBITDA margin (pre-exceptional items) Operational result (pre-exceptional items) UK & Ireland CEMEA Asia Pacific Americas Corporate Total Finance income Finance expense Net interest expense Associate income Profit before tax & exceptional items Exceptional items Profit before tax Tax NPAT
Source: DTZ
FY04 Apr-04 GBPm 123.1 43.2 0.0 0.0 166.3 17.0 10.2%
FY05 Apr-05 GBPm 144.9 48.8 2.8 0.0 196.4 24.0 12.2%
FY06 Apr-06 GBPm 162.6 58.8 10.7 0.0 232.1 32.0 13.8%
FY07 Apr-07 GBPm 176.0 87.4 39.4 7.5 310.3 41.8 13.5%
FY08 Apr-08 GBPm 212.1 124.5 93.5 16.2 446.3 30.2 6.8%
FY09 Apr-09 GBPm 162.7 103.2 79.4 18.8 364.1 -21.8 -6.0%
FY10 Apr-10 GBPm 145.7 91.5 98.5 20.3 356.0 16.1 4.5%
FY11 Apr-11 GBPm 128.3 87.3 106.3 19.4 341.3 11.4 3.3%
119.0 34.7 0.0 0.0 153.7 14.3 9.3%
15.7 -7.1 0.0 0.0 0.0 8.6 0.3 -0.5 -0.2 0.7 9.1 -0.7 8.4 -4.8 3.6
10.9 -2.0 0.0 0.0 0.0 8.9 0.3 -0.5 -0.2 2.3 11.0 0.0 11.0 -5.3 5.7
22.0 0.2 -2.4 0.0 -2.3 17.3 0.4 -0.7 -0.3 3.6 20.6 0.0 20.6 -7.8 12.8
24.1 2.6 0.0 0.0 -2.0 24.7 1.0 -0.7 0.3 4.7 29.7 0.0 29.7 -9.5 20.2
30.1 7.1 1.4 -2.2 -4.1 32.2 1.4 -2.1 -0.8 6.5 38.0 3.8 41.8 -13.1 28.7
16.0 7.0 3.5 -4.0 -6.1 16.4 2.7 -5.1 -2.5 6.7 20.6 -15.1 5.6 -5.8 -0.3
9.9 -22.5 -7.2 -6.6 -6.7 -33.0 2.7 -7.7 -5.0 2.8 -35.1 -44.6 -79.7 -7.2 -86.9
9.5 -6.1 8.7 0.5 -6.3 6.3 0.6 -6.2 -5.5 2.2 3.0 -26.5 -23.5 -0.5 -24.0
3.0 -1.2 8.7 -1.9 -7.9 0.7 0.5 -5.4 -4.9 3.6 -0.6 -2.8 -3.4 -6.5 -9.9
Table 5 : DTZ - Headcount

Apr-04 Asia Pacific Americas EMEA Group headcount
Source: DTZ
Apr-05 na na na 9000
Apr-08 6500 600 5500 12600
Apr-09 2300 300 3000 5600
Apr-10 1900 250 2450 4600
Apr-11 2150 200 2350 4700
na na na 8000
53
Figure 1 : DTZ business capabilities
Source: DTZ
Figure 2 : DTZ geographic footprint
Source: DTZ 2011 Annual Report
54
Chart 1 : DTZ revenue by geography year to April 2011
Chart 2 : DTZ revenue by service year to April 2011
Americas 6% Asia Pacific 31% UK & Ireland 37%
Consulting & Investment and Asset Research Management 5% Investment 5% Agency 11%
Occupation & development markets 35%
Valuation 18% CEMEA 26% Professional services 26%
Source: DTZ FY11 Annual Report
Source: DTZ FY11 Annual Report
Chart 3 : DTZ staff costs ratio (excl. exceptional items)
Chart 4 : DTZ operating costs ratio (excl. exceptional items)

40%
76% 74.0% 74% 72% 70.2% 70% 68% 66% 64% 62% 62.9% 67.3% 67.7%
35.1% 35% 30% 26.7% 25% 20% 15% 10% 29.1% 30.5% 29.6%
60% 58% 56% FY07

Source: DTZ
5% 0%
FY08
FY09
FY10
FY11
Source: DTZ
FY07
FY08
FY09
FY10
FY11
55
UGL post the acquisition

The charts below show the splits on various measures for UGL post the inclusion of DTZ into its overall business. Chart 5 :UGL FY11 pro-forma revenue by operating division post DTZ acquisition Chart 6 : UGL FY11 pro-forma revenue post DTZ acquisition by geography
Resources 18%
Property Services 37%
Asia 9%
EMEA 7%
Rail 24% Infrastructure 21%
Americas 19%
Australia 65%
Source: UGL
Source: UGL
Chart 7 : UGL Property Services FY11 pro-forma revenue inclusive of DTZ
Chart 8 : UGL Property Services FY11 pro-forma revenue inclusive of DTZ by geography
Corporate Real Estate 28%
Asia Pacific 30%
Facilities Management 72%
Americas 51% EMEA 19%
Source: UGL, DTZ 2011 Annual Report
Source: UGL, DTZ 2011 Annual Report
Valuation
We value UGL using a blend of DCF (risk-free rate 5.25%, market risk premium 6%, beta 1.25 long-term growth rate 3%, WACC 10.67%) and SOTP based on FY12F (60%) and FY13F (40%) EV/EBITA measures (against our estimates for the relevant divisions of BKN, MND, TSE, SPT and LEI using higher or lower multiples relative to UGLs competitive position) and PE (against market measures). For our PE measure, our target multiple is derived from a blend of the FY12 (60%) and FY13 (40%) S&P/ASX 200 PE, based on IBES consensus. Previously, we used a 5% premium to that reference multiple. But we have opted to reduce that to zero given the higher volatility impact we see of DTZ on the overall business. On the blend of these measures, our valuation is A$12.82. In setting our target price we roll forward our EPS forecasts by the growth rate one year ahead of our valuation multiples and apply the one-year forward EPS growth rate (40% FY12 and 60% FY13) of 9.8% to todays valuation. On that basis, and with the change of our PE view, we reduce our target price from A$14.63 to A$14.07. UGL Ltd | Investment View | 5 December 2011
56
Table 6 : UGL blended valuation

Weight DCF valuation EV/EBITA valuation (8.5x FY12F and 7.5x FY13F) PE valuation (11.2x FY12F and 10.1x FY12F) Blended equity valuation Target price Premium to valuation Current share price Potential upside to target price
Valuation (A$ps) Blended valuation (A$ps) $14.66 $12.13 $11.70 $4.84 $4.00 $3.98 $12.82 $14.07 9.8% $12.83 9.7%
33% 33% 34% 100%
Key downside risks to our target price and recommendation are: 1) slower-than-forecast growth in resources-related activity; 2) the deferral or cancellation of Australian federal and/or state government investment commitments; 3) slower-than-forecast US GDP growth, affecting earnings of UNICCO, Premas and Equis; 4) competitive pressures affecting margins; 5) lower than expected improvement in the DTZ business and 6) unexpected loss on fixed-price contracts. Upside risks are: 1) that margin on DTZ business expands faster than expected, 2) the resources industry division wins more contracts than forecast and 3) that the company makes further valueaccretive acquisitions. Chart 9 : UGL consensus 12month forward PE
25 X
20
15
10
0 Nov-01 Nov-02 Nov-03 Nov-04 Nov-05 Nov-06 Average Nov-07 Nov-08 Nov-09 -1 std dev Nov-10 Nov-11
UGL 12M fwd PE

Source: Datastream
+1 std dev
Chart 10 : UGL consensus 12month forward PE relative to S&P/ASX200

160%
140%
120%
100%
80%
60%
40% Nov-01 Nov-02 Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Average Nov-08 +1 std dev Nov-09 Nov-10 -1 std dev Nov-11
UGL 12m Fwd PE rel to S&P/ASX200
Source: Datastream
57
Chart 11 : UGL consensus 12month forward ROE

24 22 20 18 16 14 12 10 Nov-01 Nov-02 Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 +1 std dev Nov-09 Nov-10 Nov-11 %
UGL 12m fwd ROE

Source: Datastream
Ave 12m fwd ROE
-1 std dev
58
10
UGL financial summary

Year to 30 Jun (A$m) Income statement Divisional sales Total revenue EBITDA Associate income Depreciation & Amort EBITA Amort other intangibles EBIT EBIT(incl associate profit) Net interest expense Pre-tax profit Income tax expense After-tax profit Minority interests Adj NPAT (post-amort) Adj NPAT (pre-amort) Abnormal items Reported NPAT Divisional sales revenue Rail Services (property) Infrastructure Resources Divisional EBIT Rail Services (property) Infrastructure Resources Other/corporate Cash flow statement EBITDA Change in working capital Net interest (pd)/rec Taxes paid Other oper cash items Cash flow from ops (1) Capex (2) Disposals/(acquisitions) Other investing cash flow Cash flow from invest (3) Incr/(decr) in equity Incr/(decr) in debt Ordinary dividend paid Preferred dividends (4) Other financing cash flow Cash flow from fin (5) Forex and disc ops (6) Inc/(decr) cash (1+3+5+6) Equity FCF (1+2+4) Balance sheet Cash & deposits Trade debtors Inventory Investments Goodwill Other intangible assets Fixed assets Other assets Total assets Short-term borrowings Trade payables Long-term borrowings Provisions Other liabilities Total liabilities Share capital Other reserves Retained earnings Other equity Total equity Minority interest Total shareholders' equity Total liabilities & SE
AIFRS 2010A 4186.9 4190.4 282.2 0.0 -48.2 234.0 -11.0 223.0 223.0 -26.6 196.3 -52.3 139.6 0.5 144.5 151.1 0.0 144.5 2010A 1136.7 1208.7 969.3 872.3 2010A 53.8 68.7 79.7 56.7 -35.9 2010A 282.2 77.8 -19.4 -56.0 -55.2 229.4 -36.3 -11.3 -13.3 -61.0 -0.1 -16.7 -105.9 0.0 -1.2 -124.0 0.2 44.6 193.1 2010A 297.8 442.9 342.5 12.7 940.4 234.5 161.4 72.8 2505.1 2.2 524.1 529.2 61.7 228.9 1346.0 904.9 0.0 254.6 -1.1 1158.4 0.7 1159.1 2505.1
AIFRS 2011A 4285.1 4285.1 303.1 0.0 -50.0 253.1 -9.8 243.3 243.3 -27.5 215.8 -57.2 154.7 -0.2 158.5 164.4 0.00 158.5 2011A 1151.2 1444.5 906.9 782.5 2011A 81.5 73.5 80.1 42.3 -34.1 2011A 303.1 -94.9 -21.5 -45.8 9.7 150.6 -46.9 -17.1 -5.2 -69.2 -7.5 -6.7 -113.0 0.0 -1.1 -128.3 -13.0 -59.9 103.7 2011A 236.7 479.7 386.0 30.0 846.0 193.6 157.5 79.1 2408.5 2.9 509.4 413.8 61.8 249.2 1237.1 905.9 0.0 301.9 -41.8 1165.9 5.5 1171.4 2408.5
AIFRS 2012F 4543.8 4546.8 337.4 0.0 -72.7 264.7 -10.0 254.7 254.7 -27.1 227.7 -63.1 161.9 -0.2 164.4 171.7 0.00 164.4 2012F 1145.9 1627.3 942.7 828.0 2012F 87.1 74.6 72.6 58.4 -38.0 2012F 337.4 19.1 -27.1 -58.1 0.0 271.4 -223.0 0.0 0.0 -223.0 0.0 114.0 -117.4 0.0 0.0 -3.4 0.0 45.0 48.4 2012F 281.7 509.8 381.7 30.0 846.0 193.6 305.1 79.1 2627.0 2.9 554.3 545.9 53.3 259.0 1415.4 904.9 0.0 347.4 -41.8 1210.5 1.1 1211.6 2627.0
AIFRS 2013F 5166.5 5169.5 404.2 0.0 -97.5 306.7 -8.0 298.7 298.7 -31.9 266.8 -73.4 191.2 -0.2 193.2 199.1 0.00 193.2 2013F 1269.5 1862.0 1074.1 960.9 2013F 96.4 86.2 83.8 72.6 -40.4 2013F 404.2 -60.7 -31.9 -64.6 0.0 247.0 -104.1 0.0 0.0 -104.1 0.0 -30.0 -127.5 0.0 0.0 -157.5 0.0 -14.5 142.9 2013F 267.1 578.6 423.7 30.0 846.0 193.6 311.7 73.4 2724.1 2.9 604.5 494.1 61.0 294.5 1456.9 904.9 0.0 403.0 -41.8 1266.1 1.1 1267.2 2724.1
AIFRS 2014F 5570.8 5573.8 444.3 0.0 -99.6 344.7 -8.0 336.7 336.7 -28.4 308.3 -85.1 221.1 -0.2 223.1 228.9 0.00 223.1 2014F 1344.0 2042.1 1148.0 1036.7 2014F 103.0 104.2 90.8 81.2 -42.5 2014F 444.3 -14.4 -28.4 -75.1 0.0 326.4 -106.4 0.0 0.0 -106.4 0.0 -40.0 -146.5 0.0 0.0 -186.5 0.0 33.5 220.0 2014F 300.6 623.9 456.8 0.0 846.0 193.6 318.4 103.4 2842.8 2.9 668.5 474.6 46.2 317.5 1509.6 904.9 0.0 468.9 -41.8 1332.0 1.1 1333.1 2842.8
Closing price (A$) Valuation metrics Preferred methodology DCF valuation inputs Rf Rm-Rf Beta CAPM (Rf+Beta(Rm-Rf)) E/EV*Ke+D/EV*Kd(1-t) Equity (E/EV) Debt (D/EV) Interest rate Tax rate (t) WACC
12.83 DCF/SOTP/PER 5.25% 6.00% 1.25 12.7% 70.0% 30.0% 8.25% 30.0% 10.7%
Price target (A$) Val'n (A$) $
14.07 12.82 5.25% 3.0% 8.25% 12.5% 2373.0 1.1 267.1 347.4 2452.1 167.2 14.66 2014F 2336.9 0.4 5.3 6.8 9.8 1.9 2014F 5.7 10.7 2014F 2.5 4.0 5.1 1.5 3.6 6.5 9.8 3.9 2014F 168.2 132.7 136.2 94.0 68.6 7.3 2014F 7.8% 7.6% 9.9% 12.4% 6.8% 20.9% 8.3% 11.8% 5.3% 12.4% 15.4% 15.0% 14.7% 14.7% 2014F 50.0 8.0 6.0 4.0 25.3 176.8 13.3 11.7 11.9 15.5 2014F 1.4 9.3 8.1
10-year rate Margin Kd Ke NPV cash flow (A$m) Minority interest (A$m) Net debt (A$m) Investments (A$m) Equity market value (A$m) Diluted no. of shares (m) DCF valuation (A$) 2012F 2427.2 0.5 7.2 9.2 13.3 2.5 2012F 7.8 14.6 2012F 3.4 5.6 7.2 2.1 3.9 7.5 11.8 4.7 2012F 167.4 98.3 102.7 71.5 69.3 5.5 2012F 6.0% 5.6% 11.3% 4.6% 6.9% 1.5% -9.4% 37.9% 11.4% 4.6% 3.7% 4.5% 3.9% 3.9% 2012F 45.1 7.4 5.6 3.6 21.0 267.1 22.0 18.1 9.4 13.1 2012F 1.4 9.2 7.9 2013F 2389.9 0.5 5.9 7.8 11.3 2.2 2013F 6.4 12.3 2013F 3.0 5.0 6.2 1.8 3.9 7.2 10.7 4.3 2013F 167.8 115.3 118.7 82.5 69.1 6.4 2013F 13.7% 13.2% 19.8% 15.8% 10.7% 15.5% 15.4% 24.5% 6.3% 15.8% 17.5% 15.9% 15.6% 15.6% 2013F 48.3 7.8 5.8 3.7 23.6 229.8 18.1 15.4 9.4 14.0 2013F 1.4 9.5 8.2
Multiples Enterprise value (A$m) EV/Sales (x) EV/EBITDA (x) EV/EBIT (x) PE (pre-goodwill) (x) PEG (pre-goodwill) (x) At target price EV/EBITDA (x) PE (pre-goodwill) (x)
2011A 2340.0 0.5 7.7 9.2 13.9 2.6 2011A 8.4 15.1
Comparable company data (x) Downer EDI EV/EBITDA Year to 30 Jun EV/EBIT PE PEG Leighton Holdings EV/EBITDA Year to 30 Jun EV/EBIT PE PEG Per share data No. shares EPS (cps) EPS (normalised) (c) Dividend per share (c) Dividend payout ratio (%) Dividend yield (%) Growth ratios Sales growth Operating cost growth EBITDA growth EBITA growth Divisional EBIT growth Rail Services (property) Infrastructure Resources Other/corporate EBIT growth NPAT growth Pre-goodwill NPAT growth Pre-goodwill EPS growth Normalised EPS growth Operating performance Asset turnover (%) EBITDA margin (%) EBIT margin (%) Net profit margin (%) Return on net assets (%) Net debt (A$m) Net debt/equity (%) Net debt/net debt + equity (%) Net interest/EBIT cover (x) ROIC (%) Internal liquidity Current ratio (x) Receivables turnover (x) Payables turnover (x) 2011A 166.4 95.3 98.8 70.0 70.6 5.4 2011A 2.3% 2.0% 7.4% 8.2% 51.4% 7.0% 0.5% -25.3% -5.0% 8.2% 9.7% 23.9% 8.3% 8.3% 2011A 43.6 7.1 5.7 3.7 20.8 180.0 15.4 13.3 8.9 12.2 2011A 1.5 9.3 7.7
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11
Equity | Australia
5 December 2011
Australia Small/Mid Caps

Weekly Informer #43, 2011
The Small Ords (+6.7%) underperformed the All Ords (+7.1%) by 47bp for the week, with the Small Resources up 8.8%. The Small Ords is at a premium to the S&P/ASX 100 at a PE relative of 110.8%, above the 99.7% eight-year average.
Chart 1 : Index performance - rolling 12 months
115
105
95
85
75
65 Dec 10 Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11
All Ords
Small Ords
Small Industrials
Small Resources
Source: IRESS
Research summary over the week Key research pieces this week include BKN (guidance reiterated Buy), GUD (downgrade to Hold), NFK (BHP contract win Buy), MND (update Buy), PRY (AGM update Hold), Media (2011 TV ratings wrap/lead indicator review), UGL (contract wins Buy), TAH (update Hold), EPW (update Buy), MTS (1H12 result Hold), VBA (Singapore Airlines alliance Buy), Construction materials (building approvals), and BLY (reiterates guidance Buy). Sector performance The Small Ords (+6.7%) underperformed the All Ords (+7.1%) by 47bp for the week. Small Industrials (+5.2%) underperformed Small Resources (+8.8%) by 355bp. Ytd, Small Industrials (-11.5%) has outperformed Small Resources (-23.3%) by 1,181bp. Price-to-earnings performance Analysts
Julian Guido
+61 2 8259 5838 julian.guido@rbs.com
In terms of PE relative, the Small Ords is at a premium to the S&P/ASX 100 at 110.8% (based on one-year forward earnings). The eight-year average is 99.7%. Stocks best and worst performers The best-performing Small Industrials over the week were Centro Retail Group (+18.5%), Adelaide Brighton (+14.1%) and Energy World Corporation (+13.3%), with the worst performing being Chorus Ltd (-7.5%), Unilife Corporation (-7.3%) and Alesco Corporation (5.1%). The best-performing Small Resources over the week were Ivanhoe Australia (+40.0%), Aquila Resources (+25.2%) and Cudeco Ltd (+22.1%), with the worst being Carbon Energy (-13.0%), Nexus Energy Ltd (-9.5%) and Bandanna Energy (-9.5%). The top three weekly contributors in the Small Ords index were Flinders Mines (+4.54bp), Adelaide Brighton (+3.14bp) and Aristocrat Leisure (+2.92bp), with the worst three being Sundance Resources (-2.31bp), Navitas (-1.79bp) and Centro Retail Group (-0.91bp). Important disclosures can be found in the Disclosures Appendix.
Matthew Nicholas
+61 2 8259 6168 matthew.nicholas@rbs.com
Brewin Kwong
+61 2 8259 6891 brewin.kwong@rbs.com
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Weekly Informer #43, 2011

Table 1 : Key stock performance in the last week best and worst performers
Rank Best 1 2 3 1 2 3 Small Industrials CER ABC EWC CNU UNS ALS Small Resources +40.0% IVA +25.2% AQA +22.1% CDU -13.0% CNX -9.5% BND -9.5% NXS Small Ords Small Ords attribution (bp) +4.54 +3.14 +2.92 -2.31 -1.79 -0.91
+18.5% IVA +14.1% AQA +13.3% CDU -7.5% CNX -7.3% BND -5.1% NXS
+40.0% FMS +25.2% ABC +22.1% ALL -13.0% SDL -9.5% NVT -9.5% CER
Worst
* Companies mentioned: Flinders Mines (FMS), Adelaide Brighton (ABC), Aristocrat Leisure (ALL), Sundance Resources (SDL), Navitas (NVT), Centro Retail Group (CER), Ivanhoe Australia (IVA), Aquila Resources (AQA), Cudeco Limited (CDU), Carbon Energy (CNS), Bandanna Energy (BND), Nexus Energy Ltd (NXS), Energy World Corporation (EWC), Chorus Ltd (CNU), Unilife Corporation (UNS), and Alesco Corporation (ALS). Source: IRESS
We provide a summary of RBS research and research snippets from the past week.
Summary of research reports and snippets

Monday, 28 November 2011 Monadelphous Group (MND): 'Leveraged up for resources build' Buy, TP A$22.97. Analysts - Andrew Hodge/Matthew Nicholas In our view, MND offers the best exposure to the upcoming Australian capex cycle, which we expect to continue to strengthen over the coming three to five years, particularly in MND's endcommodity exposures of LNG, coal and iron ore. Further, MND's established operating footprint in Western Australia and Queensland means the business is geographically aligned to the areas where the bulk of the mining and energy development will occur. We forecast FY12 revenue growth of 17.9%, which remains ahead of the current IBES consensus forecast of 15.4%. FY12 contract awards of A$870m and guidance for further contract announcements in the coming months, coupled with AGM revenue guidance, give us increased confidence in MND achieving our forecasts. MND's alignment to key growth commodities, risk management discipline, strong cash conversion and net cash balance position MND the best among E&C firms to benefit from the resources-driven capex cycle, in our view. We see further upside potential, particularly in the LNG sector from the forthcoming awards of pipeline work packages. We maintain Buy. Primary Health Care (PRY): 'No real surprises' Hold, TP A$3.20. Analyst - Dr Derek Jellinek PRY's AGM contained few surprises, with FY12 NPAT guided to A$120m-A$125m (ex A$8.5m non-cash charge), in line with our estimate (A$121.6m), but slightly below market expectations. We view PRY's market position as relatively mature, with little potential for large share gains given strong competitors such as SHL. Combined with soft profitability metrics (ROE down 870bp over the past 4 years and ROICWACC spread at -1.7%), we see little upside risk in the name. Tuesday, 29 November 2011 Norfolk Group (NFK): 'Large BHP contract win ' Buy, TP A$1.49. Analyst - Julian Guido Yesterday announced a $82m contract for the design and installation of a new and modified rail signalling system for BHPs Iron Ores Port Headland Inner Harbour Project The BHP win extends the strong relationship with NFK working on the the previous RGP3, 4, & 5. As a reminder, NFK started RGP5 with $80m work of work but finished with >$180m. Contract win provides significant lift in confidence for existing forecasts. FY12 PE of 7.4x makes NFK look very cheap versus the market and peers. Maintain Buy GUD Holdings (GUD): 'The market is the market' Hold (from Buy), TP A$8.10. Analyst - Matthew Nicholas Following recent cautious commentary from the major Australian retailers, we expect an increasingly challenging half for the Sunbeam business. Furthermore, a relatively cool spring along the east coast has dampened sales of fire-fighter pumps, a key product line for Water's 1H performance. Australia Small/Mid Caps | Sector Dynamics | 5 December 2011
62
Tooday's downgrades are relatively modest (4-6%); however, they follow a 7% downward adjustment post the AGM (and an 11% downgrade at the July result) - all reflective of the change in the demand landscape in the last six months. Our target price falls to A$8.10 (from A$9.00). A subdued outlook for retail and lack of valuation support (11.0x FY12 PE) force us to downgrade our recommendation to Hold. We would look to become more positive pending any stabilisation in the macro and increased visibility in earnings. Media: '2011 TV ratings wrap' Analyst - Fraser McLeish 2011 was the first year of six commercial multi-channels and the shift of audience away from main channels continued, with digital channels capturing a combined 26% viewer share. Total commercial metro FTA TV viewing grew by 4.2% in 2011 (Seven: +11%; Nine: -2%; Ten: +3.8%) as declines in the main channel (Seven -4%, Nine -15%, Ten -18%) were offset by growth in digital channels. We understand that multi-channel advertising rates are still 40-50% below the main channels, implying they generate around 15% of total TV ad spend. The majority of spend, therefore, still remains on the main channels and we believe that main channel ratings provide the best guide to overall revenue share. Seven dominated the 2011 TV ratings, winning every week and coming top in all the key demographics. Seven's 2011 commercial audience share of 39.5% (all people, including multichannels) was up 2.4% from 37.1% in 2010. Nine's share of 32.9% was down 2.4% on 2010 (35.3%). Ten was flat at 27.6%, helped by the launch of ELEVEN, although its main station share fell 2.2% as it lost audience to both its own and competitor's digital channels. We remain cautious on the TV sector due to audience fragmentation and our expectation of ongoing high cost growth as competition for programming continues to rise. Ten (Sell, A$0.81 TP), SWM (Hold, A$3.47 TP) Wednesday, 30 November 2011 UGL Ltd (UGL): 'Bulking up in the bulks' Buy, TP A$14.63. Analyst - Andrew Hodge UGL has secured new contract wins and extensions with a value of A$200m across the oil and gas, coal and iron ore industries. These contract awards in the end-market commodities of iron ore, oil and gas and coal is consistent with the our view of significant capex increases in the bulk commodities over the forthcoming three to five years. With many of the projects of the blue chip miners and oil companies still in early phases of development, we expect further sector-wide escalation in the rate of contract awards, particularly in relation to the LNG sector. We continue to believe UGL is a well run business; however, our top picks are DOW, LLC and MND which we believe offer a more compelling relative valuation on a 12-month view. Tabcorp Holdings (TAH): 'Split picture ring a bell?' Hold, TP A$2.90. Analyst - Michael Nolan We assume negotiations are underway regarding Sydney and Victorian thoroughbred racing broadcast rights as the current agreement expires in a year. The previous renegotiation took four years to settle at a cost to Tabcorp of A$90m and a benefit to the race clubs of A$70m over the term of the new agreement. We understand that multi-channel advertising rates are still 40-50% below the main channels, implying that they generate around 15% of total TV ad spend. The majority of spend, therefore, still remains on the main channels and we believe that main channel ratings provide the best guide to overall revenue share. We value TAH at A$2.90/share. The major risk is the rate of growth in revenue/controllable expenses and EBITDA from new businesses being materially below/above our estimates. We also see a potential merger of equals with Tatts Group (source: Business Spectator, 26 November 2010) as a risk. Hold maintained.
Australia Small/Mid Caps | Sector Dynamics | 5 December 2011
63
ERM Power (EPW): 'The saints keep marching' Buy, TP A$2.00. Analyst - Jason Mabee ERM Power is on track to deliver over 50% growth in electricity sales revenue this year as it successfully deploys its large customer business model across Australia. We believe some investors carried reservations on whether or not ERM could be as successful outside of its Queensland home, but the recent large contract signed with Woolworths in Victoria (about A$140m of revenue over three years) is hard evidence that the retail strategy is bearing fruit At the IPO, we actually ascribed a negative value to this business based on a view that money would be lost while chasing a dream. To be fair to management, they have proven this view wrong and could be sitting on some very lucrative tenements. The ERM Power share price has struggled this year, after an initial strong bounce post its December 2010 listing. While the retail and gas businesses have performed well, the delay in reaching an FID on a major power station has been disappointing. In our view, there are still a range of obstacles in getting the various generation projects up and running, but management has a strong track record on this front and we expect them to get one project financially closed during FY13 (most likely Three Springs). This, along with the strong performance of the retail business, should eventually drive the share price higher. Thursday, 1 December 2011 Bradken (BKN): 'Reiterates guidance' Buy, TP A$9.85. Analyst - Matthew Nicholas BKN have successfully completed a US$200m Private Placement, with maturities of 7,10 and 12 years. This follows a total group debt refinancing announced in April, however gives BKN improved terms on the USD portion of its group debt (and longer tenors relative to the original 3 and 5 year terms). More importantly, the company has reiterated FY12 guidance (EBITDA growth of 25-30%, NPAT growth of 35-40%) first provided to the market in early July (and reiterated 4 times since), underlying the strong visibility across the business despite the ESCO transition (which appears to be tracking according to plan). Commentaries that energy markets are subdued are consistent with recent remarks from EHL, and suggest the rest of BKN's business is experiencing a solid 1H. We continue to view BKN as our top pick in the small cap mining service space, given: 1) the overweight exposure to consumables, which sees the business highly leveraged to predictable production volumes, and 2) with a developing offshore franchise (particularly in GET) only in its infancy post the ESCO license lapse on 30 June, the stock offers more than a regular 'cylical' play on the resources space. Metcash (MTS): 'Pace is the trick' Hold, TP A$4.10. Analyst - Daniel Broeren The key takeout from MTS's 1H12 result was that momentum in the core business has deteriorated with IGA>D reporting retail sales growth of just 1.7%, down form c8% in 2H11. Inventory improved toward historic levels. The supermarket 'advertising war' has been ongoing for almost 12 months and now appears to be limiting growth for IGA. Management expressed a need to increase its share-of-voice, suggesting to us that its 'Lock Down Low Prices' has not resonated with consumers. With new Woolworths management taking a more aggressive approach going forward, we see little opportunity for IGA to grow beyond efficiencies derived via the Franklins acquisition. Overall, given the number of accounting adjustments we find it difficult to forecast outside management's guidance for FY12 (for low-to-mid single-digit EPS growth). An investment in MTS is therefore driven by sentiment based on the company's ability to execute the restructuring of Franklins. While history suggests MTS will have some issues, management has been more conservative in setting expectations this time around. We lower our target price slightly to A$4.10, on lower forecast earnings, but maintain our Hold recommendation. Friday, 2 December 2011 Virgin Blue Holdings (VBA): 'Early present from the ACCC' Buy, TP A$0.41. Analyst - Mark Williams The ACCC has granted approval for the alliance with Singapore Airlines. The alliance allows for full cooperation between the carriers on pricing, schedules, frequent flyer programs and Australia Small/Mid Caps | Sector Dynamics | 5 December 2011
64
marketing on flights to and from Asia, providing VBA with a significant reach into 70 new destinations in Asia. Not only does the alliance boost VBA's international coverage, but with SIA the #2 carrier into the Australian market (carrying 1.5m passengers into Australia each year), it will provide significant feed into VBA's domestic network. In combination with VBA's other alliance partners, this should result in a positive overall yield impact on the domestic business as it means VBA will be less reliant on offering discounted fares into the domestic market in order to fill its planes. We still expect QAN to be a formidable opponent in that space but think there is only upside for VBA as it gradually increases its market share. For this reason, we maintain a Buy recommendation on the stock. Construction Materials: 'Sharp declines in October Approvals' Analyst - Andrew Scott Australian building approvals for October 2011 have been released. While we focus on the original data, the headline seasonally adjusted figure fell 11% from September levels. The national decline reflected weakness across the board. We highlight VIC, which has been a key driver for housing activity in recent years, saw a 38% drop vs pcp. WA (-2%), NSW (22%) and QLD (-28%) were also weaker. We continue to expect housing activity to decline through early 2012. We forecast a deepcycle bottom of 133k starts by June 2012. In our view, the timing of a recovery beyond this point remains the key uncertainty. This will provide a difficult macro backdrop for the Australian materials stocks, and we believe that selection of favourable exposures is crucial. We retain our Buy recommendations on JHX (US rather than Australian exposure) and CSR (greatest upside to our valuation) and our Hold recommendations for ABC, FBU and BLD. Media: 'Media lead indicators review' Analyst - Fraser McLeish Business and consumer confidence are the key forward indicators for advertising and media share prices, and both are showing some signs of improvement. We forecast advertising will return to low growth of +3.6% in 2012, although there are clearly major risks around Europe and the broader macro outlook. We forecast 'traditional' media will grow 3.0% in 2012 (TV +3.5%, newspapers +2.7%, radio +3.5%, outdoor +4.5%) and online +11.6%. We see limited scope for a significant bounce in TV, as it had its big recovery in 2010, when it grew by 18% and is already back above 2008 peak levels. Newspaper advertising remains at subdued levels and well below previous peaks. We remain cautious on TV due to accelerating audience fragmentation and we expect high cost growth to continue as competition for programming continues to rise (eg, from new overthe-top players). The publishers are extremely cheap, in our view, and have the most potential upside from a rerating when ad market conditions improve. SEK and FXJ are our top sector picks. Sell TEN. Boart Longyear (BLY): 'It's beginning to feel a lot like 2008' Buy, TP A$4.37. Analyst - Andrew Hodge Management provided an update for FY11 earnings consistent with previous guidance and RBS forecasts. However, we believe a pause in materials and labour cost inflation (which have been very high in 2011), but with prices continuing to rise, will allow BLY to reach peak margins in FY12 on a run rate basis and then achieve them on an average basis in FY13. We continue to believe BLY will marginally exceed its FY11 EBITDA guidance. Our upgraded FY12 and FY13 forecasts (9-16%) reflect an improved outlook for pricing for contract negotiations and higher products sales. In effect, the main impact of the changes is the timing of the company reaching peak margins. Given a very strong buffer between current long-run price assumptions and the cash and capital costs of projects across most commodities, we believe the cycle will remain robust for at least another 18 months. While that is the case, we believe BLY will offer more upside.
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The Small Ords underperformed the All Ords by 47bp over the past week
Table 2 : Small-cap vs large-cap performance

1 week Small Ordinaries Small Industrials Small Resources All Ordinaries S&P/ASX 300 Industrials S&P/ASX 300 Resources Relative performance (bp) Small Ords vs All Ords Small Ind vs S&P/ASX 300 Ind Small Res vs S&P/ASX 300 Res Small Ind vs Small Res
Source: IRESS
1 month 2.3% 1.9% 2.8% 2.2% 3.1% 1.0%
3 months -2.9% -1.0% -5.2% 0.6% 4.1% -6.0%
6 months -9.3% -8.0% -10.9% -7.2% -2.8% -15.7%
12 months -12.5% -8.3% -17.7% -8.7% -4.7% -16.5%
2011 ytd -16.9% -11.5% -23.3% -10.3% -5.4% -19.2%
6.7% 5.2% 8.8% 7.1% 7.5% 7.7%
-47 -224 108 -355
3 -116 178 -90
-342 -513 82 413
-211 -524 483 284
-375 -356 -116 940
-653 -603 -412 1181
Small Industrials has outperformed Small Resources by 940bp over the past 12 months
Chart 2 : Index performance rolling 12 months

115
105
95
85
75
65 Dec 10 Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11
All Ords
Small Ords
Small Industrials
Small Resources
Source: IRESS
The Small Ords has underperformed the All Ords by 653bp ytd (CY)
Chart 3 : Index performance ytd

105 100 95 90 85 80 75 70 65 60 Jan 11 Feb 11 All Ords Mar 11 Apr 11 May 11 Small Ords Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Small Resources
Small Industrials
Source: IRESS
66
The Small Ords one-year forward PE is 11.7x vs the S&P/ASX 100 at 10.6x (source: Datastream), although our FY12 earnings forecasts yield a Small Ords PE of 12.9x and an S&P/ASX 100 PE of 11.2x
Chart 4 : Small-cap vs large-cap PE (x)

18 17 16 15 14 13 12 11 10 9 8 Dec-04 Dec-05 Dec-06 Dec-07 Small Ords Index Dec-08 Dec-09 Dec-10 Dec-11 x
S&P ASX 100 Index
Source: Datastream, RBS
The Small Ords one-year forward PE relative is now 110.8%, above the eight-year average of 99.7%
Chart 5 : Small-cap PE relative

140% 130% 120% 110% 100% 90% 80% 70% Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Average Nov-10 Nov-11
Small Ords PE rel
Source: Datastream, RBS
The overall market is trading below its long-term average oneyear forward PE
Chart 6 : Australian market (All Ords) PE

20 18 16 14 12 10 8 6 Dec 91 Dec 93 Dec 95 Dec 97 Dec 99 Dec 01 Average Dec 03 +1.5 SD Dec 05 Dec 07 Dec 09 Dec 11 X
Market PE
-1.5 SD
Source: IRESS
67
Small Ordinaries Index performance over the week Chart 7 : Small Ords best performers
Ivanhoe Australia Aquila Resources Cudeco Limited Centro Retail Group Intrepid Mines Gloucester Coal OceanaGold Corp. Beadell Resource Ltd Discovery Metals Ltd Perseus Mining Ltd Ramelius Resources Mineral Deposits Platinum Australia Adelaide Brighton Kingsgate Consolid. Allied Gold Min PLC Coalspur Mines Ltd Independence Group Energy World Corpor. Grange Resources. 0% 10% 20% 30% 40%
Chart 8 : Small Ords Index worst performers

Carbon Energy Bandanna Energy Nexus Energy Limited Sundance Resources OM Holdings Limited Samson Oil & Gas Chorus Limited Unilife Corporation South Boulder Mines Alesco Corporation APN News & Media Carnarvon Petroleum Navitas Limited Biota Holdings Murchison Metals Ltd Silex Systems Northern Iron Ltd Gunns Limited Tassal Group Limited Oakton Limited -15% -10% -5% 0%
Source: IRESS
Source: IRESS
Small Industrials Index performance over the week Chart 9 : Small Industrials best performers
Centro Retail Group Adelaide Brighton Energy World Corpor. Aristocrat Leisure Seven Group Holdings Transpacific Indust. Macq Atlas Roads Grp McMillan Shakespeare Bradken Limited Austin Engineering Platinum Asset Perpetual Limited Starpharma Holdings Infigen Energy Pacific Brands IOOF Holdings Ltd GWA Group Ltd Qube Logistics Hldg Acrux Limited Henderson Group 0% 10% 20%
Chart 10 : Small Industrials worst performers

Chorus Limited Unilife Corporation Alesco Corporation APN News & Media Navitas Limited Biota Holdings Silex Systems Gunns Limited Tassal Group Limited Oakton Limited Thorn Group Limited SMS Management. Macmahon Holdings Austal Limited Cash Converters Sedgman Limited CSG Limited Challenger Infrast. Astro Jap Prop Group Singapore Telecomm. -10% -5% 0%
Source: IRESS
Source: IRESS
Small Resources Index performance over the week Chart 11 : Small Resources best performers
Ivanhoe Australia Aquila Resources Cudeco Limited Intrepid Mines Gloucester Coal OceanaGold Corp. Beadell Resource Ltd Discovery Metals Ltd Perseus Mining Ltd Ramelius Resources Mineral Deposits Platinum Australia Kingsgate Consolid. Allied Gold Min PLC Coalspur Mines Ltd Independence Group Grange Resources. AWE Limited Alacer Gold Corp. Horizon Oil Limited 0% 10% 20% 30% 40%
Chart 12 : Small Resources worst performers

Carbon Energy Bandanna Energy Nexus Energy Limited Sundance Resources OM Holdings Limited Samson Oil & Gas South Boulder Mines Carnarvon Petroleum Murchison Metals Ltd Northern Iron Ltd Ampella Mining Flinders Mines Ltd Metminco Limited Highlands Pacific Bow Energy Limited Teranga Gold Corp Kagara Ltd Molopo Energy Ltd Straits Res Ltd. White Energy -15% -10% -5% 0% 5%
Source: IRESS
Source: IRESS
68
Small Ordinaries Index performance over the month Chart 13 : Small Ords best performers
Flinders Mines Ltd Galaxy Resources Ivanhoe Australia Nexus Energy Limited Murchison Metals Ltd Cudeco Limited Gloucester Coal Energy World Corpor. Allied Gold Min PLC Aurora Oil & Gas NRW Holdings Limited Beach Energy Limited Brockman Resources Spotless Group Ltd Aquila Resources Regis Resources Resolute Mining Centro Retail Group Saracen Mineral Integra Mining Ltd. 0% 20% 40% 60% 80%
Chart 14 : Small Ords Index worst performers

White Energy Company Carbon Energy Gunns Limited Northern Iron Ltd OM Holdings Limited Platinum Australia South Boulder Mines Highlands Pacific Energy Resources Metminco Limited Unilife Corporation Bandanna Energy Carnarvon Petroleum Elders Limited Samson Oil & Gas Ltd Linc Energy Ltd Aditya Birla Arafura Resource Ltd APN News & Media Kagara Ltd -70% -50% -30% -10%
Source: IRESS
Source: IRESS
Small Industrials Index performance over the month Chart 15 : Small Industrials best performers
Energy World Corpor. NRW Holdings Spotless Group Ltd Centro Retail Group Transpacific Indust. Hastings Diversified Qube Logistics Hldg Starpharma Holdings DuluxGroup Limited Austin Engineering Cabcharge Australia Charter Hall Group Adelaide Brighton Aristocrat Leisure iiNet Limited The Reject Shop GWA Group Ltd Australand Property Skilled Group Ltd Ausdrill Limited 0% 10% 20% 30%

Gunns Limited Unilife Corporation Elders Limited APN News & Oakton Limited Hastie Group SMS Management. Ceramic Fuel Cells Navitas Limited Alesco Prima Biomed Ltd Pharmaxis Ltd Mesoblast Limited STW Infigen Energy Biota Holdings Watpac Limited Pacific Brands Acrux Limited CSG Limited -40% -30% -20% -10% 0%
Source: IRESS
Source: IRESS
Small Resources Index performance over the month Chart 17 : Small Resources best performers
Flinders Mines Ltd Galaxy Resources Ivanhoe Australia Nexus Energy Murchison Metals Ltd Cudeco Limited Gloucester Coal Allied Gold Min PLC Aurora Oil & Gas Beach Energy Brockman Resources Aquila Resources Regis Resources Resolute Mining Saracen Mineral Integra Mining Ltd. Silver Lake Resource Cape Lambert Res Karoon Gas Australia Intrepid Mines 0% 20% 40% 60% 80%

White Energy Company Carbon Energy Northern Iron Ltd OM Holdings Limited Platinum Australia South Boulder Mines Highlands Pacific Energy Resources Metminco Limited Bandanna Energy Carnarvon Petroleum Samson Oil & Gas Ltd Linc Energy Ltd Aditya Birla Arafura Resource Ltd Kagara Ltd Dart Energy Ltd Aston Res Ltd Rex Minerals Limited Straits Res Ltd. -70% -50% -30% -10%
Source: IRESS
Source: IRESS
69
Small Ordinaries Index performance ytd Chart 19 : Small Ordinaries best performers
Sigma Pharmaceutical Flinders Mines Ltd Beach Energy Limited Silver Lake Resource Aurora Oil & Gas Mesoblast Limited FlexiGroup Limited Alacer Gold Corp. Regis Resources Starpharma Holdings Samson Oil & Gas Ltd Resolute Mining Kathmandu Hold Ltd Centro Retail Group NRW Holdings Limited Bow Energy Limited Envestra Limited Austar United Programmed Ramelius Resources 0% 20% 40% 60% 80% 100% 120% 140%
Chart 20 : Small Ordinaries worst performers

Hastie Group Limited White Energy Platinum Australia Energy Resources Carnarvon Petroleum Carbon Energy Gunns Limited OM Holdings Limited Murchison Metals Ltd Arafura Resource Ltd Silex Systems Metminco Limited Elders Limited Highlands Pacific Pharmaxis Ltd APN News & Media Gindalbie Metals Ltd Kagara Ltd Northern Iron Ltd Bandanna Energy -90% -70% -50% -30% -10%
Source: IRESS
Source: IRESS
Small Industrials Index performance ytd Chart 21 : Small Industrials best performers
Sigma Pharmaceutical Mesoblast Limited FlexiGroup Limited Starpharma Holdings Kathmandu Hold Ltd Centro Retail Group NRW Holdings Limited Envestra Limited Austar United Programmed Qube Logistics Hldg Telecom Corporation GrainCorp Limited Spotless Group Ltd Energy World Corpor. Charter Hall Retail SP AusNet Macmahon Holdings ARB Corporation Clough Limited 0% 20% 40% 60% 80% 100% 120% 140%

Hastie Group Limited Gunns Limited Silex Systems Elders Limited Pharmaxis Ltd APN News & Media Infigen Energy Alesco Corporation Pacific Brands Watpac Limited FKP Property Group Oakton Limited Hills Holdings Ltd Sthn Cross Media Austal Limited Cash Converters Ten Network Holdings Perpetual Limited Transpacific Indust. Astro Jap Prop Group -90% -70% -50% -30% -10%
Source: IRESS
Source: IRESS
Small Resources Index performance ytd Chart 23 : Small Resources best performers
Flinders Mines Ltd Beach Energy Limited Silver Lake Resource Aurora Oil & Gas Alacer Gold Corp. Regis Resources Samson Oil & Gas Ltd Resolute Mining Bow Energy Limited Ramelius Resources St Barbara Limited Focus Minerals Ltd Aston Res Ltd Troy Resources NL Beadell Resource Ltd Saracen Mineral Mineral Deposits Alkane Resources Ltd Eldorado Gold Corp Kingsrose Mining Ltd -5% 15% 35% 55% 75%

White Energy Company Platinum Australia Energy Resources Carnarvon Petroleum Carbon Energy OM Holdings Limited Murchison Metals Ltd Arafura Resource Ltd Metminco Limited Highlands Pacific Gindalbie Metals Ltd Kagara Ltd Northern Iron Ltd Bandanna Energy Brockman Resources Mincor Resources NL Indophil Resources Dart Energy Ltd Ivanhoe Australia Rex Minerals Limited -90% -70% -50% -30% -10%
Source: IRESS
Source: IRESS
70
10
Small Ordinaries Index top 20 index contributors in the last week Chart 25 : Small Ords top 20 contributors (bp)
Flinders Mines Adelaide Brighton Aristocrat Leisure Regis Resources Perseus Mining Aquila Resources Aurora Oil & Gas Medusa Mining Kingsgate Consolidated AWE DuluxGroup Bathurst Resources Western Areas NL Alacer Gold Corp. Flight Centre Cudeco Bradken Mesoblast Platinum Asset Management Southern Cross Media 0 1 2 3 4 5
Chart 26 : Small Ords bottom 20 contributors (bp)

Sundance Resources Navitas Centro Retail Group Intrepid Mines Aston Resources APN News & Media Highlands Pacific Linc Energy Ltd Bandanna Energy Samson Oil & Gas South Boulder Mines Ltd Silex Systems Singapore Telecommunications Virgin Blue Holdings OM Holdings REA Group Ltd Molopo Energy Northern Iron SMS Management & Technology Straits Resources
-3
-2
-1
Source: IRESS
Source: IRESS
Small Ordinaries Index top 20 index contributors in the last month Chart 27 : Small Ords top 20 contributors (bp)
Beach Energy Chorus Aurora Oil & Gas Flinders Mines Regis Resources Aquila Resources NRW Holdings Nexus Energy Spotless Group Resolute Mining Gloucester Coal Ltd Cudeco Adelaide Brighton Aristocrat Leisure Karoon Gas Australia Galaxy Resources Evolution Mining Silver Lake DuluxGroup Ivanhoe Australia 0 2 4 6 8
Chart 28 : Small Ords bottom 20 contributors(bp)

White Energy Company Telecom Corporation of New Aston Resources Navitas Mesoblast Linc Energy Ltd Independence Group NL Mount Gibson Iron Medusa Mining Fletcher Building Sundance Resources IOOF Holdings Energy Resources of Australia Northern Iron Gunns Kingsgate Consolidated Perpetual GrainCorp Dart Energy Henderson Group PLC. -8 -6 -4 -2 0
Source: IRESS
Source: IRESS
Small Ordinaries Index top 20 index contributors ytd Chart 29 : Small Ords top 20 contributors (bp)
Beach Energy Limited Aurora Oil & Gas Limited Sigma Pharmaceuticals Limited Regis Resources Limited Alacer Gold Corp. Chorus Limited Silver Lake Resources Limited Giralia Resources NL Flinders Mines Limited GrainCorp Limited Resolute Mining Limited NRW Holdings Limited Austar United Communications Limited FlexiGroup Limited SP AusNet Straits Resources Limited Bow Energy Limited Envestra Limited Crane Group Limited Centro Retail Group 0 5 10 15
Chart 30 : Small Ords bottom 20 contributors (bp)

White Energy Company Limited Energy Resources of Australia Independence Group NL Gindalbie Metals Ltd Mount Gibson Iron Limited APN News & Media Limited Silex Systems Limited Aquila Resources Limited Fletcher Building Limited Kingsgate Consolidated Pharmaxis Ltd Sundance Resources Limited Karoon Gas Australia Limited Pacific Brands Limited Gunns Limited Intrepid Mines Limited Whitehaven Coal Limited IOOF Holdings Limited Dart Energy Limited Southern Cross Media Group -20 -15 -10 -5 0
Source: IRESS
Source: IRESS
71
11
Australia Small/Mid Caps | Sector Dynamics | 5 December 2011 12
Table 3: RBS small/mid-cap coverage

ASX Code Company Name RBS analyst Share price (A$) 0.74 2.55 1.20 2.59 3.78 1.21 0.65 12.45 6.05 0.84 3.39 2.36 0.92 Price target (A$) 1.37 2.60 1.37 2.68 3.80 1.50 0.72 11.25 7.15 1.34 3.47 2.40 0.81 Rec Mkt Cap (A$m) 466 1,385 1,519 1,455 2,601 854 238 1,640 2,039 305 2,189 3,164 962 NPAT (A$m) Pre abormals FY11F FY12F 83.1 56.6 82.4 94.8 232.7 68.6 27.2 68.7 104.6 40.6 115.1 279.6 74.1 96.4 94.6 98.0 92.7 145.5 98.9 28.8 80.2 131.1 40.4 264.6 325.4 53.6 EPS (cps) Pre goodwill FY10A FY11F FY12F 17.2 10.2 4.2 14.0 28.6 14.9 5.0 40.2 24.5 10.8 44.9 22.1 9.3 13.5 10.5 6.3 16.6 33.8 14.8 7.4 53.1 31.0 11.4 37.5 21.5 7.1 15.6 17.4 7.5 16.5 21.1 14.0 7.9 61.1 38.8 11.5 39.4 24.3 5.1 PER (x) Pre goodwill FY11F FY12F 5.5 24.3 19.0 15.6 11.2 8.2 8.8 23.5 19.5 7.3 9.0 11.0 13.0 4.8 14.7 16.0 15.7 17.9 8.6 8.3 20.4 15.6 7.3 8.6 9.7 17.9 Dividends EV/EBIT (x) (cps) Ex assoc. FY11F FY12F FY11F FY12F 5.9 17.7 14.6 n/a 10.1 11.2 7.6 16.0 16.6 6.2 19.7 8.5 9.6 5.1 10.8 13.2 n/a 12.2 7.4 7.0 13.3 12.6 6.3 7.6 7.4 11.8 8.1 5.4 0.0 16.5 0.0 10.0 4.5 26.0 14.3 7.4 45.0 21.5 5.3 9.3 8.7 0.0 16.5 10.6 9.1 5.5 30.5 21.4 8.1 35.0 21.7 3.8 Net yield (%) FY11F 11.0 2.1 0.0 6.4 0.0 8.3 6.9 2.1 2.4 8.8 13.3 9.1 5.7 FY12F 12.6 3.4 0.0 6.4 2.8 7.5 8.5 2.5 3.5 9.6 10.3 9.2 4.2
FY10A 103.1 54.4 54.1 89.5 196.8 48.0 18.4 51.4 82.9 38.7 96.2 281.4 96.9
FY13F 105.9 117.6 126.7 96.6 158.0 110.3 29.2 95.0 153.9 42.6 270.1 185.3 75.2
FY13F 17.1 21.5 9.7 17.2 22.8 15.6 8.0 71.3 45.6 12.2 38.5 13.6 7.2
FY10A 4.3 25.0 28.7 18.6 13.2 8.1 12.9 31.0 24.6 7.8 7.5 10.7 9.9
FY13F 4.3 11.8 12.4 15.1 16.5 7.7 8.1 17.5 13.3 6.9 8.8 17.4 12.8
FY10A 5.3 19.8 18.4 n/a 9.5 10.2 10.1 21.7 19.5 6.2 16.1 9.7 7.0
CONSUMER DISCRETIONARY (Media/Gaming) APN APN Fraser McLeish ALL Aristocrat Michael Nolan AUN Austar Fraser McLeish CMJ Consolidated Media Fraser McLeish EGP Echo Entertainment Michael Nolan SXL Ashley Wallace Southern Cross Media PRT Prime TV Ashley Wallace REA REA Group Ashley Wallace SEK SEEK Limited Fraser McLeish SGN STW Communications Matthew Nicholas SWM Seven West Media Ltd. Fraser McLeish TTS Tatts Group Michael Nolan TEN Ten Network Fraser McLeish CONSUMER DISCRETIONARY (Retail) ARP ARB Corporation BBG Billabong DJS David Jones GUD GUD Holdings HVN Harvey Norman JBH JB Hi-Fi MYR Myer PBG Pacific Brands PMV Premier Investments TRS The Reject Shop
Buy Buy Buy Hold Hold Buy Hold Hold Buy Buy Hold Hold Sell
Matthew Nicholas Daniel Broeren Daniel Broeren Matthew Nicholas Daniel Broeren Daniel Broeren Daniel Broeren Julian Guido Julian Guido Julian Guido
7.95 3.86 2.89 7.40 2.17 15.69 2.51 0.55 5.37 10.42
8.65 3.65 2.70 8.10 2.50 17.25 2.80 0.92 5.58 12.70
Hold Hold Hold Hold Buy Buy Buy Buy Hold Hold
576 985 1,517 519 2,305 1,551 1,464 498 833 272
32.6 145.9 174.0 46.4 290.0 118.6 163.5 90.3 63.2 23.5
37.9 118.0 168.1 49.0 242.0 134.4 163.2 103.4 61.1 16.1
42.0 111.7 140.7 46.6 227.8 137.7 142.0 86.5 61.1 23.7
46.1 124.6 135.8 53.2 256.9 155.6 160.7 104.3 71.3 29.1
46.3 57.2 34.1 76.5 27.3 106.1 28.1 9.7 41.8 89.5
52.2 46.3 33.0 71.7 22.8 120.2 28.0 11.1 39.4 61.4
58.0 43.7 27.5 67.2 21.4 138.4 24.3 9.3 39.4 89.6
63.6 48.6 26.3 76.4 24.2 155.1 27.6 11.2 46.0 109.4
17.2 6.7 8.5 9.7 7.9 14.8 8.9 5.7 12.8 11.6
15.2 8.3 8.8 10.3 9.5 13.1 9.0 5.0 13.6 17.0
13.7 8.8 10.5 11.0 10.1 11.3 10.3 5.9 13.6 11.6
12.5 7.9 11.0 9.7 9.0 10.1 9.1 4.9 11.7 9.5
12.5 6.6 6.2 7.4 5.9 9.0 6.6 4.6 7.5 9.1
10.8 9.7 6.4 8.0 7.0 9.0 7.1 4.0 10.2 11.9
9.3 8.6 7.8 8.0 7.1 8.3 8.0 4.5 8.1 8.4
23.0 29.0 28.0 64.0 12.0 77.0 22.5 6.2 36.0 31.0
26.5 29.0 23.0 61.0 11.0 85.0 20.0 6.1 35.5 68.0
2.9 7.5 9.7 8.6 5.5 4.9 9.0 11.3 6.7 3.0
3.3 7.5 8.0 8.2 5.1 5.4 8.0 11.0 6.6 6.5
CONSUMER STAPLES (Agriculture + Food/Beverage) GFF Goodman Fielder Michael Nolan MTS Metcash Daniel Broeren TGR Tassal Group Matthew Nicholas FINANCIALS (Banks) BOQ Bank of Queensland BEN Bendigo & Adelaide Bank FINANCIALS (Diversified) AUB Austbrokers BTT BT Investment Mgmt CGF Challenger Fin.Group HGG Henderson Group PLC IFL IOOF Limited IMF IMF Australia MOC Mortgage Choice PPT Perpetual PTM Platinum Asset Mgmt TSM Think Smart WHG WHK Group HEALTHCARE ANN Ansell COH Cochlear PRY Primary Health Care RHC Ramsay Health Care RMD Resmed
0.54 4.24 1.50
0.60 4.10 1.30
Hold Hold Hold
1,046 3,270 219
183.5 238.5 22.6
135.2 248.3 21.6
128.9 257.5 25.0
141.5 276.8 27.4
13.4 31.1 16.1
9.8 32.3 14.8
7.1 33.5 17.1
7.2 36.0 18.6
4.0 13.6 9.3
5.5 13.1 10.2
7.6 12.7 8.8
7.5 11.8 8.1
5.5 9.3 9.6
6.2 9.2 8.8
6.2 9.8 7.6
7.8 27.0 2.0
5.7 27.5 6.0
14.4 6.4 1.3
10.6 6.5 4.0
John Buonaccorsi John Buonaccorsi
7.95 9.31
12.38 9.32
Buy Hold
1,792 3,406
189.1 291.0
166.9 336.2
262.9 337.2
292.7 364.7
83.8 77.1
71.3 87.0
104.3 85.7
112.3 90.5
9.5 12.1
11.1 10.7
7.6 10.9
7.1 10.3
6.5 7.8
7.3 7.0
4.7 6.7
54.0 60.0
69.0 61.0
6.8 6.4
8.7 6.6
Julian Guido Julian Guido Richard Coles Julian Guido Julian Guido Julian Guido Julian Guido Richard Coles Julian Guido Matthew Nicholas Julian Guido
6.20 1.95 4.42 1.76 5.82 1.35 1.34 21.03 3.97 0.43 0.83
6.46 3.02 5.10 2.72 7.50 2.17 1.38 23.13 5.25 1.00 1.15
Buy Buy Buy Buy Buy Buy Hold Hold Hold Buy Buy
344 522 2,442 2,028 1,337 167 160 869 2,229 56 220
20.3 30.9 232.5 84.6 97.2 11.9 14.8 72.8 155.0 8.9 28.5
23.9 30.5 248.0 122.4 111.5 22.9 15.9 72.9 190.5 8.7 25.8
26.8 35.9 275.4 151.2 120.2 36.4 16.2 59.6 211.2 12.0 29.6
29.5 39.3 300.6 163.6 130.7 27.5 16.8 61.3 227.8 17.9 32.8
39.0 19.3 42.7 10.0 42.1 9.7 12.3 169.2 26.6 8.3 10.6
43.6 15.6 48.1 11.9 48.1 16.8 13.2 165.5 32.4 6.6 9.6
48.4 22.4 51.2 13.8 51.6 29.2 13.4 137.6 35.9 9.1 11.0
53.1 24.6 53.4 14.8 55.8 22.0 13.9 144.3 38.7 13.4 12.2
15.9 10.1 10.4 17.7 13.8 13.9 10.9 12.4 14.9 5.2 7.8
14.2 12.5 9.2 14.8 12.1 8.0 10.2 12.7 12.3 6.5 8.6
12.8 8.7 8.6 12.8 11.3 4.6 10.0 15.3 11.1 4.7 7.5
11.7 7.9 8.3 11.9 10.4 6.1 9.6 14.6 10.3 3.2 6.8
19.4 7.4 8.1 10.8 9.3 9.4 7.1 5.7 9.3 3.6 5.7
16.7 2.3 6.8 7.5 7.9 5.2 6.6 5.8 7.1 4.3 6.2
16.2 2.2 5.9 6.2 7.3 2.8 5.3 7.4 6.5 3.0 5.8
25.5 16.0 16.5 7.2 43.0 15.0 13.0 185.0 27.5 3.5 7.0
30.0 20.0 18.5 9.2 47.0 32.0 13.4 140.0 30.5 4.8 7.6
4.1 8.2 3.7 4.1 7.4 11.1 9.7 8.8 6.9 8.1 8.4
4.8 10.2 4.2 5.2 8.1 23.7 10.0 6.7 7.7 11.0 9.1
Dr Derek Jellinek Dr Derek Jellinek Dr Derek Jellinek Dr Derek Jellinek Dr Derek Jellinek
14.57 57.31 3.29 19.29 2.56
13.92 63.05 3.20 17.95 2.84
Hold Buy Hold Hold Hold
1,904 3,261 1,646 3,898 3,984
106.2 155.2 132.0 178.8 194.8
121.7 180.1 96.5 204.7 229.3
136.3 139.1 115.7 227.7 232.6
152.0 183.2 132.9 252.1 247.5
80.0 274.5 26.8 88.2 251.1
91.5 316.1 19.5 101.1 145.9
102.9 244.0 23.2 112.4 152.3
117.0 321.4 26.2 124.4 166.5
18.2 20.9 12.3 21.9 1.0
15.9 18.1 16.9 19.1 1.8
14.2 23.5 14.2 17.2 1.7
12.5 17.8 12.5 15.5 1.5
16.6 15.2 10.1 15.2 14.8
15.0 13.3 11.4 12.4 12.6
13.4 16.2 10.4 11.2 12.7
32.4 225.0 8.0 52.0 0.0
42.2 240.0 18.0 58.0 0.0
2.2 3.9 2.4 2.7 0.0
2.9 4.2 5.5 3.0 0.0
Priced at close of business 2 December 2011. Recommendations may lie outside the structure outlined in the disclosure page. Source: Company data, RBS forecasts
72
RBS small/mid-cap coverage (contd)

ASX Code Company Name RBS analyst Share price (A$) Price target (A$) Rec Mkt Cap (A$m) NPAT (A$m) Pre abormals FY10A FY11F FY12F EPS (cps) Pre goodwill FY10A FY11F FY12F PER (x) Pre goodwill FY11F FY12F Dividends EV/EBIT (x) (cps) Ex assoc. FY10A FY11F FY12F FY11F FY12F Net yield (%) FY11F FY12F
FY13F
FY13F
FY10A
FY13F
IT & TELCOS AMM Amcom CRZ Carsales CUS Customers DWS DWS Advanced Business HTA Hutchison Telec IIN iiNet IRE IRESS Market Tech OKN Oakton RKN Reckon SGT SingTel SMX SMS Management TEL Telecom Corp INDUSTRIALS (Construction) BLY Boart Longyear BLD Boral CSR CSR Ltd JHX James Hardie INDUSTRIALS (Miscellaneous) ALS Alesco ASB Austal Limited ASL Ausdrill Limited DLX DuluxGroup GWA GWA International HIL Hills Industries IMD Imdex Limited IVC Invocare NVT Navitas PPC Peet REX Regional Express SAI SAI Global VBA Virgin Blue INDUSTRIALS (Support Services) CAB Cabcharge Australia CND Clarius Group PRG Programmed Maintenance SGH Slater & Gordon SKE Skilled Group SLM Salmat SPT Spotless Group TWO Talent2 International
Alan Stuart Ashley Wallace Julian Guido Julian Guido Ian Martin Ian Martin Julian Guido Julian Guido Julian Guido Ian Martin Julian Guido Alan Stuart
0.88 4.65 1.13 1.25 0.06 2.79 7.60 1.39 2.39 3.12 4.60 1.51
1.09 5.38 1.68 1.42 0.13 3.28 8.70 1.52 2.37 3.16 5.26 2.01
Buy 211 Buy 1,088 Buy 153 Hold 165 Buy 760 Buy 417 Hold 965 Hold 131 Hold 318 Hold 49,737 Hold 314 Hold 2,917
18.4 43.2 21.1 18.5 41.5 34.8 58.4 20.9 15.7 3,911.7 27.9 379.7
21.6 58.2 21.5 17.4 -90.6 38.0 63.0 16.8 18.1 3,800.0 29.8 387.0
16.4 67.1 17.0 19.1 28.0 47.2 75.2 15.8 21.0 3,691.7 31.5 457.0
21.2 76.0 23.8 20.7 107.4 52.4 83.6 17.3 22.9 3,910.1 34.4 490.7
5.7 18.6 15.3 14.0 0.3 22.9 46.3 22.9 11.8 24.6 41.9 19.8
9.0 24.9 15.9 13.1 -0.7 25.0 48.6 18.0 13.6 23.9 44.3 20.2
6.8 28.5 12.6 14.4 0.2 31.6 57.0 16.8 15.8 23.2 46.4 23.7
8.8 32.0 17.7 15.6 0.8 36.0 62.4 18.3 17.2 24.5 50.5 25.5
15.5 25.0 7.4 8.9 19.6 12.2 16.4 6.1 20.3 12.7 11.0 7.6
9.7 18.6 7.1 9.5 n/a 11.2 15.6 7.7 17.6 13.1 10.4 7.5
12.9 16.3 8.9 8.7 29.1 8.8 13.3 8.3 15.2 13.5 9.9 6.4
10.0 14.5 6.4 8.0 7.6 7.8 12.2 7.6 13.9 12.7 9.1 5.9
13.5 17.3 6.0 5.8 n/a 9.8 11.1 4.5 13.9 10.4 7.4 8.4
10.0 13.0 7.1 6.3 n/a 8.5 10.5 5.7 12.3 10.5 6.9 8.1
9.1 11.0 6.3 5.7 n/a 7.4 8.6 5.3 10.9 10.3 6.8 7.7
4.8 19.9 5.0 12.0 0.0 12.0 39.0 8.5 8.5 30.0 18.0
3.4 22.8 6.5 11.0 0.0 16.0 45.5 10.5 9.5 31.5 21.0
5.5 4.3 4.4 9.6 0.0 4.3 5.1 6.1 3.6 6.5 11.9
3.9 4.9 5.8 8.8 0.0 5.7 6.0 7.6 4.0 6.8 13.9
Andrew Hodge Andrew Scott Andrew Scott Andrew Scott
3.30 3.71 2.12 6.95
4.37 4.04 2.84 7.03
Buy Hold Buy Buy
1,522 2,763 1,073 3,028
84.5 144.5 173.4 133.0
149.4 173.5 90.2 116.7
210.6 203.2 85.4 141.8
248.6 275.6 105.6 182.4
18.5 24.1 38.0 30.7
32.8 24.0 17.8 26.7
46.3 28.2 16.9 33.4
54.7 38.0 20.9 44.1
17.8 15.4 5.6 22.6
10.1 15.5 11.9 26.1
7.1 13.2 12.6 20.8
6.0 9.8 10.2 15.8
13.4 15.8 5.2 15.2
7.9 14.1 4.6 16.7
5.7 13.4 6.3 15.4
9.8 14.5 41.7 0.0
13.9 16.0 13.0 8.0
3.0 3.9 19.7 0.0
4.2 4.3 6.1 1.2
Julian Guido Julian Guido Matthew Nicholas Julian Guido Julian Guido Matthew Nicholas Matthew Nicholas Julian Guido Julian Guido Matthew Nicholas Michael Newbold, CFA Julian Guido Mark Williams
1.21 2.20 3.10 2.88 2.44 1.14 2.02 7.35 3.40 0.80 1.02 4.82 0.35
1.33 3.75 3.80 3.12 2.16 1.07 2.83 7.60 4.12 1.45 1.26 5.20 0.41
Hold Buy Buy Buy Hold Hold Buy Hold Hold Buy Buy Buy Buy
114 414 939 1,058 736 282 413 809 1,276 256 124 975 785
24.0 39.0 52.7 71.5 55.5 40.9 11.8 34.1 64.3 42.1 19.3 40.6 9.7
15.6 40.5 78.5 77.6 63.4 24.7 31.0 40.4 76.0 44.0 17.4 57.8 -48.1
14.0 49.7 96.7 79.7 56.6 26.8 47.0 46.7 88.0 19.8 21.7 66.4 64.5
16.9 50.2 116.0 84.9 60.4 31.7 54.1 51.1 103.8 31.2 24.0 77.9 114.9
25.5 20.7 25.9 19.5 18.5 17.0 6.1 33.6 18.8 14.1 17.4 25.9 0.4
16.5 21.5 29.0 21.1 21.0 9.9 15.6 38.9 21.3 14.5 15.7 29.8 -2.2
14.8 26.4 32.1 21.7 18.8 11.0 23.1 43.1 23.4 6.3 19.7 33.3 2.9
17.8 26.7 38.5 23.1 20.0 13.3 26.5 46.9 27.6 9.8 21.9 39.0 5.2
4.7 10.6 12.0 14.8 13.2 6.7 33.4 21.9 18.1 5.7 5.9 18.6 80.3
7.3 10.2 10.7 13.6 11.6 11.5 12.9 18.9 16.0 5.5 6.5 16.2 n/a
8.2 8.3 9.7 13.3 13.0 10.4 8.7 17.0 14.5 12.8 5.2 14.5 12.1
6.8 8.2 8.1 12.5 12.2 8.6 7.6 15.7 12.3 8.1 4.7 12.3 6.7
7.3 9.4 12.2 10.2 9.6 4.8 26.0 16.0 13.7 6.2 5.3 17.2 22.7
5.3 6.8 8.6 9.5 8.7 9.2 9.7 14.1 12.5 6.3 5.4 12.7 n/a
6.6 5.3 7.1 9.2 9.6 8.3 6.2 12.0 10.5 12.6 3.5 11.3 11.4
14.0 6.0 12.0 15.0 18.0 10.0 4.5 31.3 20.7 8.5 7.1 14.3 0.0
8.5 7.0 13.0 16.0 18.0 10.0 5.5 36.0 23.5 3.5 7.6 16.3 0.0
11.6 2.7 3.9 5.2 7.4 8.8 2.2 4.3 6.1 10.6 7.0 3.0 0.0
7.0 3.2 4.2 5.6 7.4 8.8 2.7 4.9 6.9 4.4 7.5 3.4 0.0
Julian Guido Matthew Nicholas Julian Guido Julian Guido Julian Guido Julian Guido Julian Guido Matthew Nicholas
4.62 0.48 2.14 1.80 1.95 2.46 2.41 0.99
6.63 0.65 2.34 2.50 2.30 4.49 2.25 1.65
Buy Hold Buy Buy Buy Buy Hold Buy
556 43 253 273 455 393 640 146
57.7 3.3 27.4 19.8 19.2 55.9 46.4 9.8
65.6 4.7 28.6 27.9 26.1 51.6 43.1 13.8
66.0 6.9 31.3 37.3 43.8 60.7 52.0 14.5
70.6 8.2 35.8 41.2 51.9 68.2 58.8 19.5
47.9 4.1 25.7 16.7 11.0 35.1 18.4 7.4
54.5 5.4 24.2 18.3 12.5 32.4 16.5 9.7
54.8 8.0 26.5 23.6 18.3 37.9 19.8 9.9
58.7 9.4 30.3 25.5 21.7 42.6 22.3 13.1
9.6 11.7 8.3 10.8 17.8 7.0 13.1 13.4
8.5 8.9 8.8 9.8 15.6 7.6 14.6 10.2
8.4 6.0 8.1 7.6 10.6 6.5 12.2 10.0
7.9 5.1 7.1 7.1 9.0 5.8 10.8 7.6
9.5 7.7 6.2 9.3 12.7 5.9 8.5 13.8
9.6 5.3 7.7 6.9 9.6 7.5 9.1 9.0
9.2 3.5 6.2 5.5 7.7 5.9 8.1 8.3
30.0 4.0 9.0 5.5 3.0 24.0 11.0 5.5
37.5 5.5 13.0 7.5 7.0 27.1 13.0 5.5
6.5 8.3 4.2 3.1 1.5 9.8 4.6 5.6
8.1 11.5 6.1 4.1 3.6 11.0 5.4 5.6
INDUSTRIALS (Engineering contractors) BKN Bradken Matthew Nicholas BOL BOOM Logistics Matthew Nicholas EHL Emeco Matthew Nicholas DOW Downer EDI Andrew Hodge HST Hastie Group Julian Guido MND Monadelphous Andrew Hodge NFK Norfolk Group Julian Guido TSE Andrew Hodge Transfield Services UGL Andrew Hodge United Group MATERIALS ABC Adelaide Brighton NUF Nufarm SGM Sims Group
7.66 0.25 1.03 3.20 0.86 21.39 1.08 2.40 12.90
9.85 0.49 1.23 5.01 1.20 22.97 1.49 2.13 14.63
Buy Buy Buy Buy Hold Buy Buy Hold Buy
1,276 116 653 1,373 118 1,897 172 1,314 2,142
78.4 4.1 40.7 186.2 40.4 83.2 18.3 123.7 151.1
90.1 5.4 56.3 155.9 18.7 96.3 21.1 128.2 164.4
120.3 17.4 68.7 190.1 23.6 114.5 22.2 126.3 171.2
143.9 21.6 78.2 221.3 31.8 135.1 24.7 144.0 196.7
60.2 1.3 6.4 52.1 17.1 95.5 13.7 29.9 91.2
63.5 1.2 8.9 42.6 7.4 110.2 13.3 26.0 98.8
72.3 3.7 10.9 44.3 1.7 130.3 14.0 23.4 102.4
84.0 4.6 12.4 51.5 2.3 153.2 15.5 28.4 117.3
12.7 19.1 16.0 6.1 5.0 22.4 7.9 8.0 14.1
12.1 21.4 11.6 7.5 11.7 19.4 8.1 9.2 13.1
10.6 6.7 9.5 7.2 49.9 16.4 7.7 10.2 12.6
9.1 5.4 8.3 6.2 37.0 14.0 7.0 8.5 11.0
11.0 13.7 11.3 5.9 18.7 15.6 6.0 10.9 10.2
9.6 10.3 9.3 6.2 29.8 13.4 5.0 9.6 9.2
8.2 6.6 8.1 5.6 25.4 10.8 4.6 9.1 8.7
39.5 0.0 10.0 0.0 0.0 95.0 2.0 14.0 70.0
45.0 0.0 6.0 21.0 0.0 112.0 3.5 14.0 71.5
5.2 0.0 9.7 0.0 0.0 4.4 1.9 5.8 5.4
5.9 0.0 5.8 6.6 0.0 5.2 3.2 5.8 5.5
Andrew Scott Andrew Scott Todd Scott
3.16 4.68 13.43
3.20 5.08 19.10
Hold Hold Buy
2,011 1,226 2,783
151.5 48.4 126.7
153.1 86.1 182.0
165.5 101.8 279.6
197.4 120.7 364.1
23.9 21.3 65.7
24.1 32.9 88.9
26.1 38.9 136.1
31.1 46.1 177.3
13.2 22.0 20.4
13.1 14.2 15.1
12.1 12.0 9.9
10.2 10.2 7.6
11.7 13.6 13.0
11.6 8.8 9.9
10.8 8.0 6.6
19.0 0.0 47.0
23.6 11.7 68.0
6.0 0.0 3.5
7.5 2.5 5.1
73
RBS small/mid-cap coverage (contd)

ASX Code Company Name RBS analyst Share price (A$) Price target (A$) Rec Mkt Cap (A$m) NPAT (A$m) Pre abormals FY11F FY12F EPS (cps) Pre goodwill FY10A FY11F FY12F PER (x) Pre goodwill FY11F FY12F EV/EBIT (x) Dividends Ex assoc. (cps) FY11F FY12F FY11F FY12F Net yield (%) FY11F FY12F
FY10A
FY13F
FY13F
FY10A
FY13F
FY10A
UTILITIES/INFRASTRUCTURE AIX Aust Infrastructure Fund APA APA Group CIF Challenger Infrastructure DUE DUET Group ENV Envestra EPW ERM Power Limited HDF Hastings Diversified Util IFN Infigen Energy MQA Macquarie Atlas Roads SPN SP Ausnet SKI Spark Infrastructure ENERGY (Oil & Gas) LNC Linc Energy OTHER RESOURCES AGO Atlas Iron AQA Aquila Resources ERA Energy Resources GBG Gindalbie Metals GRR Grange Resources ILU Iluka Resources IRD Iron Road MIN Mineral Resources OGC OceanaGold MML Medusa Mining Ltd OMH OM Holdings KCN Kingsgate Consolidated MGX Mount Gibson Iron PDN Paladin PRU Perseus Mining ALK Alkane Resources RRL Regis Resources
William Allott Jason Mabee, CFA William Allott William Allott William Allott Jason Mabee, CFA William Allott William Allott William Allott William Allott William Allott
2.00 4.64 1.09 1.76 0.69 1.48 1.81 0.24 1.47 0.97 1.33
1.92 4.80 1.35 2.00 0.80 2.00 1.95 0.80 1.88 1.00 1.35
Hold Buy Buy Buy Buy Buy Buy Buy Buy Hold Hold
1,241 2,967 345 1,927 1,060 243 959 183 682 2,765 1,758
191.3 100.3 -210.7 140.0 36.6 21.5 35.6 -66.7 -281.7 209.0 78.4
212.3 108.5 -0.8 124.9 47.2 2.0 39.7 -26.0 -57.0 252.9 153.0
160.6 117.4 11.0 86.5 63.0 31.5 26.8 -42.7 108.5 233.5 165.2
166.5 132.9 22.3 80.9 69.7 37.2 19.7 -24.4 23.0 245.0 165.9
33.2 19.4 -64.4 16.3 2.7 13.5 7.1 -8.5 -62.3 7.7 6.7
34.2 19.7 -0.3 14.1 3.3 1.5 7.7 -3.4 -12.6 9.0 11.5
25.9 18.2 3.5 8.7 4.1 19.3 5.1 -5.6 24.0 8.3 12.4
26.8 20.1 7.0 7.4 4.3 22.6 3.7 -3.2 5.1 8.5 12.5
6.0 23.9 n/a 10.8 25.3 11.0 25.5 n/a n/a 12.6 20.0
5.8 23.6 n/a 12.4 20.8 100.8 23.6 n/a n/a 10.7 11.5
7.7 25.4 31.4 20.2 16.6 7.7 35.4 n/a 6.1 11.7 10.7
7.5 23.1 15.5 23.9 16.1 6.6 48.7 n/a 28.9 11.4 10.6
5.9 16.0 12.2 11.8 14.1 11.3 21.2 68.0 825.6 12.1 10.0
5.2 14.7 13.0 13.6 12.1 7.7 25.2 38.3 n/a 11.6 10.6
6.6 13.9 15.3 12.6 11.0 4.5 16.0 27.4 30.9 11.8 10.2
10.0 34.4 14.0 20.0 5.8 3.5 10.0 1.0 0.0 8.0 9.5
10.5 35.4 10.0 16.0 5.9 7.7 10.0 0.0 7.0 8.0 9.7
5.0 7.4 12.8 11.4 8.4 2.4 5.5 4.2 0.0 8.2 7.1
5.3 7.6 9.2 9.1 8.6 5.2 5.5 0.0 4.8 8.2 7.3
Jason Mabee, CFA
1.58
2.60
Buy
795
-16.3
-204.0
-25.3
29.3
-3.8
-41.1
-5.0
5.8
n/a
n/a
n/a
27.1
n/a
n/a
n/a
0.0
0.0
0.0
0.0
Lyndon Fagan Sam Berridge Lyndon Fagan Todd Scott Todd Scott Sam Berridge Todd Scott Todd Scott Phillip Chippindale Phillip Chippindale Todd Scott Sam Berridge Lyndon Fagan Lyndon Fagan Sam Berridge Sam Berridge Sam Berridge
3.06 7.00 1.43 0.54 0.47 16.06 0.71 11.87 2.61 6.03 0.37 7.10 1.33 1.67 3.13 1.02 3.50
4.06 5.12 1.81 0.72 0.62 18.80 0.70 10.75 2.89 7.46 0.48 7.37 1.77 1.53 3.37 1.92 2.89
Buy Sell Sell Buy Buy Hold Hold Hold Buy Buy Sell Buy Buy Hold Hold Buy Hold
2,737 2,621 740 608 548 6,724 100 2,189 686 1,139 187 1,000 1,440 1,395 1,427 274 1,521
-40.8 -33.1 52.8 -3.7 33.9 36.1 -11.3 97.2 29.9 65.8 47.2 75.6 130.4 -52.9 -9.7 7.8 -10.1
168.6 -63.5 39.5 -5.3 86.1 509.1 -17.5 151.0 47.8 111.5 4.1 32.0 233.8 -59.0 -30.0 -5.4 36.3
233.2 -29.2 92.5 18.2 102.7 1,275.9 -17.2 190.1 76.5 128.2 17.3 158.6 410.9 -70.7 132.9 -9.9 52.9
215.2 -160.2 0.7 93.8 80.1 1,399.7 -17.1 211.7 28.9 121.1 26.5 192.9 384.0 -10.1 114.7 -50.1 193.5
-8.6 -9.3 27.7 -0.5 3.0 8.6 -11.8 66.6 11.4 35.0 9.4 75.2 12.1 -7.4 -2.3 2.9 -2.4
20.4 -17.0 7.6 -0.6 7.5 121.6 -13.6 89.8 18.2 59.3 0.8 23.6 21.7 -7.9 -7.1 -2.0 8.4
28.2 -7.8 17.9 1.5 8.9 304.7 -12.2 104.9 29.2 68.2 3.4 117.2 38.2 -9.1 31.2 -3.7 12.2
26.0 -42.8 0.1 7.6 6.9 334.3 -12.1 116.8 11.0 64.4 5.3 142.5 35.7 -1.3 27.0 -18.6 44.6
n/a n/a 5.2 n/a 15.9 186.3 n/a 17.8 22.9 17.2 3.9 9.4 11.0 n/a n/a 35.2 n/a
15.0 n/a 18.7 n/a 6.3 13.2 n/a 13.2 14.3 10.2 45.5 30.1 6.1 n/a n/a n/a 41.8
10.9 11.8 n/a n/a 8.0 1,073.6 36.8 7.1 5.3 6.8 5.3 4.8 n/a n/a 11.3 10.2 8.9 23.7 8.8 9.4 10.8 7.0 6.1 5.0 3.5 3.7 n/a n/a 10.0 11.6 n/a n/a 28.7 7.9
n/a n/a 6.6 n/a 8.3 81.4 n/a 24.5 10.6 17.3 4.1 10.7 6.2 n/a n/a 36.2 n/a
11.8 n/a 0.3 n/a 2.2 8.8 n/a 10.0 9.0 9.9 26.1 29.7 3.3 n/a n/a n/a 39.4
6.5 971.0 0.7 32.1 2.8 3.1 n/a 7.8 6.3 8.4 8.2 4.8 1.5 n/a 7.7 n/a 27.6
3.0 0.0 0.0 0.0 3.7 50.0 0.0 42.0 0.0 10.0 1.0 15.0 4.0 0.0 0.0 0.0 0.0
6.0 0.0 0.0 0.0 2.2 152.0 0.0 52.6 0.0 10.0 0.9 27.0 4.0 0.0 0.0 0.0 0.0
1.0 0.0 0.0 0.0 7.9 3.1 0.0 3.5 0.0 1.7 2.8 2.1 3.0 0.0 0.0 0.0 0.0
2.0 0.0 0.0 0.0 4.7 9.5 0.0 4.4 0.0 1.7 2.3 3.8 3.0 0.0 0.0 0.0 0.0
74
Equity | Australia | Media
5 December 2011
APN News & Media

Buy
Target price
2H11 comes up short

APN's update for 2011 EBIT of A$171m-173m is 7% below its previous guidance, but only 3% below the IBES consensus. Publishing remains weak, but revenue and market share in outdoor and radio are growing. Grab One is emerging as an area of hidden value. We think the stock is good value on 6x FY11F PE. Buy.
Key forecasts
FY09A EBITDA (A$m) 230.3 91.60 93.10 16.80 -42.4 4.00 5.33 4.46 6.05 3.48 6.77 FY10A 244.4 93.80 103.1 17.19 2.29 12.00 16.00 4.36 5.14 2.72 7.54 FY11F 209.4 FY12F 229.5 FY13F 244.9
A$1.20 (from A$1.37)

Price
A$0.750
n/a
Price performance
Dec 08 3.2 2.8 2.4 2.0 1.6 1.2 0.8 0.4 APN.AX S&P/ASX200 Dec 09

(3M) 0.83 -9.6 -10.6 -3.3
Dec 10
-49.0 & 91.00 & 100.3 & 76.00 & 91.00 & 100.3 & 12.37 & 14.71 & 16.21 & -28.0 7.42 & 9.90 6.06 6.05 4.08 % 6.54 18.90 8.83 & 11.80 5.10 5.27 3.61 % 7.85 10.20 9.63 & 12.80 4.63 4.75 3.37 % 8.45
(12M) 1.91 -60.8 -57.3 -51.8
0.89 -15.7 -17.8 -14.2
year to Dec, fully diluted
Downgraded guidance for 2011 EBIT c3% below consensus We cut our 2011F EBIT to A$172m (in line with downgraded guidance for A$171m-173m) and our NPAT by 9% to A$76m (guidance: A$75m-77m). The company now expects EBIT to be c7% below the A$185m it was targeting at the time of the 1H11 result (when it said it expected 2H11 EBIT to be flat on pcp), but only 3% below the A$177m IBES consensus. Guidance implies EBIT to decline 11% in 2H11 (vs -24% in 1H11) and 16% for the year. Outdoor and radio growing revenue and share, but publishing weak APN has seen growth in both revenue and market share in its outdoor and radio businesses. However, NZ and Australian publishing continues to be impacted by extremely weak advertising markets. We expect some improvement in 2012, particularly given easy pcp comparisons, although visibility of this is currently limited. Grab One generating strong growth and potential to generate value upside APN used the investor day to highlight the strong growth in its 75%-owned Grab One daily deals site in NZ, which we see as an emerging area of potential value upside. Grab One is doing annualised revenue of cNZ$17m and EBIT of NZ$5m after only 18 months in operation and has maintained its 60-70% share of the NZ daily deals market, despite new competition. Stock looks cheap on 6x PE: needs return to earnings growth to drive re-rating We reduce our target price to A$1.20 (from A$1.37) to reflect earnings downgrades outlined above. Publishing remains under pressure, however outdoor and radio are performing well and we see value upside from Grab One. The company is looking at strategic options for Outdoor, which may result in cash being released to help pay down debt (net debt is relatively high at A$657m, equivalent to 3.1x 2011F EBITDA). We believe the stock is extremely cheap on a PE of 6x 2011F and expect a significant rerating when ad markets improve. Buy retained. Important disclosures can be found in the Disclosures Appendix.
A$463.50m (US$474.39m)
A$2.48m (US$2.59m)
Sector: BBG AP Media & Ent Part of: ASX/S&P 200 RIC: APN.AX, APN AU Priced A$0.75 at close 5 Dec 2011. Source: Bloomberg
Analysts
Fraser McLeish
+61 2 8259 5543 fraser.mcleish@rbs.com
Ashley Wallace
+61 2 8259 6356 ashley.wallace@rbs.com
75
Changes to forecasts
Table 1 : APN changes to forecasts
2011F YE December (A$m) Revenue Operating costs EBITDA EBIT Interest Tax rate NPAT normalised NPAT reported WANOS (m) EPS norm (cents) DPS
2012F Change -1.0% -0.2% -4.2% -5.0% 0.0% nm -8.6% 17.2% 0.0% -8.6% -8.6% Previous 1125.5 -886.5 239.0 201.7 -49.8 20% 96.4 96.4 618.7 15.6 9.3 Revised 1113.8 -884.3 229.5 192.1 -49.8 20% 91.0 91.0 618.7 14.7 8.8 Change -1.0% -0.2% -4.0% -4.8% 0.0% nm -5.5% -5.5% 0.0% -5.5% -5.5%
Growth 2011F 0.0% 4.3% -14.3% -16.1% 9.0% nm -26.3% -152.2% 2.4% -28.0% -38.1% 2012F 4.9% 4.0% 8.7% 10.3% -9.0% 13.0% 16.5% 153.8% 0.8% 15.9% 15.9%
Previous 1070.0 -851.4 218.5 181.5 -54.3 16% 83.1 -41.8 614.0 13.5 8.1
Revised 1058.8 -849.4 209.4 172.4 -54.3 17% 76.0 -49.0 614.0 12.4 7.4
Investment view
APN trades on a PE multiple of only 6x 2011F. Adjusted to a June year end for comparison purposes the PE multiple is only 5.5x FY12F and well below media sector peers. We estimate a dividend yield of 10% in 2011F assuming a 60% payout ratio. Table 2 : Australian publishing peer multiples (RBS forecasts, June YE adjusted)
Mkt Cap Price $0.85 $3.48 $0.75 $0.93 $1.26 $0.64 PE (x) FY12F 7.3x 8.6x 5.5x 17.9x 8.6x 8.3x EV/EBITDA (x) FY12F FY13F 5.3x 6.7x 5.5x 10.1x 6.4x 5.8x 4.5x 6.5x 4.9x 8.3x 5.8x 5.6x Dividend yield FY12F FY13F 8.9% 10.1% 11.0% 4.1% 7.2% 8.6% 10.1% 10.1% 12.5% 5.8% 8.7% 8.7%
YE June adjusted Fairfax Media Seven West Media APN* TEN Southern Cross Media Prime Media
* APN has been adjusted to June YE. Source: Company data, RBS forecasts
(A$m) 1,999 2,265 464 972 889 234
FY13F 6.5x 8.8x 4.8x 12.8x 7.7x 8.1x
We reduce our target price to A$1.20 (from A$1.37) to reflect lower earnings. Our target is 10% below our A$1.32 valuation due to low trading multiples across the sector. We believe the stock remains extremely cheap and expect a significant rerating when ad markets improve. We maintain our Buy rating. Table 3 : APN sum-of-the-parts valuation
EBITDA Dec YE (A$m) NZ publishing Australian Publishing Radio (100%) Outdoor Corporate/other Total Minorities Net debt PV of low tax Equity value
EV/EBITDA multiple (x) 2012F 80.7 46.1 66.0 46.8 -10.1 229.5 2011F 7.5x 8.0x 8.4x 9.0x 8.0x 8.1x 2012F 6.7x 7.1x 8.0x 8.4x 8.0x 7.4x
Value (A$m) 538 328 524 394 -81 1703 -262 -657 30 814 (A$ps) Methodology 0.87 DCF 0.53 DCF 0.85 DCF 0.64 DCF -0.13 2.76 -0.42 50% radio -1.06 A$657m at June 2011 0.05 1.32 618m shares.
2011F 72.3 41.0 62.5 43.8 -10.2 209.4
APN News & Media | Investment View | 5 December 2011
76
APN financial summary

Year to 31 Dec (A$m) Income statement Divisional sales Total revenue EBITDA Associate income Depreciation EBITA Amortisation/impairment EBIT EBIT(incl associate profit) Net interest expense Pre-tax profit Income tax expense After-tax profit Minority interests NPAT Significant items NPAT post abnormals Divisional sales revenue NZ Publishing Australian Publishing Radio Outdoor Other Divisional EBIT NZ Publishing Australian Publishing Radio Outdoor Other (inc NPI's) Cash flow statement EBITDA Change in working capital Net interest (pd)/rec Taxes paid Other oper cash items Cash flow from ops (1) Capex (2) Disposals/(acquisitions) Other investing cash flow Cash flow from invest (3) Incr/(decr) in equity Incr/(decr) in debt Ordinary dividend paid Preferred dividends (4) Other financing cash flow Cash flow from fin (5) Forex and disc ops (6) Inc/(decr) cash (1+3+5+6) Equity FCF (1+2+4) Balance sheet Cash & deposits Trade debtors Inventory Investments Other intangible assets Fixed assets Other assets Total assets Short-term borrowings Trade payables Long-term borrowings Provisions Other liabilities Total liabilities Share capital Other reserves Retained earnings Other equity Total equity Minority interest Total shareholders' equity Total liabilities & SE AIFRS 2009A 1,042.5 1,042.5 230.3 0.0 -41.3 189.0 0.0 189.0 189.0 -51.6 137.4 -20.1 117.3 -24.2 93.1 -1.5 91.6 2009A 321.9 272.2 208.3 231.0 9.1 2009A 66.5 59.5 57.1 16.1 -10.2 2009A 230.3 -12.6 -46.7 -18.8 -32.7 119.4 -17.1 4.7 -3.5 -15.9 96.5 -167.8 -52.2 0.0 -27.6 -151.2 0.0 -47.7 102.3 2009A 32.7 176.6 9.6 66.3 1,604.4 266.9 44.0 2,200.7 20.3 118.3 762.7 1.0 141.8 1,044.1 1,024.8 -43.5 -48.2 0.0 933.1 223.4 1,156.6 2,200.7 AIFRS 2010A 1,059.1 1,059.1 244.4 0.0 -38.9 205.5 0.0 205.5 205.5 -49.8 155.7 -30.1 125.6 -22.5 103.1 -9.3 93.8 2010A 320.1 288.0 213.0 238.0 0.0 2010A 71.3 60.0 55.8 28.9 -10.5 2010A 244.4 8.9 -46.5 -15.9 -26.3 165.2 -21.3 5.2 -29.6 -45.6 0.0 -33.8 -32.6 0.0 -20.6 -87.0 0.0 32.6 144.0 2010A 63.5 169.2 12.4 67.3 1,574.0 243.3 33.1 2,162.9 25.8 119.7 694.3 9.4 126.2 975.4 1,046.0 -76.5 -8.2 0.0 961.3 226.2 1,187.5 2,162.9 AIFRS 2011F 1,058.8 1,058.8 209.4 0.0 -37.0 172.4 0.0 172.4 172.4 -54.3 118.1 -20.1 98.0 -22.1 76.0 -124.9 -49.0 2011F 311.3 273.6 219.2 254.7 0.0 2011F 56.7 37.3 56.2 35.7 -13.5 2011F 209.4 0.0 -54.3 -20.1 -22.1 113.0 -30.0 -10.0 0.0 -40.0 0.0 0.0 -59.0 0.0 0.0 -59.0 0.0 14.0 83.0 2011F 63.5 169.2 12.4 67.3 1,449.1 236.3 33.1 2,031.0 25.8 119.7 680.3 9.4 125.5 960.7 1,046.0 -75.8 -126.1 0.0 844.1 226.2 1,070.3 2,031.0 AIFRS 2012F 1,113.8 1,113.8 229.5 0.0 -37.4 192.1 0.0 192.1 192.1 -49.8 142.3 -27.8 114.5 -23.5 91.0 0.0 91.0 2012F 330.2 284.6 229.1 269.9 0.0 2012F 65.0 42.4 59.6 38.6 -13.5 2012F 229.5 0.0 -49.8 -27.8 -23.5 128.4 -35.0 0.0 0.0 -35.0 0.0 0.0 -50.1 0.0 0.0 -50.1 0.0 43.3 93.4 2012F 63.5 169.2 12.4 67.3 1,449.1 234.0 33.1 2,028.6 25.8 119.7 637.0 9.4 125.5 917.4 1,046.0 -75.8 -85.2 0.0 885.0 226.2 1,111.2 2,028.6 AIFRS 2013F 1,159.3 1,159.3 244.9 0.0 -38.5 206.4 0.0 206.4 206.4 -46.8 159.6 -33.7 125.9 -25.6 100.3 0.0 100.3 2013F 340.1 297.4 237.1 284.8 0.0 2013F 66.9 49.1 61.7 42.1 -13.5 2013F 244.9 0.0 -47.8 -33.7 -25.6 137.8 -37.0 0.0 0.0 -37.0 0.0 0.0 -57.1 0.0 0.0 -57.1 0.0 43.7 100.8 2013F 63.5 169.2 12.4 67.3 1,449.1 232.5 33.1 2,027.1 25.8 119.7 593.3 9.4 125.5 873.7 1,046.0 -75.8 -43.0 0.0 927.2 226.2 1,153.4 2,027.1 Closing price (A$) Valuation metrics Preferred methodology DCF valuation inputs Rf Rm-Rf Beta CAPM (Rf+Beta(Rm-Rf)) E/EV*Ke+D/EV*Kd(1-t) Equity (E/EV) Debt (D/EV) Interest rate Tax rate (t) WACC 0.75 SOTP, DCF 6.50% 4.50% 1.05 11.2% 80.0% 20.0% 7.50% 30.0% 10.0% Price target (A$) Val'n (A$) 10-year rate Margin Kd Ke NPV cash flow (A$m) Minority interest (A$m) Net debt (A$m) Investments (A$m) Equity market value (A$m) Diluted no. of shares (m) DCF valuation (A$) 2011F 1,069.9 1.0 6.0 6.2 6.0 0.5 2011F 7.6 9.7 2011F 5.7 7.1 7.3 1.5 2012F 1,026.6 0.9 5.2 5.3 5.0 0.5 2012F 6.7 8.2 2012F 5.3 6.2 7.3 1.5 $ 1.20 1.32 6.50% 1.0% 7.50% 11.2% 1,638.0 226.2 642.5 41.2 810.5 614.0 1.32 2013F 982.9 0.8 4.7 4.8 4.6 0.4 2013F 6.1 7.4 2013F 4.5 5.2 6.5 1.3
Multiples Enterprise value (A$m) EV/Sales (x) EV/EBITDA (x) EV/EBIT (x) PE (pre-goodwill) (x) PEG (pre-goodwill) (x) At target price EV/EBITDA (x) PE (pre-goodwill) (x)
2010A 1,083.9 1.0 5.1 5.3 4.3 0.4 2010A 6.4 7.0
Comparable company data (x) Fairfax Media EV/EBITDA Year to 30 Jun EV/EBIT PE PEG wan.ax EV/EBITDA Year to fxj.ax EV/EBIT PE PEG Per share data No. shares EPS (cps) EPS (normalised) (c) Dividend per share (c) Dividend payout ratio (%) Dividend yield (%) Growth ratios Sales growth Operating cost growth EBITDA growth EBITA growth Divisional EBIT growth NZ Publishing Australian Publishing Radio Outdoor Other (inc NPI's) EBIT growth NPAT growth Pre-goodwill NPAT growth Pre-goodwill EPS growth Normalised EPS growth Operating performance Asset turnover (%) EBITDA margin (%) EBIT margin (%) Net profit margin (%) Return on net assets (%) Net debt (A$m) Net debt/equity (%) Net interest/EBIT cover (x) ROIC (%) Internal liquidity Current ratio (x) Receivables turnover (x) Payables turnover (x) 2010A 599.8 15.6 17.2 12.0 31.6 16.2 2010A 1.6% 0.3% 6.1% 8.7% 7.2% 0.8% -2.3% 79.5% 2.9% 8.7% 10.7% 10.7% 2.3% 2.3% 2010A 12.1 23.1 19.4 9.7 17.3 656.6 55.3 4.1 7.5 2010A 1.7 6.1 6.8
2011F 614.0 -8.0 12.4 7.4 77.6 10.0 2011F 0.0% 4.3% -14.3% -16.1% -20.4% -37.9% 0.8% 23.4% 28.6% -16.1% -26.3% -26.3% -28.0% -28.0% 2011F 12.6 19.8 16.3 7.2 16.1 642.5 60.0 3.2 6.5 2011F 1.7 6.3 7.1
2012F 618.7 14.7 14.7 8.8 55.0 11.9 2012F 5.2% 4.1% 9.6% 11.4% 14.6% 13.7% 6.0% 8.3% 0.0% 11.4% 19.8% 19.8% 18.9% 18.9% 2012F 13.7 20.6 17.2 8.2 17.3 599.2 53.9 3.9 7.9 2012F 1.7 6.6 7.4
2013F 618.7 16.2 16.2 9.6 56.9 13.0 2013F 4.1% 3.4% 6.7% 7.5% 3.0% 15.9% 3.6% 9.2% 0.0% 7.5% 10.2% 10.2% 10.2% 10.2% 2013F 14.3 21.1 17.8 8.7 17.9 555.5 48.2 4.4 8.4 2013F 1.7 6.9 7.6
APN News & Media | Investment View | 5 December 2011
77
Equity | Australia | Capital Goods
5 December 2011
Produced by: RBS Morgans Limited
Change of recommendation
Clough
Overruns and margin pressure
Cost overruns and margin pressure on two EPC contracts sees CLO downgrade. The question remains can margins improve to deliver on full-year expectations? While a cleaner balance sheet, corporate activity and contract announcements could all act as catalysts, trading at 12.5x FY12 PE we move it back to Hold.
Key forecasts
FY10A EBITDA (A$m) 67.10 50.10 51.30 6.61 6.29 2.20 2.97 11.20 7.74 11.90 13.00 FY11A 49.40 49.60 53.60 6.74 1.86 3.00 4.05 11.00 10.30 -15.1 12.50 FY12F FY13F FY14F 57.10 65.20 65.20 8.19 0.03 3.00 4.05 9.04 5.89 11.90 23.70
Hold (from Buy)

Target price
A$0.80 (from A$0.92)

Price
A$0.740
n/a
43.60 & 55.10 51.00 & 65.20 51.00 & 65.20 6.40 & -4.92 3.00 4.05 11.60 8.75 11.30 8.18 27.80 3.00 4.05 9.04 6.55 26.40
Price performance
Dec 08 1.0 0.8 0.6 0.4 0.2 CLO.AX S&P/ASX200 Dec 09

(3M) 0.78 -5.1 -6.1 4.3
Dec 10
(12M) 0.63 18.4 29.1 42.8
0.81 -8.1 -10.3 -4.2
Use of %& indicates that the line item has changed by at least 5%. 1. Pre non-recurring items and post preference dividends Accounting standard: IFRS Source: Company data, RBS Morgans forecasts
15.80 % 12.60
Weaker than anticipated 1H CLO has lowered its expectations for 1H12. The group is anticipating 1H revenue to be in line with the pcp (A$524m) while underlying earnings from operations will be ~A$22m (vs A$20m on the pcp) with NPAT of ~A$19m (vs continuing operating NPAT of A$19.5m on the pcp). The lower than anticipated 1H12 is mainly a result of cost overruns (-A$3m) on a fixed price contract for the upgrade of three gas regulating stations in NSW, as well as cost overruns on two EPC contracts which the company hopes to partially recover. Better outlook for 2H CLO expects that the noted project issues to be resolved in the 2H will result in a stronger performance on a hoh basis. CLO is also confident of near term opportunities which are in the pipeline. These include the Wheatstone near shore marine contract; Wheatstone hook-up and commissioning; and INPEX Ichthys near shore marine. but questions remain on CLOs ability to increase margins While we are believers in the revenue outlook for CLO, it is the groups ability to convert revenue to earnings which remains the question. CLO should be able to deliver 5-6% EBITDA margins on its current order book. According to guidance, margins in 1H will be ~4.2%. We believe these margins should improve in 2H due to increased focus following the sale of Marine Construction and stronger internal management initiatives. However, in our view a more appropriate sustainable margin of 5-6% is unlikely to be delivered until FY13. Near term catalyst but some issues weighing on the stock SOTP at A$0.80p While there are a number of positive attributes, uncertainty will weigh on the price at least until: 1) clarity is provided around CLOs FGE stake; 2) Murray and Roberts intentions with its 62% interest in CLO are known; and 3) demonstration of margin improvement. Therefore, we have pulled back our rating to a Hold.
A$571.14m (US$584.56m)
A$0.39m (US$0.40m)
Sector: BBG AP Eng & Mach Part of: ASX/S&P 300 RIC: CLO.AX, CLO AU Priced A$0.74 at close 5 Dec 2011. Source: Bloomberg
Analysts
Alexandra Clarke
Australia +61 7 3334 4804 alexandra.clarke@rbsmorgans.com
Scott Murdoch
Australia +61 7 3334 4516 smurdoch@rbsmorgans.com
79
Changes to forecasts
We have made changes to our forecasts to incorporate CLOs recent market update. The main contributors to the downgrade relate to margins. As such we have moderated our margin assumption in FY12. This has seen our EPS forecast fall by 13% in FY12. Changes to outer years are as a result of the flow on impact to margin assumptions. Table 1 : Changes to forecasts
FY12F Prev Turnover (A$m) EBIT (A$m) Reported NPAT (A$m) Normalised NPAT (A$m) EPS (c) DPS (c) Net op cash flow (A$m)
Source: RBS Morgans forecasts
FY13F %change 0% -21% -13% -13% -13% 0% -14% Prev 1164.0 56.2 64.0 63.6 8.2 3.0 55.0 Rev 1164.0 53.7 65.2 64.7 8.3 3.0 54.0 %change 0% -4% 2% 2% 2% 0% -2% Prev 1198.9 57.9 66.7 66.3 8.5 3.0 57.8
FY14F Rev 1198.9 55.4 65.2 64.7 8.3 3.0 56.0 %change 0% -4% -2% -2% -2% 0% -3%
Rev 1108.6 40.5 51.0 50.5 6.5 3.0 43.2
1108.6 51.3 58.6 58.1 7.5 3.0 50.3
Valuation, price target and investment view

Table 2 : SOTP valuation
2012F Operating EBIT (excludes FGE) ASX Peer Group Average Multiple (MRM, MCE, WOR, MAH, NWH, DCG) EV/EBIT multiple to apply to Clough Operating EBIT valuation Forge (FGE) share price FGE shares held by Clough Market value of FGE investment Less Capital gains tax Net Cash (net debt) Equity Value Shares on Issue SOTP valuation per share
Source: RBS Morgans forecasts
40.5
Given CLOs investment in Forge, we adopt a sum-of-the-parts-based valuation methodology. We apply a multiple in line with Cloughs closest peers. We value Cloughs interest in FGE at market value of A$109m, up from the A$55m purchase price, and less the implied capital gains tax. We set our target price in line with our FY12F SOTP valuation at A$0.80 per share. There is a number of positive attributes to the CLO story, including 1) a record A$1.56bn order book providing a solid base load of work for the next two years; 2) A$0.85bn revenue secured under contract for FY12; and growth in equity-accounted contribution from FGE as it targets A$500m in revenue by 2013; 3) a strong tender pipeline coming up over the next 12 months; and 4) exposure to the onshore infrastructure pipeline of work in WA through the JV with Forge. However, we do believe there are a number of factors still weighing on the CLO share price which include 1) clarity around CLOs FGE stake, 2) Murray and Roberts intentions, given its 62% interest in CLO; and 3) demonstration of margin improvement. Until some clarity is provided around these concerns, and with the stock trading within 10% of our price target and at a premium to most of its EPCM peers, we have pulled back our rating to Hold. Potential upside catalysts to the share price and/or our forecasts include corporate activity, large contracts, margin improvement and/or acquisitions. Key risks to our forecasts include project delays, low tender conversion rates, cost overruns on fixed-price contracts, execution risk and slower-than-expected recovery in the offshore construction market for vessels.
8.4
8.4 341 A$4.50 24 109 -18 189 620 780 A$0.80
Table 3 : Peer Compco

Company Code Mkt Share PE (x) Cap price FY12 428 803 256 675 254 0.58 2.91 2.1 3.1 3.30 27.33 10.1 9.7 10.3 13.1 10.7 19.7 12.3 Div Target PE (x) PE (x) EV/EBITDA EV/EBITDA EV/EBITDA EV/EBIT EV/EBIT EV/EBIT (x) FY12 (x) FY14 (x) FY12 (x) FY13 (x) FY14 Yield Price (x) FY13 FY13 FY14 (A$) FY12 9.4 8.9 7.9 12.1 6.9 15.8 10.2 8.9 8.4 6.1 11.0 6.2 13.3 9.0 3.4 4.6 7.0 7.1 6.0 11.6 6.6 3.2 4.1 5.7 6.2 3.9 10.0 5.5 2.8 3.8 4.7 5.5 3.3 8.7 4.8 6.4 6.7 7.8 9.1 7.4 12.9 8.4 6.2 6.1 6.4 7.9 4.5 10.9 7.0 5.4 5.2% 5.6 5.5% 5.3 3.3% 6.9 3.2% 3.7 0.0% 6.1 3% 0.64 3.37 2.98 3.66 4.12 6.9
Macmahon Holdings NRW Holdings Decmil Group Mermaid Marine Aust Matrix Composites* WorleyParsons Average
MAH NWH DCG MRM MCE
WOR 6,618
9.4 3.4% 26.60
Source: RBS Morgans; * Thomson One
Clough | Investment View | 5 December 2011
80
CLO financial summary

Year to 30 Jun (A$m) Income statement Divisional sales Total revenue EBITDA Associate income Depreciation EBITA Amortisation/impairment EBIT EBIT(incl associate profit) Net interest expense Pre-tax profit Income tax expense After-tax profit Minority interests NPAT Significant items NPAT post abnormals Cash flow statement EBITDA Change in working capital Net interest (pd)/rec Taxes paid Other oper cash items Cash flow from ops (1) Capex (2) Disposals/(acquisitions) Other investing cash flow Cash flow from invest (3) Incr/(decr) in equity Incr/(decr) in debt Ordinary dividend paid Preferred dividends (4) Other financing cash flow Cash flow from fin (5) Forex and disc ops (6) Inc/(decr) cash (1+3+5+6) Equity FCF (1+2+4) Balance sheet Cash & deposits Trade debtors Inventory Investments Goodwill Other intangible assets Fixed assets Other assets Total assets Short-term borrowings Trade payables Long-term borrowings Provisions Other liabilities Total liabilities Preference shares Hybrid equity Share capital Other reserves FCTR Unrealised gains/losses Retained earnings Other equity Total equity Minority interest Total shareholders' equity Total liabilities & SE AIFRS 2010A 805.0 807.7 67.1 3.1 -9.4 57.8 0.0 57.8 60.9 -3.9 59.6 -6.5 53.1 -1.1 51.9 -1.2 50.1 2010A 67.1 -9.5 -4.9 -3.2 49.6 -21.0 40.4 -15.2 4.2 -2.4 -21.0 -13.7 0.0 0.0 -37.1 0.0 16.7 28.7 2010A 107.0 37.3 13.9 73.4 8.0 2.0 128.2 86.6 456.6 7.5 52.1 47.9 2.0 42.4 151.8 AIFRS 2011A 1008.5 1013.0 49.4 13.0 -3.7 45.7 0.0 45.7 58.6 -1.5 51.4 -2.2 49.2 0.4 49.6 -4.0 49.6 2011A 49.4 -87.5 -1.5 0.6 -39.0 -7.2 -1.0 3.2 -4.9 0.1 -5.4 -17.3 0.0 0.0 -22.6 0.0 -66.5 -46.2 2011A 64.6 45.7 8.7 104.2 0.0 0.7 161.6 79.8 465.3 1.2 34.2 0.0 4.5 114.7 154.6 AIFRS 2012F 1108.6 1108.6 43.6 14.7 -3.1 40.5 0.0 40.5 55.3 2.0 57.3 -6.8 50.5 0.4 51.0 0.0 51.0 2012F 43.6 -1.6 2.0 -6.8 37.3 -10.0 125.3 2.0 117.3 0.6 -1.2 -35.0 0.0 0.0 -35.6 0.0 119.0 27.2 2012F 189.1 50.2 9.6 113.0 1.7 0.7 41.9 77.8 484.0 0.0 38.0 0.0 4.5 114.7 157.2 AIFRS 2013F 1164.0 1164.0 55.1 17.8 -1.4 53.7 0.0 53.7 71.5 6.1 77.7 -12.9 64.7 0.4 65.2 0.0 65.2 2013F 55.1 -1.4 6.1 -12.9 46.9 -13.9 -1.7 2.0 -13.6 0.9 0.0 -23.4 0.0 0.0 -22.5 0.0 10.8 32.9 2013F 210.1 52.8 10.0 123.7 3.4 0.7 51.3 75.8 527.7 0.0 39.5 0.0 4.5 114.7 158.8 AIFRS 2014F 1198.9 1198.9 57.1 16.2 -1.7 55.4 0.0 55.4 71.6 6.8 78.4 -13.6 64.7 0.4 65.2 0.0 65.2 2014F 57.1 -0.7 6.8 -13.6 49.5 -12.8 0.0 2.0 -10.8 1.8 1.0 -23.4 0.0 0.0 -20.6 0.0 18.1 36.7 2014F 236.1 54.3 10.3 133.4 3.4 0.7 60.9 73.8 573.0 0.1 40.7 0.9 4.5 114.7 160.9 Closing price (A$) Valuation metrics Preferred methodology Multiples Enterprise value (A$m) EV/Sales (x) EV/EBITDA (x) EV/EBIT (x) PE (normalised) (x) 0.80 SOTP 2011A 554.1 0.5 11.2 12.1 12.8 2012F 428.3 0.4 9.8 10.6 12.5 Price target (A$) Val'n (A$) 2013F 407.4 0.3 7.4 7.6 9.8 $ 0.80 0.80 2014F 382.4 0.3 6.7 6.9 9.8
At target price EV/EBITDA (x) PE (normalised) (x)
2011A 11.1 11.5
2012F 9.7 12.1 2012F 7.1 9.1 13.1 11.6 12.9 19.7 7.2 2012F 796.0 6.4 6.5 3.0 0.5 3.7 2012F 9.9% 11.0% n/a n/a 2012F 58.4 3.9 3.7 4.6 12.4 -189.1 -57.9 -19.8 11.3 2012F 2.0 23.1 29.5
2013F 7.3 9.5 2013F 6.2 7.9 12.1 10.0 10.9 15.9 6.1 2013F 796.0 8.2 8.3 3.0 0.4 3.7 2013F 5.0% 4.1% 26.3% 32.4% 2013F 57.5 4.7 4.6 5.6 14.5 -210.1 -56.9 -8.7 26.4 2013F 2.1 22.6 28.6
2014F 6.6 9.5 2014F 5.5 6.9 11.0 8.7 9.4 13.4 5.2 2014F 796.0 8.2 8.3 3.0 0.4 3.7 2014F 3.0% 3.0% 3.6% 3.1% 2014F 54.5 4.8 4.6 5.4 13.4 -235.1 -57.1 -8.2 23.7 2014F 2.3 22.4 28.5
Comparable company data (x) Mermaid Marine Aust EV/EBITDA Year to 30 Jun EV/EBIT PE WorleyParsons Year to 30 Jun EV/EBITDA EV/EBIT PE
Per share data No. shares EPS (cps) EPS (normalised) (c) Dividend per share (c) Dividend payout ratio (%) Dividend yield (%) Growth ratios Sales growth Operating cost growth EBITDA growth EBITA growth Operating performance Asset turnover (%) EBITDA margin (%) EBIT margin (%) Net profit margin (%) Return on net assets (%) Net debt (A$m) Net debt/equity (%) Net interest/EBIT cover (x) ROIC (%) Internal liquidity Current ratio (x) Receivables turnover (x) Payables turnover (x)
2011A 796.0 6.2 6.9 3.0 0.4 3.7 2011A 25.3% 30.0% n/a n/a 2011A 54.7 4.9 4.5 4.9 14.7 -63.3 -20.4 29.9 12.5 2011A 1.1 24.3 22.2
229.7 -8.9
229.8 -18.6
230.4 -18.6
231.3 -18.6
233.1 -18.6
82.7 0.0 303.5 1.3 304.8 456.6
99.1 0.0 310.3 0.3 310.6 465.3
115.1 0.0 326.9 -0.1 326.8 483.9
156.8 0.0 369.5 -0.6 369.0 527.7
198.6 0.0 413.1 -1.0 412.0 573.0
Source: Company data, RBS Morgans forecasts
Clough | Investment View | 5 December 2011
81
Equity | Australia | Food, Bev & Tobacco
5 December 2011
Produced by: RBS Morgans Limited
Ridley Corporation
Buy
Target price
Worth another look at this level

Challenging operating conditions will now push the recovery in earnings out another year. We make large revisions to our forecasts. Assuming more normal conditions, we expect an earnings rebound in FY13. New strategic initiatives should support growth. Corporate activity is also a real possibility. Buy.
Key forecasts
FY10A EBITDA (A$m) 58.50 29.10 29.10 9.45 41.40 7.25 7.40 10.40 6.39 7.65 9.37 FY11A 54.20 29.30 29.30 9.52 0.77 7.50 7.65 10.30 7.45 8.50 7.83 FY12F FY13F FY14F 69.10
A$1.26 (from A$1.33)

Price
A$0.98
n/a
59.40 & 66.00
Price performance
Dec 08 1.4 Dec 09

(3M) 1.05 -6.7 -7.6 -5.9
Dec 10
27.40 & 31.70 & 34.40 26.60 & 31.70 & 34.40 8.65 & 10.30 & 11.19 -9.22 7.50 7.65 11.30 6.83 7.95 7.96 19.20 7.75 7.91 9.51 6.03 7.49 % 8.96 8.60 8.00 8.16 8.76 5.73 7.21 % 9.51
(12M) 1.28 -23.4 -16.5 -27.4
1.16 -15.5 -17.6 -18.1
Use of %& indicates that the line item has changed by at least 5%. 1. Pre non-recurring items and post preference dividends Accounting standard: IFRS Source: Company data, RBS Morgans forecasts
1.2
1.0
0.8
0.6 RIC.AX S&P/ASX200
Conditions remain challenging and softer than expected Following solid rainfall, the abundance of pasture continues to impact AgriProducts (particularly Supplements and dairy). Challenging conditions are also impacting the aquafeed market. The CSF acquisition is performing well. Salt is incurring a higher cost per tonne to harvest due to the impact of the bad weather, which has delayed the production process. Despite the tough operating conditions, management is not standing still and continues to push ahead with its new strategic priorities for the next phase of RIC's growth path. These include being involved in further industry consolidation; Asian expansion (new salt field in Indonesia); feedstock operational improvements; and property redevelopment. We reduce our FY12 and FY13 NPAT forecasts by 15.5% and 6.4% respectively We highlight that our new forecasts are well below consensus estimates. We believe our FY13 forecasts are more reflective of a normalised year. Assuming more average conditions in FY13, we forecast strong earnings growth as RIC should see an improvement in the dairy and aqua-feed sectors; benefits from the restructuring and consolidation of its Supplements business; see at least a six month contribution from the new Pakenham mill; and Salt should incur a lower cost of production. RIC should also benefit from its new ERP system in FY13. Dividends are expected to be partially franked in FY12 and potentially fully franked in FY13. Investment view: Buy and A$1.26 (was A$1.33) valuation and target price
A$301.66m (US$308.75m)
A$0.34m (US$0.35m)
Sector: BBG AP Food Prod & Proc RIC: RIC.AX, RIC AU Priced A$0.98 at close 5 Dec 2011. Source: Bloomberg
Analyst
Belinda Moore
+61 7 3334 4532 belinda.moore@rbsmorgans.com
In the absence of corporate activity or a highly accretive acquisition, it is difficult to see what will rerate the share price in the short term. But, we think the current share price represents good value for patient investors. We expect RICs share price to rerate strongly when better operating conditions arise. In a consolidating agricultural sector, we feel it is inevitable RIC will be broken up in future. The sum of its parts is worth more than the whole. Our DCF valuation and price target is A$1.26, but if we include RICs property valuation, the combined value is A$1.53. A key risk is the loss of the Penrice Soda contract = about A$4m hit to EBIT. Important disclosures can be found in the Disclosures Appendix.
83
Challenging times continue

Below we summarise the key points from RICs AGM and our recent contact with management. Earnings guidance Management stated it will provide FY12 earnings guidance at the companys 1H12 result in February. RIC stated that softer trading conditions and a higher effective tax rate (about 25% vs 0.6% the pcp) will impact the 1H12 result. We forecast a 1H12 NPAT of A$14.3m down 10% on the pcp. D&A expense will also rise in FY12 due to the amortisation of the new ERP system and a full 12-month contribution from the Camilleri Stockfeeds (CSF) acquisition. An attractive new banking facility is expected to lower RICs interest costs in FY12, despite the company having higher average debt levels. AgriProducts continues to be impacted by adverse weather: Above-average rainfall continues to generate rich pasture, which is seeing reduced demand for supplementary feed products. These conditions are affecting RICs Supplements business (feeds the cattle industry), which is generating a loss, and its Dairy business. There has been third party overstocking of certain stockfeed products. Falling raw material prices may also limit some profit opportunities. Also, RICs aqua-feed business is experiencing particularly tough conditions due to three key reasons: 1) increased competition (we think this is structural); 2) a high AUD is encouraging more imports of prawns; and 3) the water temperature in Tasmania has been too cold and thus the fish have gone into hibernation and have consequently eaten less feed. On a positive note, CSF is performing strongly. RIC will benefit from a full 12-month contribution in FY12 as opposed to only four months in FY11. The deferred consideration of A$3m will be paid to vendors in March 2012. The packaged sector is also performing well. We forecast AgriProducts to produce an EBIT of A$30.3m in FY12 compared to A$24.9m in the pcp. Growth largely reflects the acquisition of CSF. Salt will also be impacted by bad weather: Salt is incurring a higher cost per tonne to harvest due to the impact of bad weather, which has delayed the production process. Management stated that assuming a return to more normal weather patterns, overall salt costs in FY13 should fall substantially. We forecast a flat EBIT result from Salt in FY12 or A$21.3m. Strategic initiatives to deliver the next phase of growth: Managements strategic priorities for the next phase of RIC's growth path is based on linking the ingredients to feed and, ultimately, food supply to meet the growing demand for food security. We view these initiatives positively. They demonstrate that the Board and management team have a clear strategic plan to lift returns and improve the companys competitive positioning. These initiatives will contribute to RICs medium- to longer-term growth profile. RICs four key initiatives are:
Ridley Corporation | Investment View | 5 December 2011
84
Table 1 : RICs strategic initiatives

Strategic initiative Explanation Agribusiness consolidation RIC intends to participate in the consolidation of the Australian agricultural sector, including the active pursuit of other synergistic businesses in this sector. RIC is seeking to acquire operations complementary to its traditional business and businesses such as CSF that broaden its scope in the provision of nutrient solutions. RIC intends to explore further expansion in Asia, in particular, in Indonesia, as it provides strong growth opportunities for the company in both salt and animal nutrition. RIC already has a salt business in Indonesia, which processes imported raw salt through a brand new refinery for sale to the local industry. RIC is in ongoing discussions with the Indonesian government about new opportunities. A feasibility study is being conducted by RIC to establish a commercial scale salt field in Indonesia (c150kt annual harvest capacity). This would significantly reduce Indonesias reliance on large volumes of imported salt. Management stated that should this project proceed, it will fundamentally change the nature of its salt business in Indonesia and will provide an opportunity for significant long-term growth in that region. We believe the cost of the salt field could be about A$15m. Given the country risk, we expect RIC would want to generate a return in excess of 20%. It could take at least two-three years until it makes a material contribution to earnings. Feedstock operational improvements consist of cost savings, mill efficiencies and restructuring. RIC is reviewing its regional operations. A programme of replacing underperforming or non-core mills is being implemented. RIC stated that wherever possible, the new mills will be substantially funded through land sales of old mill sites. RIC has committed to constructing a new, state-of-the-art, low-cost (saves A$20/t) ruminant mill (200kt) adjacent to its existing mill at Pakenham. This mill should improve RICs competitive positioning and grow market share in the region. It will service the Victorian Gippsland dairy industry. The mill is expected to be constructed for around A$10m and achieve a ROFE of at least 18% (or an IRR of greater than 15%). Subject to receipt of approvals, this project is expected to commence shortly and be completed in August 2012 (benefits FY13). Following the successful commissioning of the new Pakenham mill, the Dandenong facility will be closed. The new mill will be part funded by the closure and sale of RICs Dandenong mill. The sale process has commenced for this 1.3ha property which is now zoned, and is ideally located, for high density residential use. Following a review of the Northern Victorian dairy market, RIC has recently divested its ruminant mill and associated operations at Corowa, just over the Murray River in NSW. As the majority of dairy enterprises are consolidating into the Gippsland and Western districts of Victoria, this business was becoming marginal and in need of a near-term capital upgrade. The Corowa sale has freed up capital of about A$1.5m. The strategic review of the long-term viability of the Supplements business has now been conducted given this business is producing losses and is highly sensitive to weather events. Following this review, RIC has consolidated this business into Townsville, where it has recently acquired the business of competitor, lick block manufacturer, Livestock Nutrition Technologies (LNT) for about A$0.75m plus working capital. It is from the new business that RIC can concentrate its service offering on the higher volume northern Queensland market. One of RICs general managers was quoted saying the move has strengthened the companys ability to service the extensive northern cattle production business, supplying supplements across Northern, Central and Western Queensland, the NT and northern regions of WA, from a more efficient manufacturing facility. He said the extensive northern cattle industry has a strong emphasis on production feeding as well as drought feeding, driven by the phosphorous deficiency across large areas of the north and annual protein drought. RICs intention is to close the other Supplements site at Wacol near Brisbane, which was impaired down to land value in FY09. The sale process for the Wacol site is underway and the closure of these operations is expected to liberate about A$10m of capital. Management expects that the outcome of these actions will contribute to the creation of a more reliable and profitable Supplements business, with a commensurately lower cost base, and capable of generating sustainable earnings. One of the reasons for the Wacol closure was greater variability in demand in southern livestock production areas and a greater range of alternatives available in supplementary feed sources across the region. Property redevelopment RIC's significant surplus land portfolio will continue to be developed and value will be unlocked. Last year, RIC announced that, following a feasibility study on the opportunity of converting the Dry Creek salt field into a potential residential development, it would now be postponed as it was unable to find a solution to maintain its contractual supply obligations with Penrice Soda. The Penrice contract runs until 2019, with an option to extend the contract up to 2033. Management said Cheetham Salts 912ha salt field at Lara, adjacent to the Avalon Airport and the Moolap salt field (475ha) located on Corio Bay close to Geelongs central business district have redevelopment opportunities. These sites are now surplus to RICs ongoing salt production requirements. Preliminary planning and technical investigations have already been undertaken at Lara and consultants have been engaged to advise on potential alternative use scenarios for the Moolap site. We note that these sites are only in the books for A$3.5m and would be worth significantly more if developed. Management has continually stressed that RIC is not a property developer. As a result of another year where the Bowen salt field did not achieve its production targets, a review of its long-term viability is currently underway.
Source: RIC, RBS Morgans
Asian expansion
Feedstock operational improvements
85
Forecast implications we downgrade our numbers

Due to the softer trading conditions, we have downgraded our FY12 and FY13 NPAT forecasts by 15.5% and 6.4% respectively. We highlight that our new forecasts are well below consensus estimates. We believe our FY13 forecasts are more reflective of a normalised year. Assuming more average conditions in FY13, we forecast strong earnings growth as RIC should see an improvement in the dairy and aqua-feed sectors; benefit from the restructuring and consolidation of its Supplements business; see at least a six month contribution from the new Pakenham mill; and Salt should incur a lower cost of production. Dividends are expected to be partially franked in FY12 and potentially fully franked in FY13. Table 2 : Forecast changes
FY12F (A$m) EBIT NPAT EPS (c) DPS (c) Consensus NPAT Old 50.0 31.5 10.2 7.75 New 44.7 26.6 8.6 7.50 32.1 % chg -10.5% -15.5% -15.5% -3.2% Old 53.1 33.9 11.0 8.00 FY13F New 51.1 31.7 10.3 7.75 35.2 % chg -3.7% -6.4% -6.3% -3.1%
Source: RBS Morgans forecasts and Bloomberg consensus estimates
Valuation A$1.26 per share

Table 3 : Savills independent valuation of RICs land portfolio
Location South Australia Victoria Queensland Total Relocation costs 50% Contingency Net land valuation
Source: Savills
Value (A$m) 100.0 33.1 5.7 138.8 -38.0 -19.0 81.8
After revising our forecasts, our DCF-based valuation has fallen to A$1.26 from A$1.33 previously. It is important to highlight that our DCF valuation ascribes no value to the company's large property portfolio. Savills independent valuation of RICs land is A$81.8m or 27cps. Combining the property valuation with our DCF would equate to a combined value for the company of A$1.53. We use a DCF model to value RIC as we believe the visibility and stability of the companys cash flows are more accurately valued through this methodology. Our DCF valuation assumes a WACC of 11.0% based on a risk-free rate of 5.25%, a cost of equity (Ke) of 13.22% and a debt premium of 2.5%, with gearing set in line with the companys target of 30%.
Investment view: Buy and A$1.26 target price

In the absence of corporate activity or a highly accretive acquisition, it is difficult to see what will rerate the share price in the short term. However we believe the current share price represents good value for patient investors. We would expect RICs share price to rerate strongly when better operating conditions arise. In a consolidating agricultural sector, we believe it is inevitable that RIC will be broken up in future. In our view, the sum of the companys parts is worth more than the whole. Our new target price of A$1.26 (up A$1.33) is in line with our new valuation. Key risks to our target price include adverse weather, disease and a reduction in feed economics or salt demand (loss of the Penrice Soda contract = about A$4m hit to EBIT). However if RIC lost the Penrice contract, it would ramp up the redevelopment of the Dry Creek salt fields into a residential community. The Dry Creek land value is in books at about A$42m plus net working capital of about A$11m.
86
RIC financial summary

Year to 30 Jun (A$m) Income statement Divisional sales Total revenue EBITDA Associate income Depreciation EBITA Amortisation/impairment EBIT EBIT(incl associate profit) Net interest expense Pre-tax profit Income tax expense After-tax profit Minority interests NPAT Significant items NPAT post abnormals Divisional Revenue (A$m) Cheetham Salt Ridley Agriproducts Divisional EBITDA (A$m) Cheetham Salt Ridley Agriproducts Corporate Cash flow statement EBITDA Change in working capital Net interest (pd)/rec Taxes paid Other oper cash items Cash flow from ops (1) Capex (2) Disposals/(acquisitions) Other investing cash flow Cash flow from invest (3) Incr/(decr) in equity Incr/(decr) in debt Ordinary dividend paid Cash flow from fin (5) Inc/(decr) cash (1+3+5+6) Equity FCF (1+2+4) Balance sheet Cash & deposits Trade debtors Inventory Investments Goodwill Other intangible assets Fixed assets Other assets Total assets Short-term borrowings Trade payables Long-term borrowings Provisions Other liabilities Total liabilities Share capital Other reserves Unrealised gains/losses Retained earnings Total equity Minority interest Total shareholders' equity Total liabilities & SE AIFRS 2010A 728.0 729.1 58.5 0.0 -12.3 46.2 0.0 46.2 46.2 -8.2 38.1 -9.0 29.1 0.0 29.1 0.0 29.1 AIFRS 2011A 723.7 724.9 54.2 0.0 -14.3 40.0 0.0 40.0 40.0 -9.7 30.2 -0.9 29.3 0.0 29.3 0.0 29.3 AIFRS 2012F 670.1 671.3 59.4 0.0 -14.7 44.7 0.0 44.7 44.7 -9.0 35.7 -9.1 26.6 0.0 26.6 0.7 27.4 AIFRS 2013F 720.5 721.8 66.0 0.0 -14.8 51.1 0.0 51.1 51.1 -8.3 42.9 -11.1 31.7 0.0 31.7 0.0 31.7 AIFRS 2014F 745.8 747.0 69.1 0.0 -14.7 54.4 0.0 54.4 54.4 -7.8 46.5 -12.1 34.4 0.0 34.4 0.0 34.4 Price target (A$) Valuation metrics Preferred methodology DCF valuation inputs Rf Rm-Rf Beta CAPM (Rf+Beta(Rm-Rf)) E/EV*Ke+D/EV*Kd(1-t) Equity (E/EV) Debt (D/EV) Interest rate Tax rate (t) WACC $ DCF 5.25% 6.00% 1.33 13.2% 70.0% 30.0% 7.75% 25.0% 11.0% Val'n (A$) 10-year rate Margin Kd Ke NPV cash flow (A$m) Minority interest (A$m) Net debt (A$m) Investments (A$m) Equity market value (A$m) Diluted no. of shares (m) DCF valuation (A$) 2012F 413.5 0.6 6.8 9.2 11.3 2013F 405.5 0.6 6.0 7.9 9.5 $ 1.26 1.26 5.25% 2.5% 7.75% 13.2% 492.0 0.0 104.1 0.0 387.8 307.8 1.26 2014F 403.3 0.5 5.7 7.4 8.8
107.9 621.0
107.3 617.5
107.3 563.9
111.6 610.0
114.9 631.9
Multiples Enterprise value (A$m) EV/Sales (x) EV/EBITDA (x) EV/EBIT (x) PE (pre-goodwill) (x)
2011A 411.5 0.6 7.4 10.3 10.3
28.6 36.6 -6.7 2010A 58.5 -4.6 -8.6 -6.8 0.8 39.4 -22.1 1.7 0.0 -20.4 -0.8 9.9 -21.4 -12.3 6.7 17.3 2010A 7.0 82.0 90.5 50.3 29.2 0.0 225.2 0.0 484.3 2.1 96.2 76.9 0.0 24.0 199.1 237.5 35.9 11.7 285.2 0.0 285.2 484.3
26.9 33.5 -6.2 2011A 54.2 -6.8 -9.1 -4.1 1.2 35.5 -13.1 -28.2 0.0 -41.3 -1.7 36.6 -22.9 12.1 6.2 22.4 2011A 13.2 89.0 91.5 52.5 44.4 0.0 233.4 0.0 524.0 1.9 92.7 113.5 0.0 25.0 233.1 237.5 36.3 17.1 291.0 0.0 291.0 524.0
26.9 39.4 -6.9 2012F 59.4 -4.1 -9.0 -9.1 0.7 38.0 -21.1 4.3 0.0 -16.8 0.0 0.0 -23.1 -23.1 -2.0 16.9 2012F 11.3 85.1 91.3 52.5 44.4 0.0 235.5 0.0 520.2 11.5 84.5 103.8 0.0 25.0 224.9 237.5 36.3 21.4 295.2 0.0 295.2 520.2
28.7 44.5 -7.2 2013F 66.0 -6.3 -8.3 -11.1 0.0 40.3 -16.7 7.5 0.0 -9.2 0.0 0.0 -23.1 -23.1 8.0 23.6 2013F 19.3 91.5 97.3 52.5 44.4 0.0 229.9 0.0 534.9 11.5 90.6 103.8 0.0 25.0 231.0 237.5 36.3 30.0 303.9 0.0 303.9 534.9
30.4 46.1 -7.4 2014F 69.1 -7.3 -7.8 -12.1 0.0 41.9 -15.1 0.0 0.0 -15.1 0.0 -3.0 -24.6 -27.6 -0.8 26.8 2014F 18.4 94.7 104.4 52.5 44.4 0.0 230.3 0.0 544.7 11.2 93.7 101.1 0.0 25.0 231.1 237.5 36.3 39.9 313.7 0.0 313.7 544.7
At target price EV/EBITDA (x) PE (pre-goodwill) (x)
2011A 9.0 13.2
2012F 8.3 14.6 2012F 6.8 10.9 14.0 12.7 17.2 27.8
2013F 7.3 12.2 2013F 6.3 11.1 14.0 11.8 15.6 24.4
2014F 7.0 11.3 2014F 5.3 9.6 12.4 11.4 15.0 23.1
Comparable company data (x) Warrnambool Cheese EV/EBITDA Year to 30 Jun EV/EBIT PE MSF Sugar Year to 31 Dec EV/EBITDA EV/EBIT PE
Per share data No. shares EPS (cps) EPS (normalised) (c) Dividend per share (c) Dividend payout ratio (%) Dividend yield (%)
2011A 307.8 9.5 9.5 7.50 78.7 7.5
2012F 307.8 8.9 8.6 7.50 86.7 7.5
2013F 307.8 10.3 10.3 7.75 75.2 7.7
2014F 307.8 11.2 11.2 8.00 71.5 8.0
Growth ratios Sales growth Operating cost growth EBITDA growth EBITA growth NPAT growth
2011A -0.6% 0.0% -7.3% -13.6% 0.8%
2012F -7.4% -8.8% 9.6% 11.9% -9.2%
2013F 7.5% 7.2% 11.0% 14.3% 19.2%
2014F 3.5% 3.4% 4.7% 6.4% 8.6%
Operating performance Asset turnover (%) EBITDA margin (%) EBIT margin (%) Net profit margin (%) Return on net assets (%) Net debt (A$m) Net debt/equity (%) Net interest/EBIT cover (x) ROIC (%) Internal liquidity Current ratio (x) Receivables turnover (x) Payables turnover (x)
2011A 35.9 7.5 5.5 4.1 13.7 102.1 35.1 4.1 7.8 2011A 1.8 8.5 7.1
2012F 32.1 8.9 6.7 4.0 15.1 104.1 35.3 5.0 8.0 2012F 1.7 7.7 6.9
2013F 34.1 9.2 7.1 4.4 16.8 96.1 31.6 6.2 9.0 2013F 1.8 8.2 7.5
2014F 34.5 9.3 7.3 4.6 17.3 94.0 30.0 6.9 9.5 2014F 1.8 8.0 7.3
Source: Company data, RBS Morgans forecasts
87
Equity | Australia | Metals & Mining
5 December 2011
Energy Resources of Aust

Sell
Target price
From hero to zero

We have made material changes to our base case valuation of ERA, factoring in higher capex, rehabilitation costs, along with revised assumptions for Ranger 3 Deeps. We continue to think the outlook for the company remains too uncertain from an investment point of view, and maintain our Sell recommendation.
Key forecasts
FY09A EBITDA (A$m) 459.8 272.6 272.6 142.9 129.1 39.00 24.80 1.10 1.22 1.15 40.60 FY10A 144.2 47.00 52.80 27.68 -80.6 8.00 5.10 5.67 4.34 5.18 8.54 FY11F 113.5 -121 & -21.5 & -4.16 & -72.4 0.00 0.00 -37.7 1.16 5.14 % -1.12 FY12F -66.7 & -66.7 & -12.8 & 209.7 0.00 0.00 -12.2 1.46 6.71 % -8.84 FY13F -61.3 & -61.3 & -11.8 & -8.05 0.00 0.00 -13.2 3.35 8.37 & -8.16
A$1.08 (from A$1.81)

Price
A$1.570
n/a
133.0 & 103.5 %
Price performance
Dec 08 20 16 12 8 4 0 Dec 09

(3M) 2.44 -35.6 -36.2 -23.8
Dec 10
(12M) 8.10 -80.6 -78.9 -75.6
1.88 -16.5 -18.5 -13.2
year to Dec, fully diluted
Significant stay-in-business spend near term

ERA.AX
S&P/ASX200
A$812.82m (US$831.91m)
A$4.69m (US$4.86m)
Sector: BBG AP Mining Part of: ASX/S&P 100 RIC: ERA.AX, ERA AU Priced A$1.57 at close 5 Dec 2011. Source: Bloomberg
We have made material changes to our base case ERA model, factoring in higher depreciation costs, increased rehabilitation costs (A$750m vs A$680m guidance), along with slightly higher capex through to 2021. Further, we have taken a more conservative view on Ranger 3 Deeps, increasing our cash cost assumptions and reviewing date of first production. The net change has been a material downgrade to our NPAT and NPV. ERA now has circa A$1.2bn of spend medium term on water treatment, Ranger 3 Deeps decline/studies, rehabilitation, and other costs, which we think may be under pressure following recent cost pressure throughout the mining industry. Too many issues without solutions
Analysts
Lyndon Fagan
Australia +61 2 8259 5870 lyndon.fagan@rbs.com
Sam Berridge
sam.berridge@rbs.com
Extending the mining lease at Ranger beyond 2021 remains the critical issue for ERA. We believe it is too early factor this in as: 1) the Mirrar traditional owners are not supportive of uranium mining; 2) the federal government would need to approve a lease extension, which looks more difficult with the Greens gaining more power; and 3) making a case for a lease extension would be a long, drawn-out process, which wouldnt be started until Ranger 3 Deeps has been drilled out (2013-14). Investment view no need to be there While the stock has fallen materially over the past year, we continue to see downside risk to the share price based on near term operational risk due to the upcoming wet season and a lack of clarity around ERAs future as the mine lease expiry approaches. We have a negative valuation on the Ranger open pit, and allocate some option value to the Ranger 3 Deeps project (50% risk weighted), which in our view is unlikely to get the go ahead in the current environment. We lower our NPV based target price to A$1.08ps (previously A$1.81ps) after factoring in the additional expenses outlined above. Important disclosures can be found in the Disclosures Appendix.
Phillip Chippindale
phillip.chippindale@rbs.com
Warren Edney
warren.edney@rbs.com
Todd Scott
todd.scott@rbs.com
89
Lower reserves = higher depreciation

ERA recently downgraded reserves from 29,800t of uranium oxide as at 31 December 2010, to 16,000t as at June 2011. Uranium reserves almost halved on the back of the decision not to proceed with the Heap Leach facility, and lower grades in the ore stockpile. The decline in reserves implies depreciation on a per tonne of production basis will almost double going forward, which is a material proportion of our earnings downgrade below. We have also factored in slightly lower production in 2012. Table 1 : Changes to NPAT and NPV
2011F Previous NPAT (A$m) Current NPAT (A$m) Change (A$m)
2012F 92.5 -66.7 -159.2
2013F 0.7 -61.3 -62.0
NPV (A$ps) 1.81 1.08 -0.73
39.5 -21.5 -61.1
We have also factored higher rehabilitation and capex costs, to be conservative, following recent cost escalation throughout the industry, along with making minor operational assumptions.
Valuation and risks

Our DCF-based valuation and target price for ERA has decreased due to the reasons outlined above. Our NPV attributes no value to Jabiluka. Downside risks to our target price are lower-thanexpected uranium prices, worse-than expected weather impacts and higher costs. Upside risks are around higher than expected uranium prices, and positive news flow around a lease extension.
Energy Resources of Aust | News Highlights | 5 December 2011
90
ERA financial summary

Capital Profile Number of shares (m) Market cap. (A$m) 518 813 EV (US$m) EV/lb 134 0.2 December year end Net Profit (normalised) Net Profit (reported) EPS (c) EPS Growth (%) CFPS (c) P/CF ratio PE DPS (c) Dividend Yield EV/EBITDA Assumptions AUD/USD Uranium spot (US$/lb) Uranium contract (US$/lb) Uranium achieved (US$/lb) Production & sales Ranger Open Pit (t) Ranger 3 Deeps (t) Jabiluka (t) Total production (t) Total production (Mlb) Total Sales (t) Profit and Loss ($m) Total sales Cost of sales Royalties Exploration EBITDA Depreciation Amortisation EBIT Interest income Interest expense Tax NPAT Minorities Profit Attributable Abnormals Profit After Abnormal Items Profitability analysis ROA - EBIT / (assets - cash) ROE - NPAT / equity EBIT margin (%) EBITDA margin (%) Effective tax rate (%) Balance Sheet ($m) Debt Equity Assets Cash Net debt / equity Net debt/(net debt + equity) EBIT / net interest EBITDA / net interest Net debt / EBITDA Cashflow Summary ($m) EBITDA Operating Cashflow Capex Free cashflow Investing Cashflow Financing Cashflow Increase (decrease) in cash 2009A 272.6 272.6 142.9 129.1 130.4 1.2 1.1 39.0 24.8% 0.1 2009A 0.79 46.75 50.84 50.84 2009A 5240 0 0 5240 11.6 5497 2009A 781 279 42 0 460 67 0 393 0 11 109 273 0 273 0 273 2009A 36% 28% 50% 59% 29% 2009A 0 967 1359 254 -26% -36% 35.1 41.1 -0.6 2009A 460 249 37 212 37 -65 147 2010A 52.8 47.0 27.7 -80.6 22.1 7.1 5.7 8.0 5.1% 2.0 2010A 0.92 45.86 48.16 48.16 2010A 3793 0 0 3793 8.4 5026 2010A 586 416 26 0 144 61 0 83 0 16 15 53 0 53 -6 47 2010A 7% 6% 14% 25% 22% 2010A 0 951 1423 188 -20% -25% 5.3 9.2 -1.3 2010A 144 42 45 -3 45 -63 -66 2011F -21.5 -121.0 -4.2 -115.0 35.4 4.4 -37.7 0.0 0.0% 1.2 2011F 1.03 55.06 61.59 61.59 2011F 2629 0 0 2629 5.8 4653 2011F 622 477 27 5 114 127 0 -13 3 25 -13 -22 0 -22 -99 -121 2011F -1% -2% -2% 18% 38% 2011F 0 1342 1973 681 -51% -103% -0.6 5.2 -6.0 2011F 114 136 130 6 130 487 494 2012F -66.7 -66.7 -12.9 210 26.5 5.9 -12.2 0.0 0.0% 1.5 2012F 1.04 45.00 63.94 63.94 2012F 4014 0 0 4014 8.9 4014 2012F 546 364 29 20 133 216 0 -83 16 28 -29 -67 0 -67 0 -67 2012F -7% -5% -15% 24% 30% 2012F 0 1259 1872 619 -49% -97% -7.0 11.2 -4.7 2012F 133 137 200 -63 200 0 -63 2013F -61.3 -61.3 -11.8 -8.0 20.2 7.8 -13.2 0.0 0.0% 3.3 2013F 1.09 47.50 64.96 64.96 2013F 3285 0 0 3285 7.2 3285 2013F 430 284 23 20 103 177 0 -74 15 28 -26 -61 0 -61 0 -61 2013F -6% -5% -17% 24% 29% 2013F 0 1154 1754 466 -40% -68% -5.5 7.7 -4.5 2013F 103 105 258 -153 257 0 -153 2014F -56.4 -56.4 -10.9 -8.0 12.5 12.5 -14.4 0.0 0.0% 7.0 2014F 1.02 52.50 62.81 62.81 2014F 2464 0 0 2464 5.4 2464 2014F 335 227 18 20 70 133 0 -63 11 28 -23 -56 0 -56 0 -56 2014F -5% -5% -19% 21% 29% 2014F 0 1041 1635 325 -31% -45% -3.8 4.2 -4.6 2014F 70 65 208 -143 207 0 -142
Valuation parameters Beta Cost of equity Cost of debt
1.35 13.4% 5.0%
WACC Rf ERP
10.4% 5.3% 6.0%
Valuation Summary Ranger Open Pit (including rehabilitation) Ranger 3 Deeps (50% risk weighted NPV) Jabiluka Exploration Total operations Net cash (debt) Corporate Total valuation
A$m -224 186 0 0 -38 681 -85 558
A$ps -0.43 0.36 0.00 0.00 -0.07 1.32 -0.16 1.08
Reserves Ranger Jabiluka Total Resources Ranger Jabiluka Total
t U308 16 68 84 t U308 132 142 274
Mlb 35 149 185 Mlb 291 312 603
%U308 0.15 0.50 0.43 %U308 0.13 0.50 0.32
Unit Sensitivity on Profit (A$m) and NPV (A$ps) 2011F 2012F Uranium (US$1/lb) 5.32 9.63 US$/A$ (US 1c) -2.18 -3.17
NPV 0.08 -0.04
Uranium production (tonnes)

t 6000 14 5000 12 4000 10 8 6 2000 4 1000 2 0 2009A 2010A 2011F 2012F 2013F 2014F 2015F Mlb
3000
Energy Resources of Aust | News Highlights | 5 December 2011
91
Precious Metals Review
2 December 2011
Gold ETFs exceed French reserves

Three cheers for the physically backed gold ETF universe, where combined holdings have exceeded yet another major national central banks reserves. Combined holdings of the 22 funds we monitor have risen to a record 2,450t, exceeding the gold holdings of Banque de France and coming within just 2t of Italys reserves. ETF holdings are now the 5th largest hoard of the yellow metal. It is clear that in spite of the gold price having largely moved in line with risk in recent weeks, interest in the yellow metal remains strong among certain investor classes. Over the course of November alone, combined gold ETFs holdings rose by nearly 100t. Professional investors, particularly speculators, have often been a seller of gold during periods of risk aversion, to de-risk their portfolios or in an effort to raise cash to meet margin calls and redemptions. As a result, during such times, gold becomes positively correlated with pro-cyclical asset classes and, seemingly, fails to serve its traditional safe-haven role. This happened in the early stages of the 2008 banking crisis and has also been noted over the last few weeks. But note too profit-taking, with gold now up 23% since end 2010 but having a low-high price spread ($1,308-1,920/oz) of a hefty $612/oz or 47%. Official sector gold holdings plus the major ETFs tonnes (ETFs as of 1st December vs official CB holdings as of end-October).
10,000 8,134 8,000
6,000
4,000
3,396 2,814 2,452 2,450 2,435 1,054 1,040 871 765
2,000
0 Germany IMF ETFs China Switzerland France United States
Nick Moore Head of Commodity Research +44 20 7678 0555 nick.metals.moore@rbs.com
Source: International Financial Statistics, gold funds, RBS
Nikos Kavalis Commodity Strategist +44 20 7085 9314 nikos.kavalis@rbs.com
www.rbsm.com/strategy Bloomberg: RBSR<GO>
The ETF universe is the stomping ground of a diverse mix of investors, which includes long-term institutional players, the asset management/private banking community and retail individuals. As such, the ETF sector was not immune to gold sales, during August and September in particular, when the big price correction took place from a peak of ~$1,920 to a low near $1,530/oz. From mid-August to the end of September, combined gold ETF holdings fell by 77t. Since then, however, investor appetite for gold has seen these fortunes reversed, with the absorption of ~120t through to 1st December. The trend turned positive following the late-September lows, as signs of strong support at $1,600/oz uncovered great value for gold and since then inflows have been consistent. While the yellow metal has moved in line with equities and other commodities over the period, modest safe-haven purchases have continued and this has benefited ETFs.
Russia
Japan
Italy
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This is all great news for the gold bulls. Physical (including ETF) investor positions tend to be resilient and less of an overhang for the market in the near term. Importantly, with speculative positions still leached of what used to be a core long, there is considerable upside for the price of the yellow metal. We expect sharply higher prices in the New Year boosted by high carat chuk kam buying for the auspicious Chinese Lunar Year of the Dragon gifting which begins 23rd January, and we forecast an average of $1,900/oz over the first quarter. Central banks on track to buy 16% of global mine production Using a combination of World Gold Council and GFMS data as well as our own calculations, we estimate that central banks bought a net ~370t over January-October this year. Interestingly, as illustrated in table below, a notable portion of the third quarter purchases were undeclared (i.e. do not appear in IMF statistics). Most importantly, based on the January-October estimate annualised, central banks are on track to absorb 16% of forecast world mine production this year. After two decades of consistently supplying the market with bullion, central banks are now a key source of gold demand. Meanwhile the Sales under Year 2 of the Central Bank Gold Agreement (CBGA3), which ended on 26 September, were just 1.1t (excluding the 53.3t IMF disposals). In October, Germany, one of the CBGA signatories, sold 4.7t (150koz) of its gold reserves, to provide material for the countrys commemorative coin minting programme. This move has had many precedents although Germany has not sold gold in recent history for reserve reallocation purposes or to raise money for other activities, it has on a number of occasions released metal to be used for coin minting. Key central bank buyers and sellers (negative) of gold during JanuarySeptember 2011, tonnes Q1
Mexico Russia Thailand Korea Bolivia Belarus Tajikistan Kazakhstan Colombia Serbia Ukraine Mongolia Greece Malta Czech Republic Sri Lanka Philippines Undeclared Net Global Purchases 93.1 22.5 9.3 0.0 0.0 2.5 1.1 -0.0 0.0 0.0 0.1 0.0 -0.1 0.1 -0.0 1.1 -0.5 4.7 133.8
Q2
5.6 25.5 18.7 25.0 0.0 1.1 0.4 3.1 0.0 0.5 0.3 0.0 0.3 0.0 0.0 1.6 4.3 -20.0 66.5
Q3
-0.5 14.7 24.9 0.0 14.0 0.0 1.7 0.0 2.3 0.3 0.0 0.2 0.0 0.0 -0.1 -8.0 -29.3 128.2 148.4
YTD
98.3 62.8 52.9 25.0 14.0 3.6 3.2 3.1 2.3 0.8 0.4 0.2 0.2 0.1 -0.2 -5.3 -25.5 112.8 348.7
Source: Thomson Reuters GFMS, World Gold Council, RBS
We have often argued that given the current market conditions, sales and not purchases by central banks would make sense, to serve reserve harmonisation purposes. Gold is near its record peak and Eurozones central banks reserves are overweight in the metal (>70% of German, Italian and French reserves). Despite this fact, for reasons explained in previous reports, it looks like central banks will continue to absorb metal in the foreseeable future, on a net basis. 2
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Precious Metals Review | 2 December 2011
ETFs have absorbed a net 190t year-to-date. Added to Thomson Reuters GFMS January-September estimates of 1,088t of bar and coin demand, investors have absorbed approximately 1,278t of physical metal. This contrasts net outflows of 173t from Comex futures YTD, illustrating the fact that long-term physical players have accounted for the bulk of gold investment demand.
Precious metal market buzz.

Turnover on the Shanghai Gold Exchange; strength into price dips
20 15 10 5 0 Jan-10 400 350 300 250 200 Jul-10 Volume (t) Jan-11 Jul-11 Price - yuan/g
Precious metals, which have been under pressure on Eurozone concerns, have begun December in a stronger mood. The Chinese 50bp cut in its bank RRR requirements plus the US Fed providing cheap swap lines helped sentiment. Gold begins December up 4% from the $1,680/oz support level, and is now trading at $1,750/oz. Silver too has leapt 7% from its $31/oz support line to above $33/oz. Platinum and palladium have also rebounded with palladium, our favoured precious metal, stealing the show and rising 18% this week from its $560/oz support line and topping $660/oz. Chinese physical demand seems to have kept to decent, albeit unremarkable levels. Turnover on the Shanghai Gold Exchange bounded higher as gold dropped mid-month and has overall kept to healthy levels, but came short of its late-September/early-October levels. The end of the wedding season saw Turkish gold imports in November fall to 0.73t from 7.49t in October. The Istanbul Gold Exchange noted that in the JanNov11 period imports of 77.4t were 82% higher than 2010 imports of 42.5t. The Indian market on the other hand has been struggling, particularly over the last couple weeks, as the weakness of the India rupee has more than offset the drop in the dollar-gold price. The wedding season gold gifting has offered some support, but the record high rupee price and high inflation impinging on disposable incomes, have kept demand under pressure. Remember that this follows a poor Diwali festival for gold jewellery, hit by a high and volatile gold price. The normally seasonally strong fourth quarter for Indian jewellery consumption seems likely to prove disappointing. Primary sales of US Eagle coins were disappointing in November, for both silver and gold. Gold Eagle sales fell for the third consecutive month (-18% mom) to 41,000 oz, the lowest since June 2008. Silver Eagle sales fell even more sharply, by 55% to 1.4Moz, a level also unseen since mid-2008. At an industrial level, sliver prices, as well as those of the PGM, are clearly undermined by EU fears, but initially also suffered in the wake of disappointing economic numbers from China and the US. More recently, however, US consumer confidence has improved, and early indicators suggest that Black Friday retail sales were healthy; this has helped to improve sentiment.
Source: SGE, RBS
Gold in Indian rupee and Chinese yuan terms

100,000 80,000 60,000 40,000 20,000 Dec-06 Dec-08 INR/Oz 14,000 11,500 9,000 6,500 4,000 Dec-10 CNY/Oz (RHS)
Source: Thomson Reuters, RBS
Gold Eagle sales, 000 oz

250
Silver Eagle sales, Moz

7 6
200
5
150
4 3
100
2
50
1 0 Jan-08
0 Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Source: United States Mint, RBS
Source: United States Mint, RBS
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Semi-conductor global billings (3monht average), $Bn

30 25 20 15 10 5 0
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
80. 0% 60.0% 40.0% 20. 0% 0.0% -20.0% -40.0%
Investors have remained cautious about silver, with negligible inflows into the physically backed funds RBS monitors being noted over the course of November. iShares investors have been liquidating, while the ETFS New York fund has added small amounts of metal. Both gold and silver remain well lent, as the effort to raise dollars continues. Forward rates have continued to move to the right, with exceptionally strong gains noted towards the end of the month. Meanwhile at the industrial level the latest global billing figures for the semiconductor industry (important for all four metals, but especially palladium and silver) show that the three-month rolling average for September was 2% down yoy. The cumulative rate of sale was up by 4%, but the improvement in the industry has been slowing as the year has progressed. This is partly due to the completion of the replenishment of the inventory pipeline, while in Japan, the anticipated post-earthquake recovery has not, for now at least, developed. In China, the auto sector continues to slow, with October sales just 5.7% higher yoy and the year-to-date sales up just 3.5% yoy. The slow-down was particularly noticeable in smaller vehicles. These figures did not help sentiment towards palladium, although this market is still not mature and the government is currently (2011-2014) rolling out the Euro 4 emission limits across the nation. Chinese palladium demand in the sector is likely to increase by some 200,000oz next year, even with the slower growth profile for the local industry, and to account for 14% of global palladium demand. Ahead of the key November 15th Johnson Matthey Platinum Review, palladium rose to $675/oz. Post the review palladium dropped 17% to low of $561 by the 25th. However, as we showed earlier value had been uncovered and palladium has begun December up 14% to touch $640/oz. In late November Johnson Matthey reported healthy broad-based growth in its business and was bullish about the outlook for the auto sector, which has helped sentiment. This should be treated with caution, though, as it could well just be due to the company gaining market share. Sentiment surrounding the EU auto sector remains nervous. Note that it accounts for 21% of global gross platinum demand and 18% of gross palladium demand.
$Bn
y-o-y
Source: SIA, RBS forecast
Platinum in local currencies

140 130 120 110 100 90 Jan-10 Jul-10 $
Jan-11 Jul-11 Rand
Source: Thomson Reuters, RBS
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Interestingly, whereas during Diwali silver demand had held up well in India, more recently we are hearing reports of weak offtake. According to some local dealers, the recent trading range of INR 54,000-58,000/Kg is too expensive for local consumers, who are looking for a return below INR 50,000/Kg to buy.
RBS Technical Commodity Strategy

William Moore, +44 20 7085 9174, William.moore@rbs.com Precious Metals Review | 2 December 2011
Source: RBS
Gold USD Daily candle chart with retracements with Ichimoku Cloud
A break through the top of the cloud and the break from the bullish flag pattern gives us an early signal that gold looks set to go HIGHER! To me the charts look poised for a break higher here and the $1,841 level is looking like an appealing longer-term objective. Although that is caveated to a certain degree by two important resistance levels at $1,752 and $1,791 which have both been tested recently and both stayed firm. They are Fibonacci retracements taken from the principal September range between the $1,920 and $1,583 levels and have been good at picking some of the highs/lows of the short-term oscillations. So the bias is for the recent bullish activity to continue and its absolutely key that the market is able to break cleanly over the $1,752 and $1,791 levels. Should I be wrong then the key support levels to be aware of are the top of the cloud at $1,730 and the lower end of the cloud. The market also appears to have formed some kind of base around the $1,712 level, so there are plenty of support levels to tuck stop losses underneath on long positions. RES: SUP: $1,752 $1,791 $1,841 $1,712 $1,694 $1,663
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Palladium Daily candle chart with retracements and MACD (5,21,5) Precious Metals Review | 2 December 2011
Source: RBS
BULLISH the chart indicates the start of a new bullish trend which should pick up pace once through the $663/$678 resistance zone. So many positive signals are coming from the short-term charts, here that palladium looks set for a rally just as it did in late June, early August and early October. The MACD momentum indicator below the chart above is designed to highlight short-term shifts in the relative performance, or more specifically the difference in how the market has performed over the last 5 trading days (week) to its performance over the past 21 days (monthly.) To me the signal looks quite stark. The recent mini sell off from the $678 to the $565 levels has come to an end and the market should now focus on the $663 to $678 zone again. The blue line as delineated on the chart above is whats called a line of polarity; its a level that manages to catch the turning points of both bullish and bearish trends note how it caught lows in June, August and September and then a cluster of highs in November. That should again have an influence on the basis that the palladium price will target this zone over the coming week. So the topside targets lie at $678 onto $694 onto $731 even potentially $792 as a much longer-term objective. I suggest using the recent low on the 1st of November at $622 as a stop loss on long positions. RES: SUP: $663 $678 $694 $633 $622 $595
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Equity | Europe
02 December 2011
Produced by The Royal Bank of Scotland plc
Global Views
Views and trade ideas pre/post EU Summit next week
The ECB meets next Thursday (8 Dec) and the EU Summit will be held the following day (9 Dec). Here are some thoughts from our European strategists on the Summit and how to trade the periphery and Germany pre/post-Summit. The 9 December Heads of State Summit is shaping up to be one of the most important meetings in recent memory. If there is a credible and timely plan to move budget parameters to a central oversight from Brussels with binding rules, then Germany's objections on allowing the ECB bazooka in one form or another will weaken. Markets will then trade a rally in periphery on an implicit deal for budget centralisation in return for ECB help. How plausible is all this? 1. Is there enough political agreement to get binding budget rules enshrined in laws? This is still developing and there is a debate on whether the rules need a new Treaty (which will take years and probably fail the test of a popular mandate), Treaty amendment, or an intergovernmental agreement via so called 'Enhanced Cooperation' clauses. For example, Germany wants national governments to cede budgets to a Brussels review with a right to reject a budget if it was assessed to be unsuitable, and with a stick of sanctions for noncompliance. This has been a much more sensitive issue for France and the current noise from Paris is that France will reject this loss of sovereignty. This does not bode well for the Summit but it is still a week away and we wait to see how negotiations develop. At this stage, it is unrealistic for the 9 Dec EU meeting to be the final word on the terms of greater fiscal union, and we will probably be served with another string of Summits in 2012 as part of an iteration process for EMU policy harmonisation. 2. Will the ECB play ball, even if budgets are effectively outsourced? That depends on how watertight the agreement is, but my working assumption is that legal ambiguity will be put to one side and as long as Germany does not object vociferously then the ECB balance sheet will be available, if needed. At the least, we expect markets to trade this theme if the December Summit produces results. 3. What are the execution risks? For instance, truly binding fiscal handcuffs require Treaty change and this will take years and is subject to very high risk of failure. In fact, Treaty failure is more likely than not. Treaty amendments require the consent of all EU members, and the UK is a complication here, while intergovernmental agreements are a touch looser but still need parliamentary support. We doubt the markets will look at any intergovernmental agreement unfavourably but markets would still be concerned on the political vote risk given that it has been hard to get reforms such as removing wage indexation done across all EMU members. Tactical trades we work backwards with the post-Summit ideas first: If the 9 December EU Summit delivers, the ex-post tactical trade is to go long periphery and sell Germany. Expectations of ECB action will do the trick and on the assumption of the December EU Summit transferring power to Brussels we would expect German long end yield convergence higher. Conversely, if the EU December Summit disappoints, for instance there's no agreement on fiscal policy, then ex-post spreads should widen aggressively and I still expect German bonds to rally. It is pretty binary but the crisis is political.
Analysts
Equity Research 250 Bishopsgate, London, EC2M 4AA, United Kingdom www.research.rbsm.com
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So to answer the tactical question of what to do here and now: Buy German short end to 5y as the ECB goes towards ZIRP, and forwards coalesce around lower USD levels. The market will be thinking of global QE which includes the ECB and that could infer buying across all EMU bond markets, not just periphery. For 10y Bunds, I do not change my structural long until I am more confident the Euro crisis is being resolved or entering an end-game. That is far from the case. In addition, if the ECB is forced into the QE for reasons of deflation or bank runs then it is not wise to be short Bunds for the ECB duration grab. Besides, the consensus is now bearish Bunds and few have probably noticed that the EMU region is self financing and so the money has to flow somewhere. This is why short end can trade negative in Germany and while this is not a duration need from the market, Bunds are still the best eligible collateral for Euros. In the meantime, ECB easing helps suppress yields but all this is a curve steepener between 2s30s, while German 5s30s will be the trade to have soon given that the juice in 2y is now getting limited. In EGB spreads, most real money investors are likely to sit on the fence (beyond year end book closing) given that we are so close to the Summit date and the pre-Summit hope is hardly a novel experience anymore. Would be go long periphery here? No. By all means close down risk for year end but there is little basis to believe the EU Summit will beat by now heightened expectations but we are flexible enough to say that if leaders do positively surprise then we will change our trading recommendations accordingly. The point is, EMU policy moves are an iterative process so there will be further developments that will allow investors to get exposure and even if there is a favourable policy development/ECB intervention, that still does not make supply tension in Q1-12 disappear. In other words, there is no silver bullet and so no need to get panicked about either bull or bear trades. Bear in mind also that even if speculation on ECB balance sheet deployment gathers pace the danger remains that risk events overtake. For instance, a hard default of Greece in Q1 2012. Some of the EGB spread compression into year end has been remarkable with France post auction trading just 85bp over Bunds. This is a massive pain trade and our desk reports fast money exiting shorts in year end position closing. The spread can squeeze to 75bp but is a great entry level into supply and clean risk positions next year. Other trades that we like include long Green Euribor outright or v Euro$, long Dec ECB OIS, long 30y UST v 30y DSL. In basis, we still like selling STG Mar-13 FRA-OIS v EUR, but otherwise expect that the decline in USD LIBOR and EURIBOR is likely to disappoint until a EMU solution of sorts is found. Harvinder Sian, RBS
Global Views | 02 December 2011
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RBS Economics | Global Weekly Preview
05 December 2011
Global Weekly Preview

ECB to deploy new measures for banks, waiting for the EU summit
Main economic data releases & events: 05 Dec 2011 09 Dec 2011
Time Country Indicator Period Nov Nov Oct Nov Dec Oct Q3 Oct Oct Nov Nov Dec RBS GBM 50.5 52.9 0.0 -0.5 4.5 -0.5 1.0 -0.5 2.5 15.0 5.2 0.5 Median 50.5 53.8 -0.3 -0.5 4.25 1.0 1.2 0.3 2.5 10.0 5.2 0.5 Previous 51.3 52.9 0.3 -0.6 4.5 -4.3 1.2 -2.7 2.5 10.1 5.2 0.5
Monday, 05 December 09:30 UK PMI Services 15:00 US ISM Non-Manf. Composite 15:00 US Factory Orders, % Tuesday, 06 December 00:01 UK BRC Sales Like- For- Like, % yoy 03:30 AU RBA Cash Rate Decision, % 11:00 GE Factory Orders, % mom Wednesday, 07 December 00:30 AU GDP, % qoq sa 11:00 GE Industrial Production, % mom 20:00 NZ Official Cash Rate, % Thursday, 08 December 00:30 AU Employment Change, thousands 00:30 AU Unemployment Rate, % 12:00 UK BoE Rate Announcement, % 18:30 EA EU-27 Leaders Hold First Summit Session in Brussels Friday, 09 December * EA EU Leaders Hold Summit Meeting in Brussels 09:30 UK PPI input, % yoy 09:30 UK PPI output, % yoy 13:30 US Trade Balance, USD bn 14:55 US U. of Michigan Confidence
p = preliminary
Nov Nov Oct Dec P
13.5 5.4 -44.5 66.0
12.9 5.3 -44 65.8
0.8 5.7 -43.1 64.1
Source: RBS Research, RBS Strategy, Bloomberg
German Chancellor Merkel and French President Sarkozy will meet in Berlin on Monday, attempting to find a common position to shape the debate at the upcoming EU leaders summit, which begins on Thursday and continues on Friday. Merkel and Sarkozy will try to push an overhaul of the European Fiscal foundations but whether or not they will agree on a common and credible ground remains to be seen. Ahead of the EU summit, the focus will be on Central Bank decisions. On Tuesday the RBA is due to announce its cash rate target. Our Economists in Australia favour no change in the cash rate at next weeks Board meeting, putting the odds of a cut at 40% (consensus is for a 25bp cut) After moving the cash rate back down to 4.5% in November, which RBA staff have called a neutral rate, RBS view is that the Board will feel comfortable to leave it there for the time being. Thursday we get Bank of England and ECB decisions. When the BoE published the November Inflation Report the December policy meeting was all set up for a cliffhanger. A 50 basis point undershoot on inflation in the medium term even when the Euro meltdown risk was excluded suggested that several MPC members were hankering for upscaling QE2 as soon as possible. Nothing can be ruled out these days, but the chances that a majority of the Committee will vote to upscale QE2 in December therefore look pretty slim, unless the data flow
Editors Jan Dubsky RBS Economics jan.dubsky@rbs.com Silvio Peruzzo Editors Silvio Peruzzo RBS Economics silvio.peruzzo@rbs.com www.rbsm.com/strategy Bloomberg: RBSR<GO>
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We expect the ECB to announce a number of policy decisions on Thursday; primarily aiming at helping the banks and fighting risks of credit crunch (see our ECB Preview for more details). We look for a refi rate cut of 25bps with no corridor change. We see risks clearly skewed towards a 50bp cut (and in that case a narrowing in the corridor). In addition to a lowering in interest rates we look for a further loosening of the collateral policy in euros, a move towards (re)accepting dollar collateral which if implemented, would go a long way to assuage some of the concerns related to funding. We remain of the view that QE will not be deployed by the ECB at this stage: it will need further indications from sovereigns that they are serious about reforming the Union before it can be more forceful in its intervention. In that context, there are increasing signs that the EU Heads of States meeting of Dec 9 will see new proposals on the table regarding a more serious reform of the Union which could eventually lead to greater ECB backing. On Tuesday and Wednesday we get German factory orders and industrial output for October (we forecast below consensus outturn on both readings), while in the UK the focus will be on the November Services PMI (on Monday) and industrial production for October (on Wednesday). Light week on the data front in the US. - please see our data previews and our Global Weekly Calendar which includes the full set of RBS Economics forecasts - RBS Economics
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RBS Economics | Global Weekly Preview | 05 December 2011
and contagion from Europe is truly catastrophic between now and midday on Thursday. The belief that the MPC is ready to cut Bank Rate refuses to go away - perhaps because there is a belief that the ECB will take rates lower than the perceived 1% lower bound on the refi rate. Again, we think that this is very unlikely, based on what the Committee has said in public on this issue in the recent past (for more details see full preview in the PDF).
The Week Ahead

RBS Economics | Global Weekly Preview | 05 December 2011 3 Monday, 05 December UK: Services PMI, November Released: 09:30 Forecast: 50.5 Market: 50.5 Previous: 51.3
The PMI services balance fell last month to 51.3. When one of the most reliable gauges of activity in the service sector drops close to the 50 line it always sets the recession alarm bells ringing. But we are not quite there yet. The forward looking business expectations balance bounced back impressively in October, so one could make a case for a modest rally in the series in November. But we think it is more likely that weak fundamentals dominate and the activity balance continues to slide south, falling to 50.5 - still above the 50 line. But only just. RB US: Factory Orders, October Released: 15:00 Forecast: 0.0% Market: -0.3% Previous: 0.3% (mom)
For the RBS US Strategy view please click here US: Manufacturing ISM Survey, November Released: 15:00 Forecast: 52.9 Market: 53.8 Previous: 52.9
For the RBS US Strategy view please click here Tuesday, 06 December UK: BRC retail sales, November Released: 00:01 Forecast: -0.5% Market: -0.5% Previous: -0.6% (yoy)
The November BRC data will be closely watched as an early indicator of the state of consumer demand as we enter the Christmas shopping season and against the backdrop of reports of a retail price war. In November, the CBI reported sales balance fell (-19 from -11), GfK consumer confidence barely recovered from three-year lows (-31 from -32), and key macroeconomic indicators continued to deteriorate (notably employment). Mild weather conditions can be supportive of consumer spending, but we judge the risks at this point to be skewed to the downside especially in areas such as clothing & footwear where purchases of winter ranges may have been delayed. More generous price discounting might provide a prop, but note that the BRC data are in nominal terms so the effect of price cutting is more ambiguous. Overall, we look for a similar pace of sales growth to that seen in October: +1.5% y/y on the total measures, -0.5% y/y on a like-for-like basis, a little below the underlying trend. RKW Australia: RBA cash rate decision, December Released: 03:30 Forecast: 4.5% Market: 4.25% Previous: 4.5%
Barring a disaster in Europe, we narrowly favour no change in the cash rate at next weeks Board meeting, putting the odds of a cut at 40%. After moving the cash rate back down to 4.5% in November, which RBA staff have called a neutral rate, we expect that the Board will feel comfortable to leave it there for the time being. The Bank continues to forecast growth to pick up strongly next year on the back of the boom in investment, and recent domestic data have on the whole been quite strong. This leaves the risk of a cut as hinging on the Banks judgment about Europe, and perhaps a concern that the Board dont meet again
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Germany: Factory orders, October Released: 11:00 Forecast: -0.5% Market: 1.0% Previous: -4.3% (mom)
We forecast German factory orders to fall slightly in October, by 0.5% m/m, posting a third consecutive decline on the month. Factory orders contracted by 3.6% q/q in Q3 following nine consecutive quarters of expansion. The most recent survey data continue to point to ongoing and fast contraction in orders, for example the new orders series of the German manufacturing PMI declined for the eighth consecutive month in October to 42.2 (and then again in November to 41.9, lowest since May 2009). Also, the outlook for foreign orders according to the PMI weakened very significantly, with the new exports orders series pointing to contraction since July this year. Our forecast is consistent with a decline of 5.6% 3m/3m. SP Wednesday, 07 December Australia: Real GDP, Q3 Released: 00:30 Forecast: 1.0% Forecast: 2.1% Market: 1.2% Market: 2.3% Previous: 1.2% Previous: 1.4% (qoq) (yoy)
We will finalise our GDP forecast after key trade and public demand data are published on Tuesday. Our preliminary forecast is for a 1% rise in GDP as we see strength in business investment and a solid rise in consumer spending offsetting large subtractions from net exports, inventories and public investment. Residential investment should be fairly flat, while public consumption should post a solid rise. The main risks relate to the subtraction from inventories and whether business investment will print more strongly than we have anticipated. Note that the Annual National Accounts showed that growth in 2010-11 was revised up from 1.8 to 2.1%, although we are not sure whether this means H2 2010 growth was revised higher or if H1 2011 growth was bumped up instead. KD Germany: Industrial production, October Released: 11:00 Forecast: -0.5% Market: 0.3% Previous: -2.7% (mom)
We forecast German industrial production output to fall by 0.5% m/m in October, following a larger decline of 2.7% in September. Overall industrial output rose by 1.7% q/q in Q3, boosted by a strong rise of 3.2% m/m in July. We believe that weakening foreign and domestic demand will weigh negatively on industrial output growth in Q4 and Q1 next year, contributing to a contraction in GDP. Survey data suggest the decline in activity in the coming months is likely to accelerate. The most recent readings of the Manufacturing PMIs for Germany are already consistent with fast contraction in output. For example the output series of the the German manufacturing PMI declined below the 50 mark in October, to 49.7 consistent with contraction, and declined further in November to 47.7. Our forecast is also consistent with a contraction in output on a 3m/3m basis, the first since February 2010. SP 4
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until February. So far, the signs are that Europe has entered recession as policymakers have been unable to stop the worsening situation in financial markets, while the US is growing at a modest rate and China has started to ease policy given inflation appears finally under control. The fall-out to date for Australia has been limited, though, in that commodity prices have fallen, but remain high as companies continue to ramp up investment, bank funding costs are under limited pressure and confidence has levelled off after rebounding over recent weeks. The Bank has given no indication of its intentions and we suspect that the decision will be made on the day. The market is pricing a 97% chance of a 25bp rate cut. FE
New Zealand: RBNZ cash rate decision, October Released: 20:00 Forecast: 2.5% Market: 2.5% Previous: 2.5% RBS Economics | Global Weekly Preview | 05 December 2011 5
Unless Europe falls off a cliff, the RBNZ is expected to sit tight at a record low of 2.5%. Recent data have been OK, although there was an odd rise in the quarterly unemployment rate considering that the new monthly employment series shows an improving trend. Europe is likely to dominate the RBNZs thinking, though, and we suspect that it will remain nervous about the possibility of bank funding freezing up at some point. The market is pricing in a 2% chance of a 25bp rate cut. KD Thursday, 08 December Australia: Labour market data, November Released: 00:30 Forecast: 15k Market: 10k Previous: 10k (employment) Forecast: 5.2% Market: 5.2% Previous: 5.2% (u/e rate) We expect a solid but unspectacular rise in employment of 15K in November, with the unemployment rate remaining unchanged at 5.2%. Forward indicators, while softer than they were last year, still point to moderate growth in employment. Business hiring intentions from both the NAB and AIG surveys suggest that employment should continue to grow, while job vacancies also suggest that the current weakness in employment is overdone. FE UK: BoE MPC policy decision, December Released: 12:00 Forecast: 0.5% Market: 0.5% Previous: 0.5%
When the Bank published the November Inflation Report the December policy meeting was all set up for a cliffhanger. A 50 basis point undershoot on inflation in the medium term even when the Euro meltdown risk was excluded suggested that several MPC members were hankering for upscaling QE2 as soon as possible. The Minutes soon put paid to that. We learned that the Committee voted unanimously to stick to the 75 billion purchase programme, and viewed the 50 bp undershoot as not a big deal. (The Old Lady's Enigmatic Communication Strategy). At least some Committee members appear to think that it makes no sense to upscale QE2 while the existing purchase programme is still underway, given speed limit effects on the monthly run rate of asset purchases. The Minutes also suggested that the Committee would take until February to decide whether QE2 was as effective as the MPC had hoped, and therefore whether QE2 needed to be topped up (although Paul Fisher subsequently argued that little could be learned by February). And the Committee is back to worrying about whether it is credible to stimulate the economy with inflation far above target. All in all, the Minutes appeared to shoot down in flames the idea that a change in policy was imminent. Nothing can be ruled out these days, but the chances that a majority of the Committee will vote to upscale QE2 in December therefore look pretty slim, unless the data flow and contagion from Europe is truly catastrophic between now and midday on Thursday. The belief that the MPC is ready to cut Bank Rate refuses to go away - perhaps because there is a belief that the ECB will take rates lower than the perceived 1% lower bound on the refi rate. Again, we think that this is very unlikely, based on what the Committee has said in public on this issue in the recent past. RB
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Friday, 09 December UK: Producer prices, October Released: 09:30 Forecast: 13.5% Market: 12.9% Forecast: 5.4% Market: 5.3% Previous: 0.8% (yoy input) Previous: 5.7% (yoy output)
Input price inflation eased to a 10-month low of 14.1% y/y in October. Although input prices appear to be modestly higher in the month crude oil edged up by around 0.7% m/m in sterling terms and the Thomson Reuters/Jeffries commodities index was slightly higher base effects should be sufficient to push the y/y rate lower. We look for a rise in input prices of 0.4% m/m, which would take the y/y rate down to 13.5%. Survey data show an ongoing moderation in producer pricing: the manufacturing PMI output prices balance in November signalled the lowest inflation for over two years (with input costs now reportedly falling). On core output prices we look for a rise of 0.1% m/m, nudging the y/y rate down to 3.3% from 3.4%. For headline output prices we also look for a rise of 0.1%, lowering the y/y rate to 5.4% from 5.7%. RKW US: Trade balance, October Released: 13:30 Forecast: -44.5bn Market: -44.0bn Previous: -43.1bn
For the RBS US Strategy view please click here US: University of Michigan, December Released: 14:55 Forecast: 66.0 Market: 65.8 Previous: 64.1
For the RBS US Strategy view please click here
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Weekly Data Calendar

RBS Economics | Global Weekly Preview | 05 December 2011 7
Time BST Country Monday 05 December 00:30 AU 00:30 AU 02:30 CN 08:45 IT 08:50 FR 08:55 GE 09:00 EA 09:00 EA 09:30 UK 10:00 EA 10:00 EA 11:59 UK 11:59 UK 15:00 US 15:00 US Tuesday 06 December 00:01 UK 00:30 AU 00:30 AU 00:30 AU 03:30 AU 08:00 EC 08:15 CH 08:15 CH 10:00 EA 10:00 EA 11:00 GE 11:00 GE 14:00 CA 15:00 US Release Month RBS Forecast Median forecast Previous
Company Operating Profit, % qoq Real Business Inventories, % qoq China HSBC Services PMI PMI Services PMI Services PMI services PMI Services PMI Composite PMI Services Retail sales, % mom Retail sales, % yoy Halifax house price, % 3m yoy Halifax house price, % mom ISM Non-Manf. Composite Factory Orders, % BRC Sales Like- For- Like, % yoy Current Account Balance, AUD bn Real Net Exports of GDP, ppc Real Public Demand, % qoq RBA Cash Rate Decision, % ECB's Coene Speaks at Bruegel Conference in Brussels CPI, % mom CPI, % yoy GDP, % qoq GDP,% yoy Factory Orders, % yoy Factory Orders, % mom BoC O/N Lending rate, % Fed's Tarullo Testifies at Senate Banking Committee
Q3 Q3 Nov Nov Nov F Nov F Nov F Nov F Nov Oct Oct Nov Nov Nov Oct Nov Q3 Q3 Q3 Dec Nov Nov Q3 P Q3 P Oct Oct Dec
3.5 1.2
3.0 1.2 44.1 49.3 51.4 47.8 47.2 50.5 0.1 -0.8 -0.7 0.0 53.8 -0.3 -0.5 -5.6 -0.6 4.25 0.0 -0.3 0.2 1.4 1.9 1.0 1.0
51.4 47.8 47.2 50.5
52.9 0.0 -0.5 -6.7 -0.8 -0.4 4.5
6.7 2.5 54.1 43.9 49.3 51.4 47.8 47.2 51.3 -0.6 -1.4 -1.8 1.2 52.9 0.3 -0.6 -7.4 -0.5 -0.4 4.5 -0.1 0.0 0.2 1.4 2.4 -4.3 1.0
0.2 1.4
Wednesday 07 December 00:30 AU GDP, % qoq sa 00:30 AU GDP, % yoy sa 06:45 CH Unemployment Rate, % nsa 06:45 CH Unemployment Rate, % sa 09:00 IT Industrial Production, % mom 09:00 IT Industrial Production, % yoy 09:30 UK Industrial Production,% mom 09:30 UK Industrial Production, % yoy 09:30 UK Manufacturing Production, % mom 09:30 UK Manufacturing Production, % yoy 11:00 GE Industrial Production, % yoy 11:00 GE Industrial Production, % mom 15:00 UK NIESR GDP est, % 20:00 US Consumer Credit, USD bn 20:00 NZ Official Cash Rate, % 23:50 JP Machinery Orders, % mom 23:50 JP Machinery Orders, % yoy 23:50 JP Balance of payments, JPY bn Thursday 08 December * GR 00:30 AU 00:30 AU 07:30 FR 08:30 NE 11:00 IR 11:30 FR 12:00 UK 12:45 EA 12:59 JP 13:15 CA 13:30 US 13:30 CA 13:30 EA 15:00 US 18:30 EA 23:50 JP 23:50 JP 23:50 JP 23:50 JP 23:50 JP Friday 09 December * CN * CN * CN * EA 02:00 CN 02:00 CN 07:00 GE 07:00 GE 07:00 GE 07:00 GE Greece HICP, % yoy Employment Change, thousands Unemployment Rate, % Bank of France Business Sentiment Netherlands CPI, % Ireland HICP, % yoy Sarkozy Attends European Popular Party Marseille Meeting BoE Rate Announcement, % ECB Rate Announcement, % Eco Watchers Survey Current DI Housing Mortgage Co Hous. St Initial Jobless Claims, thousands New Housing Price ECB Press Conference Wholesale Inventories, % EU-27 Leaders Hold First Summit Session in Brussels GDP deflator, % yoy Q3 GDP, Annualized % qoq Q3 GDP, % qoq Money stock, M2 % yoy Money stock, M3 % yoy Industrial production, % yoy Fixed Assets Inv Excl. Rural YTD, % yoy Retail Sales, % yoy EU Leaders Hold Summit Meeting in Brussels Consumer Price Index , % yoy Producer Price Index , % yoy CPI, % mom CPI, % yoy HICP, % mom HICP, % yoy
Q3 Q3 Nov Nov Oct Oct Oct Oct Oct Oct Oct Oct Nov Oct Oct Oct Oct Oct Nov Nov Nov Nov Nov Nov Dec Nov Nov 2-Dec Oct Oct 2nd estimate 2nd estimate 2nd estimate Nov Nov Nov Nov Nov Nov Nov Nov F Nov F Nov F Nov F
1.0 2.1
1.2 2.3 3.1 3.1 -0.3 -2.7 -0.3 -0.7 -0.3 1.4 3.5 0.3 7.0 2.5 0.5 9.6 503.6
2.5 0.5 9.4 536.9
1.2 1.4 2.9 3.0 -4.8 -2.7 0.0 -0.7 0.2 2.0 5.4 -2.7 0.5 7.386 2.5 -8.2 9.8 1584.8 2.9 10.1 5.2 95.52 2.6 1.5 0.5 1.25 45.9 207.6 391 0.189 -0.1 -1.9 6.0 1.5 2.7 2.3 13.2 24.9 17.2 5.5 5.0 0.0 2.4 0.0 2.8
15.0 5.2
10.0 5.2 2.5
0.5 1.0
0.5 1.0 395 0.4 -1.9 5.2 1.3 2.7 2.3 12.6 24.8 16.8 4.5 3.4 0.0 2.4 0.0 2.8
0.0 2.4 0.0 2.8
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Time BST 07:00 07:45 07:45 07:45 07:45 08:30 08:30 09:00 09:00 09:00 09:00 09:30 09:30 09:30 09:30 09:30 09:30 09:30 13:30 13:30 13:30 14:55
Country GE FR FR FR FR SE SE NO NO NO NO UK UK UK UK UK UK UK US CA CA US
Release Trade Balance, EUR bn, nsa Industrial Production, % mom Industrial Production, % yoy Manufacturing Production, % mom Manufacturing Production, % yoy Industrial Production, % mom Industrial Production, % yoy CPI, % mom CPI, % yoy CPI Underlying, % mom CPI Underlying, % yoy Trade balance (g & s) Trade balance (total) Trade balance (non-EU) PPI input, % yoy PPI output, % mom PPI output, % yoy PPI core output, % yoy Trade Balance, USD bn Merchandise Trade Labor Productivity U. of Michigan Confidence
Month Oct Oct Oct Oct Oct Oct Oct Nov Nov Nov Nov Oct Oct Oct Nov Nov Nov Nov Oct Oct Q3 Dec P
RBS Forecast
Median forecast 15 -0.2 2.8 -0.2 3.5 -0.8 3.7 0.3 1.5 0.2 1.3 -3450 -9400 -5400 12.9 0.0 5.3 3.3 -44 0.8 65.8
Previous 17.4 -1.7 2.3 -1.6 3.4 1.32 4.79 -0.1 1.4 0.0 1.2 -3940 -9814 -5715 0.8 0.0 5.7 0.3 -43.1 1.247 -0.93 64.1
13.5 0.1 5.4 3.3 -44.5 66.0
All times are GMT. = no fixed date * = no fixed time F = final p = provisional
r = revised # = consensus forecast e = estimate
Source: RBS Research, RBS Strategy, Bloomberg
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Economists Chief European Economist Senior European Economist UK Economist UK Economist UK Economist (Analyst) Euro area Economist Euro area Economist Head of Research & Strategy Non-Japan Asia Chief Japan Economist Chief China Economist Chief Economist Australia Australian Economist Jacques Cailloux Nick Matthews Ross Walker Richard Barwell Gareth Anderson Silvio Peruzzo Jan Dubsky Sanjay Mathur Junko Nishioka Li Cui Kieran Davies Felicity Emmett +44 207 085 4757 +44 207 085 0173 +44 207 085 3670 +44 207 085 5361 +44 207 085 2999 +44 207 085 7520 +44 207 085 9119 +65 6518 5165 +81 3 6266 3589 +852 2966 2531 +61 2 8259 5171 +61 2 8259 5835 RBS Economics | Global Weekly Preview | 05 December 2011 9
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Equity | Asia Pacific
2 December 2011
Produced by: The Royal Bank of Scotland Asia Securities (Singapore) Pte Limited
Circuit Breaker
All eyes on the summit
Another week of Asian outflows, although this data does not capture the positive impact of recent policy easing. Regional markets and flows could trend higher from here until the EU summit on 9 December, which would be pivotal for the medium-term outlook of risky assets. Maintain 'risk on' for now but stay nimble.
Chart 1 : Asia ex-Japan fund flows
3 (US$ bn) 2
-1
-2
-3 Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Asia ex-Japan fund flows
4-wee k moving average
Source: EPFR Global, RBS
Asia ex-Japan fund flows Asia ex-Japan funds registered net outflow of US$850m this week and 58% came from ETFs. In terms of retail vs institutional, retail investors accounted for the bulk of the outflows at 54%. On a country basis, all markets in the region saw net outflows, led by China at US$532m, followed by Korea at US$198m and India at US$183m. Do note that EPFR Global compiles this data as of every Wednesday and hence this set of numbers do not capture the impact of this weeks policy easing moves. We expect Asian flows to trend higher from now till the EU Summit on 9 December at least. DM vs EM and cross-asset class fund flows Outflow of capital from DM funds fell 80% wow to US$2.7bn due to a sharp improvement in sentiments on the US market. US funds saw net inflows of US$424m, while Western Europe and Japan funds registered net outflows of US$1.3bn and US$304m, respectively. EM funds saw net outflows of US$1.5bn, with US$485m and US$202m exiting from GEM and EMEA funds. On a cross-asset class basis, equities and fixed income saw net outflows of US$4.0bn and US$1.7bn, while money markets funds saw inflows of US$9.7bn. Analyst
Dylan Cheang
Singapore +65 6518 5936 dylan.cheang@rbs.com
Tactical indicators Risk appetite remains a mixed bag. The VIX declined from 34.5 last Friday to 27.4 as of yesterdays close, while the CBOE put-call ratio was similarly down from 1.32 to 0.95 as news of policy easing and strong ISM Manufacturing data lifted sentiments. However, in Hong Kong, the short turnover as a percentage of total turnover on the Hang Seng index rose from 7.6% to 8.3% and this 1.7 percentage points higher than its long-term average.
RCB Reg 198703346M, Permit MICA (P) 155/08/2011, Level 21, One Raffles Quay, South Tower, 048583, Singapore http://research.rbsm.com
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Weekly summary
Fund flows
Another week of outflows from Asia ex-Japan: Asia ex-Japan registered its third consecutive sessions of net funds outflow this week at US$850m, a 20% increase compared to last week. ETFs accounted for 58% of the outflow and this represents a higher weighting as compared to ETFs share of the inflows in 2010, which stood at 47%. In terms of retail vs institutional flows, the bulk of the outflow this week was actually accounted for by the retail investors at 54%, this again constituting a larger proportion compared to their 36% share of the inflows in 2010. At first glance, this set of numbers may seemingly contradict what transpired this week, where major central banks embarked on policy easing in unison, triggering a strong bounce in regional markets. However, the apparent disconnect was due to the fact EPFR Global compiles its data every Wednesday and hence, this weeks policy moves are actually not captured in this set of funds flow numbers. As we have highlighted in our latest Ebbs & flows note dated 2 December 2011, we believe the shift towards policy easing will auger well for the outlook of regional markets and the associated flow of funds. This is particularly so for countries that have undertaken policy easing recently, such as China, Thailand or Indonesia. However, in the mean time, investors should also be mindful that the situation remains highly fluid, especially in light of the upcoming EU summit on 9 December, which is shaping up to be a highly crucial meeting that could determine on whether the ECB balance sheet will be made available going forward. Essentially, whats on the discussion table now is a new fiscal compact that will make budget discipline among euro zone countries legally biding and non-compliance will mean facing sanctions. A final decision on this is unlikely to be reached by 9 December, however, should a general framework be established by then, it may pave the way for greater intervention by the ECB in the current debt crisis. We expect risky assets and funds flow into equities to surge in the event of this outcome. Table 1 : Asia ex-Japan fund flows
(US$m) Asia ex-Japan fund flows Total 486.4 967.9 (222.2) (709.5) (850.0) 19,066.0 19,563.5 (13,995.7) Asia ex-Japan fund flows ETF 239.6 925.2 (87.2) (224.5) (490.3) 7,299.5 9,108.0 (1,034.7) Asia ex-Japan fund flows Non-ETF 246.8 42.6 (135.1) (485.0) (359.7) 11,766.6 10,455.5 (12,961.0) Asia ex-Japan fund flows Institutional 213.6 1,001.3 (4.7) (368.3) (388.7) 9,649.0 13,117.2 (3,958.7) Asia ex-Japan fund flows Non-Institutional 278.0 (46.9) (213.1) (333.0) (455.4) 9,623.0 6,973.9 (9,853.2)
Fund flows over the last five weeks 2-Nov-11 9-Nov-11 16-Nov-11 23-Nov-11 30-Nov-11 Annual fund flows Total flows - 2009 Total flows - 2010 Total flows - 2011 YTD
Net outflows across all Asian markets: For the second consecutive week in a row, all the markets in Asia ex-Japan registered net outflow of funds. In absolute terms, China led the outflows at US$532m, followed by Korea at US$198m and India at US$183m. In Southeast Asia, Indonesia and Singapore saw the largest outflow of funds, averaging at US$58m. This was followed by Thailand at US$47m and Malaysia at US$35m. Comparing the percentage share of outflows registered by each market this week with its respective average share of inflows in 2010, the largest deterioration in terms of positioning was seen in China and Singapore. China, for instance, accounted for 42.8% of this weeks outflow even though its share of inflows in 2010 was markedly lower at 33.7%. We believe the downbeat sentiments on China during this period reflect investors concern over its economic outlook, whereby the HSBC flash estimate shows Chinas PMI falling from 51.0 in October to 48.0 in November. However, as we have mentioned earlier, this set of data does not capture the impact arising from the latest policy easing moves. Hence, we believe that the Chinese flow numbers should rebound from hereon. Circuit Breaker | Analysis | 2 December 2011
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In the case of Singapore, the market has been experiencing a deterioration in terms of positioning for some time now. On a year-to-date basis, Singapore accounted for a huge 9.2% share of the regions outflow, compared to its minute 1.4% of inflows in 2010. This suggests that the market is not a destination of choice in times inflows. But when it comes to outflows, it becomes an ideal source of funding for portfolio managers. The downbeat outlook for the market stemmed from various angles. First, the export-oriented nature of the Singapore economy puts it at a disadvantage in the current environment and unlike the likes of Hong Kong and Taiwan, Singapore lacks the support of a robust giant economy standing right at its door-step. Secondly, at a more micro level the Singapore real estate sector, which constitutes a huge part of the equity indices, is also starting to wobble in the wake of government measures to tame property prices and this will in turn have negative implications for the banks. Trevor Kalcic, our banking analyst, has recently downgraded Singapore banks to an Underweight on expectations of lower sector profitability as asset growth continues to outstrip revenue growth. Table 2 : Total country flows Asia ex-Japan
(US$m) 2-Nov-11 9-Nov-11 16-Nov-11 23-Nov-11 30-Nov-11 Annual fund flows Total flows - 2009 Total flows - 2010 Total flows - 2011 YTD 14,584.3 15,860.9 (5,787.2) 2,211.3 3,089.7 (707.3) 6,258.6 7,466.1 (4,968.3) 1,089.2 2,832.0 (523.8) 5,144.0 8,102.4 (1,426.4) 708.9 1,351.5 (336.4) 226.4 451.1 6.2 885.9 667.4 (1,255.7) 4,002.4 5,317.5 746.3 1,014.8 1,943.0 (625.5) China Hong Kong 645.9 745.1 (1.4) (465.3) (532.1) 261.1 187.0 (152.2) (61.1) (83.0) India 314.4 62.7 (64.6) (212.2) (182.9) Indonesia 117.2 60.4 17.2 (53.6) (59.6) Korea 252.6 179.7 (131.9) (434.0) (198.2) Malaysia Philippines Singapore 57.9 60.8 (8.0) (77.3) (35.2) 20.8 12.5 (1.7) (14.1) (8.7) 10.7 8.8 (22.5) (43.2) (57.2) Taiwan 291.0 165.0 39.2 (146.1) (40.2) Thailand 69.2 25.7 5.3 (51.7) (46.8)
Fund flows over the last five weeks
Note: This dataset consists of total capital flows into a particular market within Asia ex-Japan. Apart from contributions from Asia ex-Japan and dedicated country funds, this dataset also includes flows from other global and emerging market funds. Therefore, the aggregation of these country flows will differ from the Asia ex-Japan fund flow data highlighted earlier. Source: EPFR Global, RBS
Emerging markets (EM) vs developed markets (DM) flows: The outflow of capital from DM funds declined substantially by 80% wow to US$2.7bn this week. The sharp improvement was due to the quick turn-around in sentiments on the US market. It was only one week ago when the latter saw sharp outflows of US$11.0bn, the highest level since early September. However in a span of one week, sentiments made a major U-turn with US funds seeing net inflows of US$424m. Meanwhile, the outflow of capital from Western Europe funds entered its 4th consecutive session at US$1.3bn, while in the case of Japan, funds flow were negative at US$304m. EM funds registered the 3rd consecutive sessions of net outflows at US$1.5bn this week. With the exception of LatAm funds, all the other segments registered net outflows, led by Asia exJapan at US$850m. GEM and EMEA funds similarly saw net outflows of US$485m and US$202m, respectively, while LatAM was the only segment that managed to buck the downtrend with slight inflows of US$19m. Table 3 : DM vs. EM fund flows
DM Fund flows over the last five weeks 02-Nov-11 09-Nov-11 16-Nov-11 23-Nov-11 30-Nov-11 Annual fund flows Total flows - 2009 Total flows - 2010 Total flows - 2011 YTD
US
Japan
Western Europe 628.7 (757.4) (603.1) (1,814.4) (1,274.3) 2,531.1 (10,088.5) (3,451.7)
EM
Asia ex-Japan 486.4 967.9 (222.2) (709.5) (850.0) 19,066.0 19,563.5 (13,995.7)
GEM
EMEA
LatAm
1,035.9 5,899.1 1,113.7 (13,543.8) (2,684.7) (35,491.4) (14,732.1) (1,483.6)
1,162.5 7,303.4 3,105.6 (11,028.9) 423.6 (41,692.8) (2,830.9) (3,934.5)
(620.4) (294.4) (237.6) 41.9 (304.2) (5,457.8) (840.0) 2,739.2
3,492.9 2,085.5 (182.9) (2,664.1) (1,518.0) 64,463.7 84,077.5 (27,313.5)
2,945.8 1,144.5 31.6 (1,517.9) (485.4) 34,499.8 56,093.2 (2,060.6)
49.4 (41.5) (7.4) (321.8) (201.7) 2,111.9 6,578.8 (4,498.6)
11.4 14.6 15.1 (115.0) 19.1 8,786.0 1,841.9 (6,758.7)
Circuit Breaker | Analysis | 2 December 2011
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Cross-asset class flows: The net outflow of capital from equity funds continued for a 2nd consecutive sessions at US$4.0bn this week. However, the size of the outflow was down 74.5% wow and much of this was due to the reversal of sentiments on US funds. Do note that on a year-to-date basis, US$23.6bn has exited from equities and this constitutes a 28% reversal of 2010s inflows. Meanwhile, fixed income funds registered the first outflow of capital in eight weeks at US$1.7bn, while on the other hand, the positive momentum for money market funds continues with inflows totalling US$9.7bn. Table 4 : Cross-asset class fund flows
(US$mn) Fund flows over the last five weeks 2-Nov-11 9-Nov-11 16-Nov-11 23-Nov-11 30-Nov-11 Annual fund flows Total flows - 2009 Total flows - 2010 Total flows - 2011 YTD
Equity 4,895.8 9,594.6 1,512.1 (15,604.0) (3,971.6) 38,461.1 84,335.8 (23,635.0)
Fixed Income 1,603.9 4,074.9 2,373.5 5,486.2 (1,723.7) 157,867.6 182,591.1 72,931.5
Money Markets (25,277.7) 37,928.0 1,984.0 5,168.3 9,680.8 (468,331.9) (443,931.4) (159,194.2)
Tactical indicators
Mixed risk appetite: Risk appetite continues to remain a mixed bag this week. In the US, risk appetite jumped on news of policy easing by the major central banks, while better-thanexpected ISM manufacturing data also lifted sentiments. The VIX index declined from 34.5 last Friday to 27.4 as of yesterdays close, while the CBOE put-call ratio was similarly down from 1.32 to 0.95. However, sentiments in Hong Kong painted a different picture, with the short turnover as a percentage of total turnover on the Hang Seng index rising from 7.6% to 8.3%. Although the intensity of short-selling has moderated in the wake of the latest policy announcements, it nonetheless remained higher than last weeks close. At current level, the ratio is also 1.7 percentage points higher than its long-term average. Dollar index traded lower: The Dollar index traded lower this week on news that the Federal Reserves and other central banks have cut the cost of dollar swap lines. In addition, the strong ISM Manufacturing reading of 52.7 for November (vs Bloomberg consensus of 51.8) and ADP employment change of 206,000 jobs (vs Bloomberg consensus of 130,000 jobs) further lifted sentiments, this providing the impetus for investors to exit safe havens like the dollar. MSCI Asia ex-Japan gained 8.4% (USD-based total returns) on the back of the dollar weakness. Negative earnings momentum continues: Earnings momentum in Asia ex-Japan continues to stay negative, although the intensity of downgrades has declined markedly. In aggregate, there 103 upgrades versus 312 downgrades. Indonesia was the only market in the region that managed to register positive momentum; while on a sectoral basis, positive momentum was seen in the healthcare space. We have recently upgraded the sector from an Underweight to a Neutral as valuation has become less demanding, while the growth outlook remains highly promising. For more details on our sector upgrade, please refer to our note In the pink of Health dated 25 November 2011.
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Stock screens
Hong Kong and China risk-on stocks screens: We believe that the recent policy easing stance as set forth by the Chinese government will be positive for China and the associated Hong Kong equities in the interim. Hence in this weeks Circuit Breaker, we have two screens on HSI and HSCEI stocks, ranking them by PB and year-to-date percentage change in share prices.
Key events
US and Europe macro data: The key US macro data to look out for next week includes the unemployment rate, change in nonfarm payroll and ISM non-manufacturing composite for November. Based on Bloomberg consensus, the unemployment rate and ISM nonmanufacturing composite are expected to come in at 9.0% and 53.5, respectively. In Europe, the ECB will be announcing its policy rate next week and Bloomberg consensus is expecting a 25bp cut to 1.0%. The other major data due to release includes the euro zone retail sales for October, PMI Composite for November and the euro zone GDP for 3Q. Bloomberg consensus is expecting the following: PMI Composite (47.2), retail sales (-0.8% yoy) and GDP (+1.4% yoy). Asia macro data: A number of key macro data coming out from China next week and this includes the CPI, PPI, industrial production and retail sales numbers for November. Bloomberg consensus is expecting the following: CPI (+4.5%), PPI (+3.3%), industrial production (+12.6% yoy) and retail sales (+16.8% yoy). Meanwhile, also keep a lookout for the announcement of Koreas seven-day repo rate and its money supply number for October. Lastly, the PMI numbers for Hong Kong and Singapore will also be out next week. Table 5 : Regional asset allocation
Overweight Country China Malaysia New Zealand Singapore Taiwan Thailand Sector Telecoms Financials Utilities Consumer Staples Energy Technology Industrials Healthcare Asia Pacific vs the world
Source: RBS
Neutral Hong Kong
Underweight India Indonesia Korea Australia Philippines
Consumer Discretionary Materials
Underweight
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Go with the flow

Chart 2 : GEM fund flows
4 (US$ bn) 3 2 1 0 -1
-1 1 2
Chart 3 : Asia ex-Japan fund flows

3 (US$ bn)
-2 -3 -4 -5 Jan-09
-3 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 -2
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Asia ex-Japan fund flows 4-week moving average
GEM fund flows (US$ bn)
4-week moving average
Note: This data consists of capital flows into BRIC and Global Emerging Markets funds. Source: EPFR Global, RBS
Note: This data consists of capital flows into ASEAN, Asia ex-Japan, Greater China and dedicated country funds in the region. Source: EPFR Global, RBS
Chart 4 : Total country flows and weekly averages I

100 (100) (200) (US$ m)
Chart 5 : Total country flows and weekly averages II

25 (US$ m)
(25) (300) (400) (50) (500) (600) China Hong Kong India Taiwan 4wma Korea
(75) Malaysia Thailand Singapore Indonesia 4wma Philippines Net fund flows this week
Net fund flows this week
Note: This data consists of capital flows into each market from all fund types. Source: EPFR Global, RBS
Note: This data consists of capital flows into each market from all fund types. Source: EPFR Global, RBS
Chart 6 : DM vs EM fund flows

6 5 4 3 2 1 0 -1 (US$bn)
Chart 7 : Equity vs fixed income fund flows

6
(US$ bn)
-2
-2 -3 -4 -5 Jan-09
-4
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
-6 Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Total DM fund flows - 3mma
Total EM fund flows - 3mma
Total Equity Funds - 3mma
Total Bond Funds - 3mma
116
Chart 8 : Total fund flows China

1,500 (US$m) 1,000 500 200 (500) 100 (1,000) (1,500) (2,000) Jun-09 500 400 300 600
Chart 9 : Total fund flows India

800 (US$m) 600 400 200 50 (200) 0 (400)
0
300 250 200 150 100
(50) (100) (150) (200) Dec-09 May-10 Nov-10 Apr-11 Oct-11
(600)
(100) (200) Dec-09 May-10 Nov-10 Apr-11 Oct-11
(800) (1,000) Jun-09
Total funds flow - China - LHS
6mma - RHS
Total funds flow - India - LHS
6mma - RHS
Chart 10 : Total fund flows Korea

1,000 (US$m) 800 600 200 400 200 (200) (400) 0 (600) (800) (1,000) Jun-09 (50) (100) Dec-09 May-10 Nov-10 Apr-11 Oct-11 150 100 50 250 300
Chart 11 : Total fund flows Taiwan

2,500 (US$m) 2,000 1,500 1,000 500 80 (500) (1,000) (1,500) Jun-09 60 40 20 0 (20) Dec-09 May-10 Nov-10 Apr-11 Oct-11 200 180 160 140 120 100
Total fund flows - Korea - LHS
6mma - RHS
Total fund flows - Taiwan - LHS
6mma - RHS
Chart 12 : Total fund flows Indonesia

300 (US$m) 200 100 80 120
Chart 13 : Total fund flows Thailand

250 (US$m) 200 150 80 70 60 50 40 50 30 20 (50) (100) 10 0 (10) (20) (30) Dec-09 May-10 Nov-10 Apr-11 Oct-11
100
100
60 40 (100) 20 (200) 0
(150)
(300)
(20) (40) Dec-09 May-10 Nov-10 Apr-11 Oct-11
(200) (250) Jun-09
(400) Jun-09
Total funds flow - Indonesia - LHS
6mma - RHS
Total funds flow - Thailand - LHS
6mma - RHS
117
Trend is your friend

Chart 14 : Dollar index
90 88 75 86 84 82 80 78 76 74 25 72 70 Jan-09 15 Jun-09 Dec-09 May-10 Nov-10 Apr-11 Oct-11 45 35 65 55 (index) 85
Chart 15 : VIX index

90 80 70 60 50 40 30 20 10 Jan-08
DXY index - LHS
14-day RSI - RHS
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Source: Bloomberg, RBS
Chart 16 : CBOE put-call ratio

1.5 (x)
Chart 17 : Asia-Pacific ex-Japan earnings momentum

30 (%) 20
1.3
10 0 -10
0.9
1.1
-20 -30
0.7
-40
0.5 Jan-09
Jul-09
Jan-10
Jul-10 Average
Jan-11
Jul-11 4wma
-50 Nov-06
Nov-07
Nov-08
Nov-09
Nov-10
Nov-11
Last Price
Earnings momentum Source: Datastream, RBS
12 Week Moving Average
Chart 18 : Short turnover as a percentage of total turnover on the Hang Seng index
15 14 13 12 11 10 9 8 7 6 5 4 3 2 Jan-09 Jul-09 Jan-10 Last Price Jul-10 Average Jan-11 Jul-11 4wma (%)
Chart 19 : AAII bull-to-bear indicator
60 40 20 0 -20 -40 -60 -80 Jan-92
Jan-95
Jan-98
Jan-01
Jan-04
Jan-07
Jan-10
AAII bull to bear indicator
6-month moving average
118
New issues and lock-up schedules

Table 6 : New issues summary
Issuer Woori Investment & Securities HKT Trust Pavilion Real Estate Investment Trust Asian Citrus Holdings Ltd PT ABM Investama Tbk Axis Real Estate Investment Trust PT Visi Media Asia Tbk China Construction Bank ICBC Hankook Tire United Laboratories International CapitaMall Trust CapitaMalls Malaysia Trust Parkson Retail Asia Atlas Resources Hyundai Glovis Samsung Life Hong Leong Bank Nexolon Co Belle Corp
Source: Bloomberg
Pricing Date 24-Nov-11 23-Nov-11 23-Nov-11 22-Nov-11 21-Nov-11 18-Nov-11 17-Nov-11 15-Nov-11 9-Nov-11 9-Nov-11 7-Nov-11 1-Nov-11 28-Oct-11 28-Oct-11 24-Oct-11 17-Oct-11 17-Oct-11 11-Oct-11 4-Oct-11 4-Oct-11
Size (US$m) 551 1,194 223 60 229 58 56 6,600 1,100 559 125 198 106 1,109 110 230 296 829 72 103
Deal Type FO IPO IPO FO IPO FO IPO FO FO FO CB Rights FO IPO IPO ABB ABB Rights IPO Rights
Disc/ Prem (%) -0.1 na na -7.2 na -4.3 na -10.9 -6.0 -12.1 20.0 -4.8 -3.8 na na -3.9 -5.0 -26.6 na -38.3
Aftermarket Perf (%) 19.1 0.2 na 5.8 na 4.5 76.7 12.8 -2.3 8.3 na -0.8 8.7 26.1 na 10.8 -0.2 24.6 -0.2 43.3
119
Table 7 : Asia ex-Japan lock-up schedules

Ticker Hong Kong MGM China Dragon Crown Huaneng Renewables Samsonite International Prada SpA Shuang Hua Holdings Modern Educataion Group Newton Resources Ltd Mascotte Holdings China Hanking Citic Securities AGTech Holdings Shanghai Pharmacauticals MGM China Shunfeng Photovoltaic International Zall Development Cayman Holding Sun Art Retail Group Malaysia UOA Development MSM Malaysia Holdings Eversendai Corp Bhd Bumi Armada Bhd Indonesia Garuda Indonesia Buana Listya Tama Singapore Perennial China Malacca Trust Sheng Siong Group Korea Korea Electronic Power Industry Doosan Engine Hyundai Wia Iljin Materials TK Chemical SeAH Special Steel Korea Aerospace Industries Shinsegae International Nexolon Co
Source: Bloomberg
Lock-up expiry
Offer Price (LCY) 15.34 1.10 2.50 14.50 39.50 1.16 1.30 1.75 0.40 2.51 13.30 1.77 23.00 15.34 1.11 2.89 7.20 2.90 3.38 1.62 3.03 750 155 0.70 0.22 0.33 5500 19300 65000 15800 5000 28000 15500 65000 4000
Current Share Price (LCY) 11.12 0.85 1.96 10.20 38.90 1.30 1.11 1.00 0.29 2.56 14.10 0.34 14.42 11.12 0.35 3.41 10.72 1.45 4.81 1.62 3.03 420 102 0.50 0.20 0.42 5910 13800 155000 19100 2430 31500 40150 133000 3990
Performance since issue (%) -27.5 -22.7 -21.6 -29.7 -1.5 12.1 -14.6 -42.9 -27.5 2.0 6.0 -81.1 -37.3 -27.5 -68.9 18.0 48.9 -50.0 42.3 0.0 0.0 -44.0 -34.2 -29.3 -11.4 25.8 7.5 -28.5 138.5 20.9 -51.4 12.5 159.0 104.6 -0.2
Total Market Cap (US$m) 5,439 121 2,135 1,847 12,812 109 57 515 170 603 19,363 160 5,469 5,439 69 1,536 12,926 555 1,082 401 3,700 1,057 200 432 53 447 171 851 3,537 664 194 239 3,471 842 280
2282 HK Equity 935 HK Equity 958 HK Equity 1910 HK Equity 1913 HK Equity 1241 HK Equity 1082 HK Equity 1231 HK Equity 136 HK Equity 3788 HK Equity 6030 HK Equity 8279 HK Equity 2607 HK Equity 2282 HK Equity 1165 HK Equity 2098 HK Equity 6808 HK Equity UOAD MK Equity MSM MK Equity EVSD MK Equity BAB MK Equity GIAA IJ Equity BULL IJ Equity PCRT SP Equity MTL SP Equity SSG SP Equity 130660 KS Equity 082740 KS Equity 011210 KS Equity 020150 KS Equity 104480 KS Equity 019440 KS Equity 047810 KS Equity 031430 KS Equity 110570 KS Equity
11/30/2011 12/7/2011 12/7/2011 12/13/2011 12/21/2011 12/27/2011 12/31/2011 12/31/2011 1/11/2012 3/28/2012 4/3/2012 4/11/2012 5/14/2012 5/28/2012 7/7/2012 7/7/2012 7/21/2012 12/5/2011 12/25/2011 12/28/2011 1/17/2012 2/11/2012 5/22/2012 12/6/2011 1/22/2012 2/13/2012 12/16/2011 1/4/2012 2/21/2012 3/3/2012 4/25/2012 5/31/2012 6/29/2012 7/13/2012 10/13/2012
120
10
Equity | Asia
2 December 2011
Produced by: The Royal Bank of Scotland N.V., (Hong Kong) Branch
Ahead Of The Curve

Taming the dragon
The cut in the RRR by the Chinese central bank this week indicates a softening of monetary policy. Inflation appears to be a lesser concern and CPI data on 8-9 December is likely to show a sub-5% figure. We remain bullish on Chinese equities.
Top 10 Asian research ideas (see page 16) In this issue
Upcoming events Asia macro calendar Results diary Analysts event diary Initiation over the last week Weekly revision review Country specific market information Asia ex-Japan: Market weightings Asia ex-Japan: Sector weightings Regional valuation tables and charts Macroeconomic forecasts Top 10 Asian research ideas RBS Asia stock coverage universe Research published last week RBS Asian research team
Source: RBS
Date 1-Dec-11 1-Dec-11
Subject Banks - Malaysia China Lookout - Flash
Title Domestic growth is picking up Be on the ride for 2012 Feeding an insatiable hunger for coal Healthy growth despite macro risk Key secular drivers intact October economic data CPO outlook is turning neutral Merger provides strong growth October - bettered but still slow
Analyst Chehen Perera Wendy Liu Trevor Kalcic Woo Chang Chung Wanli Wang David Beller John Rachmat Chehan Perera Y C Mok Irene Huang
30-Nov-11 Energy - Indonesia 30-Nov-11 Hyundai Dept Store 30-Nov-11 Quanta Computer 30-Nov-11 Thailand Strategy 29-Nov-11 Agricultural Products - Asean 29-Nov-11 Hong Leong Bank 29-Nov-11 Insurance Korea
25-Nov-11 China/HK Financials Monthly Chartbook November 2011

Source: RBS
Initiation of coverage RBS added two Indonesian coal companies to its coverage list this week. We advise an overweight position on the sector as we expect China and India to increase their aggregate share of the seaborne coal market from 20% in 2010 to 36% by 2025. Indonesia should benefit due to its proximity and low costs. We also project the domestic market to grow at a 22% CAGR during 2010-15. Against this background, we initiated coverage on Harum Energy and Resource Alam Indonesia with Buy ratings. Our target prices for these stocks imply upside of 28% and 35%, respectively. In India, we initiated coverage on Tata Communications with a Buy recommendation and 30% upside potential. We believe that debt reduction is a priority and a land sale could be a catalyst to revive investor interest. Chart 1 : RBS earnings momentum (past 10 weeks)
20 10 0 (10) (20) (30) (40) (50) (60) 30-Sep 7-Oct 14-Oct 21-Oct 28-Oct 4-Nov 11-Nov 18-Nov 25-Nov 2-Dec 2 -14 8 -9 3 -9 6 -26 -39 -53 # of revisions 16
Upcoming events
Analyst marketing 30 Nov 5 Dec (HK) 6-7 Dec (HK) 7-8 Dec (SG) 8-9 Dec (SG) 5-9 Dec (US) China Retailing (Katherine Chan) China Consumer (Lei Yang) Thailand Strategy (David Beller) Offshore Marine (Gina Kim) Asian Technology (Wanli Wang)
Non-deal roadshow 5-9 Dec (EU) Giant Interactive Upcoming conference 8-9 Dec (HK) HK/China Access
Source: RBS
12
9 -20
4 -19
6 -18
-34
Analysts
James McCafferty
+852 3988 7190 jim.mccafferty@rbs.com
Source: RBS
Upgrades
Downgrades
RBS earnings momentum RBS saw further earnings downgrades across its universe this week. However, there were six earnings upgrades. Amongst them was a 12% upgrade in our March 2012 estimates for Luk Fook Holdings. We see an improvement in gross margin despite the company seeing a slowdown in revenue growth. Important disclosures can be found in the Disclosures Appendix.
James Barrett, CFA

+852 3988 7173 james.barrett@rbs.com
38/F Cheung Kong Center, 2 Queen's Road Central, Hong Kong http://research.rbsm.com
121
Analysts event diary

Table 3 : Analysts event diary
Date 5 Dec 11 Sector Tech Event Conference: Advanced Semiconductor Update business call: Siemens AG Other: DRAM price Conference: AMAT-US, AMD-US, ATML-US, DELL-US, TQNT-US, Advanced Semiconductor, NTGR-US Dividend: WMT-US USD 0.3650 Earnings: COST-US Conference: NSM-US Analyst meeting: CSCO-US, LM Ericsson Telefon Monthly sales: ProMOS Conference: ALTR-US, GLW-US, VECO-US, CY-US Analyst Do Hoon Lee
7 Dec 11
Tech
Do Hoon Lee
8 Dec 11
Tech
Do Hoon Lee
9 Dec 11
Tech
Do Hoon Lee
Monthly release 1st-4th 5th and 20th 10th 15th and 30th 15-20th 24-26th
Source: RBS
Casinos & gaming Tech Transport Tech Transport Financials
Macau: GGR record release Panel prices: Witsview releases prices Singapore: Ridership data for both MRT/LRT and buses from SMRT DRAM contract price release Singapore: Ridership data for both MRT/LRT and buses from Comfort DelGro Taiwan: Financial conditions data from Central Bank (CBC)
Philip Tulk Jeffrey Toder John Rachmat Jeffrey Toder John Rachmat N/A
Ahead Of The Curve | RBS viewpoint | 2 December 2011
122
Initiation over the last week

Table 4 : Companies initiated last week
Publication date 30-Nov-11 30-Nov-11 29-Nov-11 29-Nov-11 25-Nov-11
Source: RBS
Ticker HRUM.JK KKGI.JK SNTX.BO 0891.HK TATA.BO
Company name Harum Energy Resource Alam Indonesia Sintex Industries Trinity Tata Communications
Analyst Trevor Kalcic Trevor Kalcic Atul Rastogi Katherine Chan Piyush Choudhary
123
Weekly revision review: 25 Nov 1 Dec 2011

Table 5 : Earnings revision
Country China Reuters/ BBG 0694.HK 694 HK REC Date 01-Dec-11 Company Beijing Cap Intl Airport Lead Analyst Osbert Tang, CFA Curr BUY Prev HOLD HK$ Price Target Curr 4.50 23.3 Prev 3.65 Year End Dec-11 Rmb Dec-12 Rmb Dec-13 Rmb EPS Forecasts* Curr 0.211 0.226 0.291 Prev 0.213 0.250 0.319 Chg% -0.9 -9.6 -8.8 Rmbm Rmbm Rmbm Curr 1,038 1,084 1,305 Prev 1,047 1,187 1,426 Chg% -0.8 -8.7 -8.5
The sky looks clearer: We believe less capex and traffic diversion risks, T3D capacity boost and potential alignment of landing charges are positive drivers. At 0.88x PB (vs 0.72x at trough) and 11.8x PE (vs 10x) for FY12F (on reported earnings), we see valuations as undemanding and upgrade to Buy from Hold. China 3888.HK 3888 HK 25-Nov-11 Kingsoft Corp Thomas Chong BUY BUY HK$ 3.81 (27.4) 5.25 Dec-11 Rmb Dec-12 Rmb Dec-13 Rmb 0.283 0.278 0.316 0.319 0.386 0.456 -11.3 -28.0 -30.7 Rmbm Rmbm Rmbm 315 317 364 352 435 519 -10.4 -27.2 -29.9
Corporate day takeaways: The 3Q11 results were below our estimates on slower growth in online games and WPS software. Management aims to strengthen the existing business and explore mobile internet opportunities. We forecast weak earnings in the transition and cut our TP to HK$3.81. But we stay at Buy for long-term growth potential. China SPRD.O SPRD US 28-Nov-11 Spreadtrum Comms Jack Lu HOLD BUY US$ 27.00 (18.2) 33.00 Dec-11 Dec-12 Dec-13 US$ US$ US$ 2.642 2.650 2.800 2.369 2.661 2.771 11.5 -0.4 1.0 US$m US$m US$m 139 140 147 131 147 153 6.4 -5.0 -3.6
Growth to pause in 2012: We expect Spreadtrum's earnings momentum to stall in 2012. The company lacks good products to monetize the TD smartphone growth trend in 1H12 and it's too early to factor in WCDMA potential. Downgrade to non-consensus Hold. Hong Kong 0590.HK 590 HK 29-Nov-11 Luk Fook Holdings Larry Cho BUY BUY HK$ 40.70 0.5 40.50 Mar-12 Mar-13 Mar-14 HK$ HK$ HK$ 2.779 2.790 3.485 2.406 2.537 3.078 15.5 10.0 13.2 HK$m HK$m HK$m 1,460 1,514 1,891 1,305 1,376 1,670 11.9 10.0 13.2
Raising earnings estimates: Following Luk Fook's 1HFY12 conference call, we raise our FY12F/13F/14F earnings by 12%/10%/13%, lifting our target price from HK$40.5 to HK$40.7, based on a new target multiple of 14.6x FY13F PE (from 16x). We believe a sales slowdown has been priced in and maintain Buy with 35% potential upside. Hong Kong 0891.HK 891 HK 29-Nov-11 Trinity Dec-11 HK$ 0.317 HK$m 516 Dec-12 HK$ 0.413 HK$m 670 Dec-13 HK$ 0.504 HK$m 819 Nearing the peak: We raise our FY3/12-13F NP for KR to reflect continued earnings surprises and improved confidence on overseas lines. However, further upside potential in underwriting margins looks limited. Relative PB is near its peak. Optimism on the global reinsurance pricing cycle seems excessive. Downgrade to Hold. Rahul Jain BUY BUY Rs 138.0 (24.2) 182.0 Mar-12 Mar-13 Mar-14 Rs Rs Rs 13.36 17.09 19.18 16.71 18.63 21.15 -20.0 -8.3 -9.3 Rsm Rsm Rsm 56,431 72,219 81,055 70,595 78,702 89,380 -20.1 -8.2 -9.3 Katherine Chan BUY HK$ 7.20
India
HZNC.BO HZ IN
01-Dec-11
Hindustan Zinc
Growth expectations tempered: We lower our FY12/13F EBITDA 24%/9% as we cut lead volumes 55/14% and our FY12/13 zinc and lead price forecasts 11-17%. The new lead smelter and silver refinery started production, after delays, and will likely gradually ramp up output over the next few quarters. We cut out target price to Rs138, but maintain Buy. India SNTX.BO SINT IN 29-Nov-11 Sintex Industries Atul Rastogi BUY Rs 140.0 Mar-12 Mar-13 Mar-14 Rs Rs Rs 18.48 19.84 21.23 Rsm Rsm Rsm 4,412 5,376 5,755
Better than it looks: We believe Sintex's valuation at 4.8x FY13F EPS factors in an earnings collapse or debt default, which seems unlikely. We expect net debt to remain around Rs19bn, and gearing to fall to 44% by FY13, even as we factor in a 10% pa decline in Nief revenues. We initiate at Buy with a Rs140 target price. India TATA.BO TCOM IN 25-Nov-11 Tata Communications Piyush Choudhary BUY Rs 237.4 Mar-12 Mar-13 Mar-14 Rs Rs Rs -24.71 -19.34 -7.62 Rsm Rsm Rsm -7041.1 -5512.2 -2171.8
Deleveraging begins...: We expect TCom to start deleveraging in its core business in FY13, on the back of improving profitability and lower capex intensity. In our view, the current core business FCFE yield of 14% offers a significant margin of safety. A sale or a demerger of the surplus land is likely in the medium term. We initiate at Buy.
124
Earnings revision (contd)

Country Indonesia Reuters/ BBG ADRO.JK ADRO IJ REC Date 30-Nov-11 Company Adaro Energy Lead Analyst Trevor Kalcic, CFA Curr BUY Prev BUY Rp Price Target Curr 2300 Prev Year End Dec-11 Dec-12 Dec-13 EPS Forecasts* US$ US$ US$ Curr 0.016 0.019 0.021 Prev Chg% US$m US$m US$m Curr 503 613 686 Prev Chg%
Proven coal player with proven growth: Adaro Energy is a vertically integrated miner and the largest supplier to the domestic market, for which we see a 22% consumption CAGR over 2010-15. It is involved in several highvalue projects. We forecast a 29% earnings CAGR for 2010-15. We maintain coverage with a Buy and Rp2,300 target price. Indonesia AALI.JK AALI IJ 29-Nov-11 Astra Agro Lestari John Rachmat HOLD SELL Rp 22000 24.6 17650 Dec-11 Dec-12 Dec-13 Rp Rp Rp 1668 1804 1958 1609 1415 1739 3.7 27.5 12.6 Rpb Rpb Rpb 2,627 2,841 3,084 2,533 2,229 2,739 3.7 27.5 12.6
A pure play on CPO price: We view Astra Agro Lestari (AALI) as the stock with the potential for the widest CPO price-driven swing in its valuation among the three Indonesian CPO planters we cover. As we find the CPO price downside and upside risks to be finely balanced at this point, we upgrade AALI's rating to Hold. Indonesia BUMI.JK BUMI IJ 30-Nov-11 Bumi Resources Trevor Kalcic, CFA HOLD SELL Rp 2150 Dec-11 Dec-12 Dec-13 US$ US$ US$ 0.019 0.033 0.043 US$m US$m US$m 407 692 915
More questions than answers: Despite solid fundamentals from Bumi's mines and potentially positive refinancing catalysts, we have concerns about corporate governance and increasing political risks. For FY10-15, we forecast a 31% earnings CAGR driven by a 15% CAGR in sales volume. We resume coverage at Hold with a Rp2,150 TP. Indonesia HRUM.JK HRUM IJ 30-Nov-11 Harum Energy Trevor Kalcic, CFA BUY Rp 9400 Dec-11 Dec-12 Dec-13 Rp Rp Rp 582 724 902 Rpb Rpb Rpb 1,572 1,957 2,436
Strong growth and strategic location: Harum is the second-highest growth story we cover. We forecast a 31% earnings CAGR for 2010-15, primarily driven by a 20% CAGR in coal volume growth. Its mines are adjacent and strategically located. Look for the JORC process to upgrade reserves. We initiate with a Buy and a target price of Rp9,400. Indonesia ITMG.JK ITMG IJ 30-Nov-11 Indo Tambangraya Trevor Kalcic, CFA HOLD Rp 42000 (8.7) Dec-11 Dec-12 Dec-13 US$ US$ US$ 0.451 0.466 0.491 US$m US$m US$m 510 526 555
Strong growth and strategic location: Harum is the second-highest growth story we cover. We forecast a 31% earnings CAGR for 2010-15, primarily driven by a 20% CAGR in coal volume growth. Its mines are adjacent and strategically located. Look for the JORC process to upgrade reserves. We initiate with a Buy and a target price of Rp9,400. Indonesia KKGI.JK KKGI IJ 30-Nov-11 Resource Alam Indonesia Trevor Kalcic, CFA BUY Rp 7400 n.c. Dec-11 Dec-12 Dec-13 Rp Rp Rp 498 708 1001 Rpb Rpb Rpb 498 708 1,001
Upcoming growth play: KKGI is potentially the strongest growth story among the coal companies we cover; we see 54% revenue CAGR and a 63% EPS CAGR in 2010-15F. We believe the stock has several near-term and longer-term positive catalysts. We initiate coverage at Buy, with an Rp7,400 target price. Indonesia PTBA.JK PTBA IJ 30-Nov-11 TB Bukit Asam Trevor Kalcic, CFA BUY Rp 21000 (17.2) Dec-11 Dec-12 Dec-13 Rp Rp Rp 1370 1639 1781 Rpb Rpb Rpb 3,157 3,777 4,103
All aboard the growth train: We believe PTBA has significant growth potential, but has been hampered by hauling bottlenecks. We expect this to be resolved, with project updates serving as catalysts. We forecast a 2010-15 earnings CAGR of 28%. We maintain our Buy rating with a lower Rp21,000 target price. Malaysia AEON.KL AEON MK 25-Nov-11 Aeon Annuar Rahman BUY BUY RM 9.00 1.7 8.85 Dec-11 Dec-12 Dec-13 RM RM RM 0.436 0.561 0.668 0.386 0.562 0.668 13.0 -0.2 n.c. RMm RMm RMm 153 197 234 135 197 235 13.1 -0.1 -0.1
Strong comeback: Aeon's 3Q11 net profit improved sequentially, up 23% qoq, on a strong earnings recovery by the retail division. On a normalised basis, 9M11 net profit was still 7% lower than 9M10 and constitutes 84% of our 2011F estimates. Maintain Buy. Malaysia AXIA.KL 01-Dec-11 AXIATA MK Axiata Group Kwok Yan Chue BUY BUY RM 5.86 (3.0) 6.04 Dec-11 Dec-12 Dec-13 RM RM RM 0.309 0.329 0.356 0.334 0.357 0.387 -7.5 -7.8 -8.0 RMm RMm RMm 2,618 2,781 3,017 2,826 3,022 3,279 -7.4 -8.0 -8.0
Strong underlying assets: We believe Axiata will be able to create long term value with its attractive cellular footprint in South Asia. Meanwhile, dividend upside potential is the best, in our view, given massive holding company cash of RM6.3bn and a still falling group net gearing of just 19%. We reiterate our Buy call on the stock.
125

Country Malaysia Reuters/ BBG GENT.KL GENT MK REC Date 25-Nov-11 Company Genting Lead Analyst Kwok Yan Chue Curr BUY Prev BUY RM Price Target Curr 14.71 (13.6) Prev 17.03 Year End Dec-11 Dec-12 Dec-13 EPS Forecasts* RM RM RM Curr 0.639 0.732 0.893 Prev 0.691 0.821 0.940 Chg% -7.5 -10.8 -5.0 RMm RMm RMm Curr 2,368 2,711 3,309 Prev 2,559 3,041 3,483 Chg% -7.5 -10.8 -5.0
Best footprint: Genting Bhd reports better EBITDA across its core divisions in 3Q11. However, normalised net profit is down 23% yoy and 16% qoq due to a combination of higher pre-operating expenses for its US business and large losses in investment & others segment. Malaysia JCYI.KL JCYH MK 30-Nov-11 JCY International Vince Ng, CFA SELL SELL RM 0.60 50.0 0.40 Sep-12 Sep-13 Sep-14 RM RM RM 0.055 0.071 0.079 0.032 0.047 0.079 71.9 51.1 n.c. RMm RMm RMm 113 145 162 65 95 162 72.2 52.0 n.c.
Expectations remain high: JCY returned to the black in 4QFY11 on the back of higher sales and margins realised. While we project strong growth over the next two years, partly due to the Thailand floods, we see potential earnings headwinds over the longer term. Malaysia KFCK.KL KFC MK 29-Nov-11 KFC Holdings Annuar Rahman BUY HOLD RM 3.70 n.c. 3.70 Dec-11 Dec-12 Dec-13 RM RM RM 0.194 0.237 0.266 0.194 0.237 0.266 n.c. n.c. n.c. RMm RMm RMm 154 188 211 154 188 211 n.c. n.c. n.c.
Poor performance on higher input cost: KFC reported weak 3Q11 results: net earnings fell 8% qoq and 15% yoy, bringing the 9M11 decline to 2% yoy. According to management, this poor performance is due to a combination of high input costs and inflationary pressures. Malaysia KSTE.KL KSB MK 29-Nov-11 Kinsteel Diana Teo HOLD HOLD RM 0.60 n.c. 0.60 Dec-11 Dec-12 Dec-13 RM RM RM -0.030 0.039 0.076 0.009 0.040 0.077 -433.3 -2.5 -1.3 RMm RMm RMm -29 38 73 8 38 73 -451.2 -0.9 -0.5
Still in the red: Kinsteel remained in the red in 3Q11, with a net loss of RM9m, up from the RM7m loss in 2Q11 but down from the RM19m loss in 3Q10. The group continues to be affected by higher raw material costs, despite an increase in steel prices. We believe any meaningful recovery would occur only from 2012. Maintain Hold. Malaysia MPIM.KL MPI MK 01-Dec-11 Malaysian Pacific Inds Vince Ng, CFA BUY BUY RM 3.60 (5.3) 3.80 Jun-12 Jun-13 Jun-14 RM RM RM -0.010 0.143 0.446 0.161 0.337 0.571 -106.2 -57.6 -21.9 RMm RMm RMm -2 30 94 34 71 120 -106.4 -57.4 -21.9
Cheap, but we see value elsewhere: After the Malaysian equity market slump, MPI trades at historical low valuations. We find such distressed levels difficult to ignore, but we believe Unisem is a more attractive play on a potential sector recovery. Malaysia MXSC.KL MAXIS MK 01-Dec-11 Maxis Kwok Yan Chue HOLD HOLD RM 5.51 (2.5) 5.65 Dec-11 Dec-12 Dec-13 RM RM RM 0.300 0.316 0.331 0.318 0.344 0.359 -5.7 -8.1 -7.8 RMm RMm RMm 2,251 2,370 2,482 2,383 2,578 2,689 -5.5 -8.1 -7.7
Slowing down: Maxiss financials slowed further in 9M11 dragged by market share rebalancing and the fledgling home services division. We believe Maxis is trading at about fair value, based on our RM5.51 new target price. We reiterate our Hold call on the stock, although we estimate it has the highest dividend yield in the sector. Malaysia MDCH.KL MCIL MK 28-Nov-11 Media Chinese Intl Dharmini Thuraisingam BUY BUY RM 1.70 n.c. 1.70 Mar-12 Mar-13 Mar-14 RM RM RM 0.106 0.118 0.122 0.111 0.118 0.122 -4.5 n.c. n.c. RMm RMm RMm 181 198 206 187 199 206 -2.9 -0.2 n.c.
Sequential growth: MCIL reported good 2QFY12 results, with earnings growing 18% qoq, 13% yoy and 8% in 6MFY12. At current price levels, the stock offers attractive yields of over 8% at what we see as cheap valuations of 7.1x 2012F PER (ex-cash). Maintain Buy and target price of RM1.70. Malaysia MISC.KL MISC MK 25-Nov-11 MISC Vince Ng, CFA HOLD SELL RM 6.60 32.0 5.00 Dec-11 Dec-12 Dec-13 RM RM RM 0.098 0.235 0.333 0.106 0.220 0.295 -7.5 6.8 12.9 RMm RMm RMm 78 1,051 1,487 475 983 1,316 -83.6 6.9 12.9
Weak data; on corrective path?: Fundamentals remain weak which is partially priced in given sector's significant underperformance. We believe success of launches is critical for developers to generate cash flow (apart from asset sales) to reduce debt. Proposed policy reforms may take time, but are steps in the right direction. Buy DLF. Malaysia MSMH.KL MSM MK 25-Nov-11 MSM Malaysia Annuar Rahman BUY BUY RM 5.60 (7.4) 6.05 Dec-11 Dec-12 Dec-13 RM RM RM 0.340 0.349 0.396 0.380 0.402 0.424 -10.5 -13.2 -6.6 RMm RMm RMm 239 245 278 267 283 298 -10.5 -13.3 -6.6
Attractive entry point: MSM reported a poor set of 3Q11 results in which net profit declined 37% qoq and 40% yoy due to higher raw sugar costs. Thanks to a strong earnings performance in 1H11, MSM's 9M11 net profit grew 30% yoy. Maintain Buy.
126

Country Malaysia Reuters/ BBG PTRD.KL PETR MK REC Date 25-Nov-11 Company Perdana Petroleum Lead Analyst Curr Dharmini Thuraisingam BUY Prev BUY RM Price Target Curr 1.10 n.c. Prev 1.10 Year End Dec-11 Dec-12 Dec-13 EPS Forecasts* RM RM RM Curr -0.043 0.076 0.121 Prev 0.013 0.076 0.121 Chg% -430.8 n.c. n.c. RMm RMm RMm Curr -13 38 61 Prev 5 37 60 Chg% -352.4 0.4 0.4
Back in the red in 3Q: 3Q11 losses were disappointing, but Dayang Enterprise's purchase of a 10% stake in Perdana Petroleum (PETR) and the pick-up in oil & gas-related activities should translate to higher vessel utilisation rates for PETR. At 0.7x PB, PETR offers a good investment opportunity, in our view. Buy. Malaysia SIME.KL SIME MK 28-Nov-11 Sime Darby Vince Ng, CFA BUY BUY RM 12.00 n.c. 12.00 Jun-12 Jun-13 Jun-14 RM RM RM 0.671 0.709 0.743 0.671 0.709 0.743 n.c. n.c. n.c. RMm RMm RMm 4,034 4,260 4,468 4,034 4,260 4,468 n.c. n.c. n.c.
Softer but slightly ahead: Sime reported lower qoq earnings due to weaker earnings across most of the core businesses, in particular Plantations, but still slightly ahead of our forecast. We see the issues plaguing the company as receding and view current share price as attractive for a large-cap exposure to CPO. Buy with RM12.00 TP. Malaysia UMWS.KL 25-Nov-11 UMWH MK UMW Holdings Annuar Rahman BUY BUY RM 9.10 (4.2) 9.50 Dec-11 Dec-12 Dec-13 RM RM RM 0.648 0.730 0.780 0.702 0.796 0.780 -7.7 -8.3 n.c. RMm RMm RMm 747 842 899 785 890 899 -4.9 -5.5 n.c.
Strong auto recovery: 3Q11 normalised net profit grew 16% qoq and 33% yoy on a strong automotive division recovery, offset partly by setbacks in the manufacturing and engineering and oil and gas divisions. Normalised net profit was up 6% yoy for the nine-month period and constitutes 70% of our full-year forecast. Maintain Buy. Malaysia UNSM.KL UNI MK 01-Dec-11 Unisem Vince Ng, CFA BUY BUY RM 1.40 (17.6) 1.70 Dec-11 Dec-12 Dec-13 RM RM RM 0.045 0.102 0.140 0.074 0.129 0.217 -39.2 -20.9 -35.5 RMm RMm RMm 18 70 102 44 97 171 -58.6 -28.3 -40.3
Looking distressed: Unisem's share price has fallen close to 60% ytd owing to significant earnings deterioration as a result of the global slowdown due to problems in the West. While a recovery is difficult to predict, we consider current share price levels attractive as valuations seem distressed. Malaysia WTKH.KL WTKH MK 30-Nov-11 WTK Holdings Vince Ng, CFA BUY BUY RM 2.40 n.c. 2.40 Dec-11 Dec-12 Dec-13 RM RM RM 0.145 0.182 0.205 0.161 0.200 0.214 -9.9 -9.0 -4.2 RMm RMm RMm 64 80 90 70 88 94 -9.6 -9.1 -4.5
A sharp pullback: 3Q11 earnings fell significantly qoq due to weaker demand from Japan, but were still much higher than pre-quake levels. We see the setback as temporary and view the sharp share price correction as a good buying opportunity. Singapore GAGR.SI GGR SP 29-Nov-11 Golden Agri-Resources John Rachmat HOLD SELL S$ 0.65 16.1 0.56 Dec-11 Dec-12 Dec-13 US$ US$ US$ 0.045 0.053 0.045 0.043 0.033 0.040 4.7 60.6 12.5 US$m US$m US$m 1,955 1,021 1,483 1,573 777 1,808 24.3 31.5 -18.0
Aggressive expansion plan: GGR has the most aggressive landbank expansion plan of the three Indonesian crude palm oil planters we cover. We upgrade our recommendation to Hold on the back of stronger CPO price performance, but continue to see downside risk if La Nina flooding does not occur. Singapore IFAR.SI IFAR SP 29-Nov-11 Indofood Agri Resources John Rachmat SELL SELL S$ 1.10 (26.7) 1.50 Dec-11 Dec-12 Dec-13 Rp Rp Rp 1214 817 999 1062 1014 1264 14.3 -19.4 -21.0 Rpb Rpb Rpb 1,971 1,396 1,659 1,751 1,539 2,042 12.5 -9.3 -18.8
Waiting for Godot: Indofood Agri Resources' (IFAR) 3Q11 results show that the benefits of listing its subsidiary Salim Ivomas Pratama (SIMP) did not offset the earnings loss incurred by diluting its SIMP stake. Unless the company manages the IPO proceeds better, we do not see much upside potential. We reiterate Sell with a lower TP of S$1.10. South Korea 069960.KS 069960 KS 30-Nov-11 Hyundai Dept Store Woo Chang Chung BUY BUY W 191000 (15.9) 227000 Dec-11 Dec-12 Dec-13 W W W 14145 16160 17711 14742 17200 19213 -4.0 -6.0 -7.8 Wb Wb Wb 326 378 414 340 403 450 -4.1 -6.0 -7.8
Healthy growth despite macro risk: We minimally lower our FY12F earnings by 6%, reflecting macro concerns and vendor commission cuts. However, we retain Buy rating, as we think HDS's earnings resilience and solid FY12F earnings growth will drive up share prices. Taiwan 1722.TW 1722 TT 29-Nov-11 Taiwan Fertilizer Andre Chang, CFA HOLD BUY NT$ 80.00 (29.2) 113.00 Dec-11 Dec-12 Dec-13 NT$ NT$ NT$ 3.364 3.641 3.154 3.212 4.050 3.238 4.7 -10.1 -2.6 NT$m NT$m NT$m 3,296 3,568 3,090 3,148 3,969 3,174 4.7 -10.1 -2.6
Not as fertile as it seems: We downgrade Taifer to Hold at a new TP of NT$80, as we lower 2012F/2013F earnings to 9%/21% below Bloomberg consensus. We believe Taifer's core earnings may decline more than the market expects, due to potentially weak urea prices. Taifer's property development business risks further delays too.
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Country specific market information

This ratio is often used by investors to indicate the scale of development in a local stock market. Chart 2 : Market cap to GDP ratio
China (Local) China (Foreign) Australia India Korea Hong Kong Taiwan Singapore Malaysia Indonesia Thailand Philippines New Zealand 0% Source: Datastream 27.4% 50% 100% 150% 200% 250% 300% 350% 400% 450% 500% 63.3% 53.8% 100.5% 172.6% 208.4% 184.1% 72.7% 118.3% 447.7% 29.5% 128.7% 64.9%
Chart 3 : Market concentration: Top 10 stocks per country as percentage of MSCI Index
Australia China Hong Kong India Indonesia Korea Malaysia New Zealand Philippines Singapore Taiwan Thailand 0% Source: Datastream, MSCI 20% 40% 60% 46.6% 74.5% 80% 100% 120% 70.0% 65.2% 49.4% 53.8% 100.0% 49.6% 57.3% 51.2% 72.1% 59.8%
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10
Asia ex-Japan: market and sector weightings
Chart 4 : Market weightings

MSCI Australia MSCI China MSCI Hong Kong MSCI India MSCI Indonesia MSCI Korea MSCI Malaysia MSCI New Zealand MSCI Philippines MSCI Singapore MSCI Taiwan MSCI Thailand 0.0 Source: Datastream, MSCI 1.9 % 5.0 10.0 15.0 20.0 25.0 30.0 0.3 0.7 5.0 10.9 3.5 2.9 15.8 6.6 8.2 18.2 26.0
Chart 5 : Sector weightings

MSCI Consumer discretionary 8.0
MSCI Consumer staples
6.7
MSCI Energy
7.7
MSCI Financials
33.2
MSCI Health Care
1.5
MSCI Industrials
8.6
MSCI Information technology
12.9
MSCI Materials
13.0
MSCI Telecom services
5.5
MSCI Utilities
3.0
% 10.0 15.0 20.0 25.0 30.0 35.0
0.0 Source: Datastream, MSCI
5.0
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11
Regional valuation tables

Table 6 : IBES consensus forecasts
PE (x) 2011E 2012E Australia China Hong Kong India Indonesia Korea Malaysia New Zealand Philippines Singapore Taiwan Thailand Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecom services Utilities Asia ex Japan Asia Pacific ex Japan Source: IBES 11.0 9.1 11.7 13.3 14.3 9.8 15.1 13.3 15.1 12.7 16.3 10.7 11.4 17.7 10.2 9.6 18.6 11.2 17.0 9.8 12.8 18.0 11.3 11.4 10.0 8.2 13.2 11.5 12.5 8.6 13.6 11.5 13.5 12.0 13.0 9.5 10.2 15.6 9.5 9.1 16.6 10.7 13.0 8.8 11.9 13.7 10.2 10.3 EPS growth (%) 2011E 2012E 2013E 7.8 12.1 19.0 8.6 20.6 10.3 8.6 5.8 7.2 -1.8 -24.4 15.3 17.3 7.5 21.5 14.9 4.6 0.1 -27.7 25.6 3.2 -7.2 6.3 8.4 9.9 11.2 -11.3 16.0 15.1 13.4 11.7 15.9 12.1 5.9 25.1 12.7 12.4 13.5 7.4 5.8 12.3 4.5 30.7 12.1 7.5 31.5 10.9 10.5 8.4 13.1 13.4 13.8 15.1 12.4 11.7 10.5 10.0 11.1 21.8 12.3 13.3 12.2 8.4 11.4 15.3 15.4 20.3 12.8 8.5 14.2 13.8 12.7 3m changes in EPS est (%) 2011 2012 -2.0 -2.0 -1.1 -0.3 0.3 -6.9 1.7 -10.7 0.1 -3.1 -18.4 -1.6 -4.0 -9.6 -4.2 -4.3 -8.9 -16.4 -22.8 -8.5 -3.5 -12.0 -8.6 -8.4 -1.8 -4.5 -6.4 -1.4 -1.4 -5.9 -4.4 -9.5 -0.4 -6.4 -17.7 -2.3 -4.9 -10.5 -7.5 -7.3 -9.7 -15.2 -20.4 -13.7 -4.1 -6.9 -10.3 -10.3 Australia China Hong Kong India Indonesia Korea Malaysia New Zealand Philippines Singapore Taiwan Thailand Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecom services Utilities Asia ex Japan Asia Pacific ex Japan Source: IBES
Table 7 : Historical valuations

12m forward Trailing PB Divided ROE Price/cash PE (x) (x) yield (%) (%) earnings Curr 5 yr avg Curr 5 yr avg Curr 5 yr avg Curr 5 yr avg Curr 5 yr avg 10.5 8.2 12.9 12.0 12.6 8.7 13.5 12.5 13.6 12.0 13.3 9.6 10.3 15.5 9.6 9.1 16.3 10.6 13.3 8.6 12.0 13.9 10.3 10.3 13.0 13.3 15.8 15.8 12.7 10.4 14.3 13.6 14.0 13.9 14.8 10.4 12.7 16.1 12.2 12.8 18.9 13.8 14.7 11.4 12.9 14.9 13.0 13.0 1.8 1.7 1.3 2.7 4.1 1.3 2.2 1.5 2.7 1.6 1.8 2.1 2.2 2.7 1.9 1.4 3.5 1.4 2.0 1.9 2.1 1.4 1.6 1.7 2.3 2.7 1.7 3.8 4.1 1.5 2.1 1.9 2.5 1.8 1.9 1.9 2.2 3.0 2.6 1.8 4.4 1.9 2.2 2.6 2.5 1.6 2.0 2.1 4.7 3.2 3.3 1.4 2.5 1.3 3.5 5.5 2.9 3.7 4.8 3.6 2.0 3.2 2.9 4.3 2.0 2.9 2.7 3.1 4.6 3.2 3.0 3.4 4.4 2.2 3.0 1.1 2.5 1.5 3.5 6.1 2.8 3.4 3.9 3.7 2.3 3.0 2.7 3.8 1.9 2.5 2.5 2.6 4.0 3.0 2.5 3.1 13.7 17.2 11.0 16.6 25.8 12.5 13.5 8.9 17.0 13.4 11.8 19.2 16.8 16.8 16.3 12.5 18.0 12.8 13.7 17.3 15.8 7.7 14.0 13.9 13.9 15.7 9.2 18.7 24.9 11.7 13.0 13.3 15.7 13.2 10.6 15.0 13.3 15.3 17.5 11.4 18.2 10.6 13.0 17.9 17.1 9.0 12.7 13.0 9.9 7.0 9.5 11.3 11.1 5.7 11.2 6.7 10.6 9.2 7.3 7.2 8.8 12.3 7.5 10.0 15.6 7.1 6.8 7.9 6.0 8.4 7.5 8.0 12.2 10.2 13.7 14.2 10.8 8.0 11.3 7.2 9.9 10.7 8.7 8.1 11.1 14.3 9.9 16.1 19.3 10.5 8.6 10.5 6.8 10.5 9.8 10.2
2013E 9.2 7.2 11.6 10.1 10.8 7.7 12.1 10.4 12.2 10.8 10.5 8.4 9.0 13.9 8.8 8.1 14.4 9.2 10.7 7.8 11.0 12.0 8.9 9.1
Table 8 : Index performance (%)

(USD prices) MSCI Australia MSCI China MSCI Hong Kong MSCI India MSCI Indonesia MSCI Korea MSCI Malaysia MSCI New Zealand MSCI Philippines MSCI Singapore MSCI Taiwan MSCI Thailand MSCI Consumer discretionary MSCI Consumer staples MSCI Energy MSCI Financials MSCI Health Care MSCI Industrials MSCI Information technology MSCI Materials MSCI Telecom services MSCI Utilities MSCI Asia ex Japan MSCI Asia Pacific ex Japan
Source: IBES
Weight* 26.0 18.2 8.2 6.6 2.9 15.8 3.5 0.3 0.7 5.0 10.9 1.9 8.0 6.7 7.7 33.2 1.5 8.6 12.9 13.0 5.5 3.0 73.7 100.0
1W 10.0 7.2 5.1 4.3 2.4 11.1 4.0 5.7 1.9 5.7 6.2 5.9 6.6 5.3 6.6 8.7 7.7 8.3 8.8 9.4 2.5 2.2 6.8 7.7
1M -1.1 0.6 -2.5 -10.9 1.2 -0.6 -0.1 -5.1 -3.8 -1.3 -5.0 3.5 -2.5 0.4 -0.5 -2.8 1.5 -2.5 -1.7 -2.3 1.4 -0.9 -2.1 -1.8
3M -6.6 -7.5 -10.3 -12.0 -5.0 -1.5 -2.3 -13.8 -4.6 -9.9 -9.8 -7.3 -5.6 -4.1 -5.2 -9.1 -5.2 -9.7 2.4 -13.9 -2.4 -4.3 -7.2 -7.1
YTD -11.5 -17.0 -16.6 -31.8 4.1 -6.2 -4.6 -2.0 -4.1 -16.6 -22.0 -4.3 -3.6 -0.5 -13.5 -17.1 -16.2 -23.6 -15.9 -20.2 5.3 -6.6 -15.7 -14.6
12M -2.7 -18.2 -17.4 -28.6 4.5 2.2 -0.1 3.4 2.2 -14.3 -14.1 -3.1 -3.3 3.3 -7.6 -13.7 -11.2 -20.5 -7.5 -13.2 6.8 -5.5 -12.6 -10.1
* Weight is measured as percentage of the MSCI Asia Pacific ex Japan index.
130
12
Regional valuation charts

Chart 6 : Contribution to 2011F EPS growth by country
3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 AU CH HK IN ID KR MY NZ PH SG TW TH (%)
Chart 7 : Contribution to 2011F EPS growth by sector

4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 CD CS EN FN BN RE HC ID IT MA TS UT (%)
CH - China, HK - Hong Kong, IN - India, ID - Indonesia, KR Korea, MY - Malaysia, PK - Pakistan, PH - Philippines, SG- Singapore, TW - Taiwan, TH Thailand Source: IBES, RBS forecasts
CD - Consumer discretionary, CS - Consumer staples, EN - Energy, FN - Financials, BN - Banks, RE - Real estate, HC - Health care, ID - Industrials, IT - Information technology, MA - Materials, TS - Telecommunication services, UT - Utilities Source: IBES, RBS forecasts
Chart 8 : Earnings momentum of Asia ex Japan
Chart 9 : Trailing PB vs 2010A ROE relative to Asia ex Japan (sector)

2.5 Expensive 2.0 Consumer staples 1.5 Relative ROE (%) 1.0 Utilities 0.5 Materials Energy IT Financials Industrials Cheap Telecom services Consumer dicsretionary Trailing P/B (x) Health care
30 20 10 0 -10 -20 -30 -40 -50 Sep-91
(%)
Sep-95
Sep-99
Sep-03
Sep-07 12 wma
Sep-11 0.0 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4
Earning momentum Source: IBES, RBS forecasts
Source: IBES, RBS forecasts
Chart 10 : Trailing PB vs 2010A ROE relative to Asia ex Japan (market)

2.5 Expensive 2.0 Philippines 1.5 Malaysia Australia New Zealand HK Korea India Thailand Taiwan S'pore China Relative ROE (x) Trailing P/B (x) Indonesia
Chart 11 : 2010A PE vs 2011 EPS growth relative to Asia Pacific ex Japan

1.90 Expensive 2010F PE (x)
1.70
1.50 Philippines Malaysia Hong Kong Singapore
Taiwan India Indonesia New Zealand
1.30
1.0
1.10
0.5
0.90 Cheap
2011 EPS growth (%)
Australia
Thailand Korea China 1.0 1.5
Cheap 2.0 2.5
0.0 0.0 0.4 0.8 1.2 1.6 2.0
0.70 -1.5
-1.0
-0.5
0.0
0.5
131
13
Macroeconomics forecasts
Table 9 : G-4 economic forecasts
2010A US GDP Inflation Policy Rate 10 year yield (end) Euro Area GDP Inflation Policy Rate German 10 year yield (end) EURUSD (end) UK GDP Inflation Policy Rate 10 year yield (end) GBPUSD (end) Japan GDP Inflation Policy Rate 10 year yield (end) USDJPY (end) G-4 (weighted average vs PPP) GDP Inflation Policy Rate 10 year yield (end)
Source: RBS estimates
2011F 1.8 3.2 0.1 1.6 1.5 2.7 1.3 2.3 1.32 1.0 4.6 0.5 2.0 1.55 -0.4 -0.3 0.1 1.1 86.0 1.4 2.7 0.5 1.9
2012F 2.4 2.6 0.1 -0.2 -0.4 1.7 1.0 3.5 1.36 1.0 3.5 0.5 3.2 1.68 2.2 -0.1 0.1 1.6 90.0 1.3 2.0 0.4 2.4
3.0 1.6 0.1 3.3 3.6 1.6 1.0 3.0 1.34 1.4 3.3 0.5 3.4 1.56 4.0 -0.7 0.1 1.1 81.1 2.6 1.4 0.4 2.9
Chart 12 : OECD Composite leading indicators

20 15 10 5 0 -5 -10 -15 Nov-96 (%, 12m rate of change)
Nov-98
Nov-00
Nov-02 G7
Nov-04 Global
Nov-06 Asia
Nov-08
Nov-10
Source: OECD, RBS
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14
Table 10 : Asia economic forecasts

2010A Australia GDP Inflation (average) Policy Rate 10yr bond yield AUDUSD(end) China GDP Inflation (average) Policy Rate 3m CNY CHIBOR USDCNY (end) Hong Kong GDP Inflation (average) Policy Rate 3m HIBOR USDHKD (end) India GDP Inflation (average) Policy Rate 10yr bond yield USDINR (end) Indonesia GDP Inflation (average) Policy Rate 3m interbank rate USDIDR (end) South Korea GDP Inflation (average) Policy Rate 3m CD rate USDKRW (end) Malaysia GDP Inflation (average) Policy Rate 3m KLIBOR USDMYR (end) Philippines GDP Inflation (average) Policy Rate 3m interbank rate USDPHP (end) Singapore GDP Inflation (average) Policy Rate 3m SGD SIBOR USDSGD (end) Taiwan GDP Inflation (average) Policy Rate 3m CP rate USDTWD (end) Thailand GDP Inflation (average) Policy Rate 3m interbank rate USDTHB (end) Asia ex Japan GDP Inflation (average) Policy Rate
Source: RBS estimates
2011F 1.5 3.5 4.50 4.5 0.93 9.1 5.5 6.56 2.1 6.35 5.3 5.4 0.50 3.0 7.8 7.2 6.6 8.50 8.0 47.6 6.3 5.5 6.50 8.8 9,000 3.8 4.3 3.25 3.7 1,190 4.8 3.1 3.00 3.0 3.21 4.0 4.5 4.50 5.2 42.8 6.0 5.2 N/A 1.5 1.3 4.5 1.4 1.88 0.5 30.7 3.1 3.9 3.50 1.6 30.5 7.6 5.4 5.9
2012F 3.7 2.8 4.50 4.8 1.10 8.7 4.6 7.06 2.5 6.10 5.0 6.8 0.50 4.5 7.8 7.4 5.3 8.50 8.3 47.1 6.0 5.1 6.00 9.5 8,950 4.2 3.2 3.25 4.1 1,150 5.8 2.6 3.25 3.5 3.02 3.8 3.5 4.50 6.4 42.8 5.0 2.9 N/A 3.0 1.2 3.5 1.3 1.88 0.9 31.0 3.7 3.0 3.50 5.5 29.5 7.3 4.5 6.3
2.7 2.8 4.80 5.6 1.02 10.3 3.3 5.81 1.5 6.61 7.0 2.3 0.50 0.1 7.8 10.1 12.1 5.25 7.4 44.7 6.1 5.1 6.50 6.9 9,010 6.2 3.0 2.50 2.9 1,126 7.3 1.7 2.75 2.0 3.08 7.8 3.8 4.00 4.3 43.6 14.5 2.8 N/A 0.7 1.3 10.9 1.0 1.63 0.5 29.2 7.8 3.3 2.00 1.4 30.1 9.6 5.2 5.1
133
15
Equity | Global
5 December 2011
Produced by: The Royal Bank of Scotland plc
Global Action Pack

Monday 5 December 2011
Table 1 : This mornings research
Subject Title Who will buy? Flash: More pain before gain Flash: Server conference call feedback Winter tyre tracker Flash: Robust 1H but no big surprises Equities in November Flash: Buyout of Veolia JV Flash: News roundup - M&A Downgrading FY12F EPS by 22% Flash: To leave CAC 40 Insurance and financials weekly 5-9 December 2011 Flash: India Field Trip II Flash: Stability through diversity No of pages 10 5 6 6 5 23 4 3 7 4 8 11 5 5
European Research
Air Berlin AkzoNobel ARM Automobiles & Parts - Europe Berkeley Group Fund Manager's Monthly - Europe Homeserve Nonlife Insurance - United Kingdom Sthree Suez Environnement The Money Bin The Week Ahead (Europe) Vodafone Vodafone
Asian Research
Ahead Of The Curve CIMC Circuit Breaker Construction Materials India DLF Ltd DLF Ltd Fook Woo Group HCL Technologies Industrial Bank of Korea Infosys Larsen & Toubro Monthly Market Review Noble Group Shanda Interactive Telco Services - China Wipro
Source: RBS
Taming the dragon Boxes under pressure All eyes on the summit Flash: No uptick in cement growth yet Flash: Visibility on asset sale increases... Takeaways from RBS India Access Flash: Delaying 1HFY12 results reporting Flash: Remains optimistic New pressure on margin Flash: Sounding cautious Slowdown looks priced in November 2011 - Asia Pacific markets The one-offs vs valuation More time to nurture Flash: Anti-monopoly Investigation Flash: Reorganisation driving momentum 4
30 38 16 4 4 10 5 5 7 5 11 168 10 13 5
Analyst
RBS European Research 250 Bishopsgate, London, EC2M 4AA, United Kingdom http://research.rbsm.com
135
Global Action Pack summaries

Table 2 : Europe Upgrades/downgrades and initiations
Company Air Berlin Sthree Ticker Last Actual Year End EPS new FY1 FY2 FY3 EPS old FY1 FY2 FY3 Change (%) FY1 FY2 FY3 Curr Price Target New 2.00 3.65 2.25 4.00 -11.1 -8.8 Recom Old Sell Buy Sell Buy Old Chg (%) New
AB1 GY Dec-10 -2.79 -1.71 -1.54 -1.28 -0.64 -0.46 -117.6 -168.6 -236.5 Reason for EPS Change: Weakening revenues, high non-fuel costs STHR LN Nov-10 16.58 16.02 23.48 16.47 20.55 26.01 Reason for EPS Change: more conservative revenue growth assumptions 0.7 -22.0 -9.7
Table 3 : Asia Upgrades/downgrades and initiations

Company CIMC Industrial Bank of Korea Larsen & Toubro Noble Group Shanda Interactive Ticker Last Actual Year End EPS new FY1 FY2 FY3 EPS old FY1 n/a FY2 n/a FY3 n/a Change (%) FY1 n/a FY2 n/a FY3 n/a HK$ Curr Price Target New 7.50 n/a 17000 1575 2.75 35.70 Recom n/a Sell n/a -2.9 Hold Buy -7.3 Buy Buy -40.0 Buy Buy 5.0 HoldHold Old Chg (%) New Old
200039 CH Dec-10 1.35 0.89 1.28 Reason for EPS Change: Initiation of coverage
024110 KS Dec-10 2726 2408 2780 2753 2516 2900 -1.0 -4.3 -4.1 W 16500 Reason for EPS Change: Government pressure is forcing the bank to lower KEB's lending rate to SMEs LT IN Mar-11 67.15 71.91 82.07 70.08 77.52 88.41 -4.2 -7.2 -7.2 Rs Reason for EPS Change: Lower our order inflow growth assumption and EBIDTA margin decline NOBL SP Dec-10 7.03 10.21 11.62 9.97 11.61 15.65 -29.5 -12.1 -25.7 Reason for EPS Change: Negative earnings surprises that are poorly explained SNDA US Dec-10 5.97 8.98 10.02 7.49 12.46 16.85 Reason for EPS Change: Lower EPS on incubating new business S$ 1460 1.65 37.50
-20.4 -27.9 -40.5 US$
Global Action Pack | 5 December 2011
136
Europe
Air Berlin (Sell, TP 2.00) - Who will buy? Air Berlin has clearly stated it is looking for a partner. The 3Q11 results disappointed relative to our forecasts. Trading looks increasingly challenging. The new CEO is shrinking capacity but not changing the overarching strategy. The focus looks to us to be on selling the business rather than fixing it. http://track.sumnet.com/home/00000275/T03982E/air_lin_20106101.pdf AkzoNobel (Hold, TP 36.00) - More pain before gain The Paints teach-in revealed that weak trading and negative inventory write-down will impact the result in 4Q11. Akzo has strong market positions globally, which should lead to solid growth and profitability. This, however, will mainly depend on execution, which has been patchy so far. http://track.sumnet.com/home/00000275/T039766/akz_bel_10087682.pdf ARM (Buy, TP 7.00) - Server conference call feedback Yesterday we hosted a conference call with Ian Ferguson, Head of Server Systems and Ecosystems. While ARM in servers in 4 years away, we believe that the server market is an opportunity that will help the company grow further into the computing market, drive ASPs and increase operating margins. http://track.sumnet.com/home/00000275/T0397DC/arm_10087722.pdf Automobiles & Parts - Europe - Winter tyre tracker We launch our winter tyre tracker, analysing temperature, days of snowfall and regulation across the main winter tyre markets. Comments from tyre manufacturers suggest restocking of winter tyres has been strong, but so far weather has been discouraging for a strong second wave of demand. http://track.sumnet.com/home/00000275/T039832/aut_rts_20106117.pdf Berkeley Group (Hold, TP 13.10) - Robust 1H but no big surprises Berkeley interim results show a useful profit uplift yoy, but helped by a disposal, with underlying ASP somewhat light due to a timing issue. Importantly pre-disposal guidance up to FY13 has been held. There are no plans for accelerating the first dividend return but intial timing aims hold. http://track.sumnet.com/home/00000275/T039772/ber_oup_10087685.pdf Fund Manager's Monthly - Equities in November This publication is designed to help fund managers write their reviews. We analyse the key developments in economics and markets in November and present our key market diagnostics. http://track.sumnet.com/home/00000275/T0397C1/fun_hly_20106088.pdf Homeserve (Hold, TP 3.60) - Buyout of Veolia JV Homeserve has announced the buy out of 51% Domeo JV partner Veolia for 83m cash. Despite additional interest costs in FY12 & FY13, we expect modest low-to-mid single digit upgrades to consensus FY12 & FY13 EPS forecasts. http://track.sumnet.com/home/00000275/T039794/hom_rve_20106079.pdf Nonlife Insurance - United Kingdom - News roundup - M&A Hardy (HDU.L, N/R) has, to all intents and purposes, put itself up for sale and Haverford has declared its original partial offer for Omega (OIH.L, N/R) has lapsed and it has put up a revised offer of 73pps. http://track.sumnet.com/home/00000275/T03977A/non_nce_20106075.pdf Sthree (Buy, TP 3.65) - Downgrading FY12F EPS by 22% 4Q net fees were in line with RBS estimates but we have downgraded our FY12 EPS estimate by 22% to reflect more conservative growth assumptions. We lower our price target to 365p and maintain our Buy rating. http://track.sumnet.com/home/00000275/T0397C6/sth_ree_20106089.pdf
137
Suez Environnement (Hold, TP 12.00) - To leave CAC 40 SE will be replaced by Legrand in the CAC 40 as of 19 December. This represents additional selling pressure equivalent of 0.96x of the average daily volume. Although there is share price upside, the stock could still underperform due to a lack of earnings visibility and catalysts until next year. http://track.sumnet.com/home/00000275/T039786/sue_ent_10087690.pdf The Money Bin - Insurance and financials weekly Fears over the EU receded slightly after central bank intervention and hints of more ECB action. As a result, Financials rose 7.7%, outperforming the FTSE ALL Share (+6.1%) and Insurance (+5.2%). The best performers were Henderson (+10.5%) and Catlin (+9.6%). Charles Taylor was the worst performer (+1.0%). http://track.sumnet.com/home/00000275/T03982A/the_bin_20106100.pdf The Week Ahead (Europe) - 5-9 December 2011 .Macro: The ECB meets next Thursday (8 Dec) and the EU Summit will be held the following day (9 Dec). The 9 December Heads of State Summit is shaping up to be one of the most important meetings in recent memory. If there is a credible and timely plan to move budget parameters to a central oversight from Brussels with binding rules, then Germany's objections on allowing the ECB bazooka in one form or another will weaken - this would be very positive for risk assets. http://track.sumnet.com/home/00000275/T0397FB/the_pe_10087734.pdf Vodafone (Buy, TP 1.90) - India Field Trip II Management is preparing for a Vodafone Indian IPO. This should come in 2013 assuming operational progress continues at the current strong rate, which it should and key non-operational issues are resolved, which now seems slightly more likely. http://track.sumnet.com/home/00000275/T0397D4/vod_one_10087719.pdf Vodafone (Buy, TP 1.90) - Stability through diversity Andy Halford gave a polished performance at our sales lunch. This detailed Vodafone's strong position both because of its diverse portfolio and structural growth opportunities. We were encouraged by colour on Verizon Wireless and India which we have covered in a separate note. http://track.sumnet.com/home/00000275/T0397CD/vod_one_10087717.pdf
Asia
Ahead Of The Curve - Taming the dragon The cut in the RRR by the Chinese central bank this week indicates a softening of monetary policy. Inflation appears to be a lesser concern and CPI data on 8-9 December is likely to show a sub-5% figure. We remain bullish on Chinese equities. http://track.sumnet.com/home/00000275/T0397A1/ahe_rve_20106081.pdf CIMC (Sell, TP HK$7.50) - Boxes under pressure We initiate on the B-share of China International Marine Container (CIMC) at Sell with a target price of HK$7.5. We expect weaker dry cargo container demand to hurt FY12 earnings; also, the offshore engineering division remains loss-making. http://track.sumnet.com/home/00000275/T0397E3/cimc_20106092.pdf Circuit Breaker - All eyes on the summit Another week of Asian outflows, although this data does not capture the positive impact of recent policy easing. Regional markets and flows could trend higher from here until the EU summit on 9 December, which would be pivotal for the medium-term outlook of risky assets. Maintain 'risk on' for now but stay nimble. http://track.sumnet.com/home/00000275/T0397F3/cir_ker_10087726.pdf
138
Construction Materials - India - No uptick in cement growth yet While Nov 2011 cement sales reflect robust yoy growth, we believe the low base of Nov 2010 (due to more festival holidays) is key factor. The mom growth is muted reflecting no demand pick up. Pricing is largely stable, but production discipline is critical for sustainability. We remain cautious on outlook. http://track.sumnet.com/home/00000275/T03971F/con_als_20106057.pdf DLF Ltd (Buy, TP Rs260.00) - Visibility on asset sale increases... Visibility on asset sale increases as Rs 14bn-15bn is expected from the sale of hotel land, IT Park/ SEZs and Gurgaon land by the end of Dec' 2011. Aman resort sale for Rs 20bn is also expected by 4Q. We believe that while DLFs asset monetization remains on track, successful launches in 2H would be critical. Buy. http://track.sumnet.com/home/00000275/T039740/dlf_ltd_20106061.pdf DLF Ltd (Buy, TP Rs260.00) - Takeaways from RBS India Access We hosted DLF at the RBS India Access conference in Singapore. DLF maintains its FY12 guidance (launches and asset sale) despite weak 1H performance. We see more visibility in DLF's asset monetisation in 2H12, but successful launches in 2H remain critical to reducing its high net debt, in our view. Buy. http://track.sumnet.com/home/00000275/T039815/dlf_ltd_20106111.pdf Fook Woo Group (Buy, TP HK$3.50) - Delaying 1HFY12 results reporting Fook Woo has announced that due to an internal control issue it has delayed 1HFY12 results reporting and suspended trading since 28 November. The company has set up a special committee and will get an auditing firm to investigate into the issue. It expects to have the results out by end-December. http://track.sumnet.com/home/00000275/T03983A/foo_oup_20106124.pdf HCL Technologies (Buy, TP Rs500.00) - Remains optimistic We hosted HCL Tech in our India access conference in Singapore. Key highlights are i) HCL Tech remains optimistic regarding demand for large outsourcing deals especially within nondiscretionary spend; ii) remains confident to deliver flat EBIT margins in constant currency in FY12F. http://track.sumnet.com/home/00000275/T039840/hcl_ies_20106130.pdf Industrial Bank of Korea (Hold, TP W16500.00) - New pressure on margin We expect IBK's NIM to shrink 20bp in 2012F because of potentially lower interest rates for guaranteed SME loans. We expect increased competition to hurt IBK's overall profitability. We downgrade IBK to Hold at a reduced W16,500 target price. http://track.sumnet.com/home/00000275/T0397D5/ind_rea_20106090.pdf Infosys (Buy, TP Rs3000.00) - Sounding cautious We hosted the CFO of Infosys in our India access conference in Singapore. Key highlights include 1) decision-making slowdown seems to have increased further, 2) however Infosys expects higher offshoring in CY12, especially from Europe BFSI. http://track.sumnet.com/home/00000275/T039798/inf_sys_20106080.pdf Larsen & Toubro (Buy, TP Rs1460.00) - Slowdown looks priced in Lack of buoyancy in ordering/execution is well known and largely priced in. The situation should improve in FY13F, even if partially, from current likely nadir and L&T's exposure to diverse sectors would benefit from the uptick. We maintain our Buy with a revised TP of Rs1,460. Bearcase value range is Rs1,016-Rs1,065. http://track.sumnet.com/home/00000275/T0397B8/lar_bro_20106086.pdf Monthly Market Review - November 2011 - Asia Pacific markets The Monthly Market Review is your guide to the Asia Pacific markets' movements over the past month. This document highlights performance attribution analysis for local markets and puts AsiaPacific markets into context with the rest of the world. http://track.sumnet.com/home/00000275/T0397AC/mon_iew_20106083.pdf
139
Noble Group (Buy, TP S$1.65) - The one-offs vs valuation Following its disappointing 3Q11 results, Noble's valuation has declined to about 1-2 SD from the mean on our PER and EV/EBITDA forecasts. Yet we believe the stock's underperformance is mostly driven by one-off items and see good opportunities to recover some of those losses. Reiterate Buy with new S$1.65 TP. http://track.sumnet.com/home/00000275/T0397F7/nob_oup_10087729.pdf Shanda Interactive (Hold, TP US$37.50) - More time to nurture 3Q revenues were in line but earnings missed on higher costs for incubating businesses. Cloud computing and mobile internet have major potential, according to management. Hold, we see more time needed for new initiatives to bear fruit. Management provided no further details on its privatisation plans. http://track.sumnet.com/home/00000275/T0397D9/sha_ive_20106091.pdf Telco Services - China - Anti-monopoly Investigation China Telecom and China Unicom separately made an announcement regarding the recent investigation over the pricing of the dedicated Internet leased line access last Friday. We believe the financial impact on CT and CU should not be material. We retain our Buy rating on CT and CU. http://track.sumnet.com/home/00000275/T039811/tel_ces_20106102.pdf Wipro (Buy, TP Rs425.00) - Reorganisation driving momentum We hosted Wipro in our India access conference in Singapore. Key highlights are i) recent reorganisational changes are driving revenue momentum, with 4Q12 guidance likely to be better than 3Q12 in our view; ii) currency benefits on margin to be relatively lower in the near term. Any major macro shock remains risk. http://track.sumnet.com/home/00000275/T039836/wipro_20106123.pdf Note: Links to research are valid for 30 days from the date of publication
140
RBS Top 100 Earnings Forecasts

5 December 2011
ASX code Company name Market cap (A$m) Last year end Price (A$) Target FV (A$) Up/ price down (A$) Rec 12m YTD - YTD -Rel. Abs.
NPAT pre abnormals (A$m) Earnings Quality* Actual EPS pre goodwill (c) EPS ANALYSIS IBES 3m EPS growth EPS (pre goodwill) revisions 12m fwd Fcst 1 Fcst 2 EPS CAGR 3 yr Actual DIVIDEND ANALYSIS Div yield DPS (c) Div frank (%) Fcst 1 PE (x) (pre goodwill) Fcst 1 Fcst 2 PEG VALUATION PE rel (pre goodwill) Fcst 1 Fcst 2 EV/ EV / P/ NTA EBIT (x) EBITDA (x) Fcst 1 Fcst 1 Fcst 1 B/SHEET ANALYSIS ROE ND/EBITDA Gearing (Tier 1 Analyst ratio for banks) Fcst 1 Fcst 1 Fcst 1
Actual
Fcst 1
Fcst 2
Actual
Fcst 1
Fcst 2
Fcst 1
Fcst 2
Fcst 1
Fcst 1
Banks
ANZ BEN BOQ CBA NAB WBC ANZ Banking Group Bendigo & Adelaide Ban Bank of Queensland Commonwealth Bank National Australia Bank Westpac Banking Corp 54,655 3,386 1,787 77,868 53,482 65,262 Sep 11 Jun 11 Aug 11 Jun 11 Sep 11 Sep 11 21.05 9.47 7.93 49.96 24.65 21.69 24.32 9.32 12.38 51.05 30.18 23.69 27.02 9.81 13.75 60.06 33.54 27.76 16% -2% 56% 2% 22% 9% Buy Hold Buy Hold Buy Hold -10% -5% -24% -2% 4% -2% -1% 4% -15% 7% 13% 7% 5,594.0 336.2 166.9 6,793.0 5,460.0 6,301.0 6,125.8 337.2 262.9 7,303.7 6,155.2 6,672.8 6,482.3 364.7 292.7 7,833.3 6,715.9 7,171.9 n.a. n.a. n.a. n.a. n.a. n.a. 209.4 87.0 71.3 420.7 249.5 202.1 221.7 85.7 104.3 444.7 273.0 210.0 229.6 90.5 112.3 468.8 289.9 221.5 -1.3% 0.0% -4.9% -1.5% -0.7% -0.9% 6% -2% 46% 6% 9% 4% 4% 6% 8% 5% 6% 5%
5% 2% 18% 5% 7% 4%
140.0 60.0 54.0 320.0 172.0 156.0
148.0 61.0 69.0 339.0 188.0 166.0
154.0 63.0 75.0 358.0 200.0 174.0
7.0% 6.4% 8.7% 6.8% 7.6% 7.7%
100 100 100 100 100 100
9.5 11.0 7.6 11.2 9.0 10.3
9.2 10.5 7.1 10.7 8.5 9.8
2.1 5.3 0.4 2.1 1.4 2.3
0.84 0.97 0.67 0.99 0.79 0.91
0.88 1.00 0.67 1.02 0.81 0.94
6.4 6.8 4.7 7.6 6.1 6.8
5.6 6.2 3.6 6.9 5.1 6.1
1.8 1.7 1.1 2.8 1.7 2.1
15.7% 8.3% 10.7% 19.0% 15.9% 15.8%
n.a. n.a. n.a. n.a. n.a. n.a.
11.2% 8.4% 8.3% 10.2% 9.9% 10.1%
Andrew Lyons John Buonaccorsi John Buonaccorsi Andrew Lyons Andrew Lyons Andrew Lyons
Chemicals
IPL ORI Incitec Pivot Orica 5,212 9,527 Sep 11 Sep 11 3.20 26.31 4.30 28.64 4.30 28.64 34% 9% Buy Buy -19% 6% -10% 15% 530.1 620.0 557.2 773.6 572.8 823.2 1.1 0.9 32.5 170.8 34.2 212.5 35.2 226.2 -3.7% 1.0% 5% 24% 3% 6%
4% 14%
11.5 90.0
12.0 94.0
14.1 97.0
3.7% 3.6%
50 35
9.4 12.4
9.1 11.6
2.5 0.9
0.82 1.09
0.87 1.11
7.8 9.5
6.5 7.9
4.6 13.6
14.4% 22.2%
1.1 1.3
27.3% Belinda Moore 56.7% Andrew Scott
Commercial Services & Supplies

BXB DOW SEK TSE Brambles Downer EDI SEEK Transfield Svcs 10,799 1,373 2,093 1,352 Jun 11 Jun 11 Jun 11 Jun 11 7.30 3.20 6.21 2.46 7.17 5.01 7.15 2.13 7.17 5.01 7.15 2.24 -2% 57% 15% -13% Hold Buy Buy Hold 3% -28% -6% -27% 11% -19% 3% -18% 532.1 155.9 104.6 128.2 631.9 190.1 131.1 126.3 731.1 221.3 153.9 144.0 1.0 0.5 1.0 0.5 36.6 42.6 31.0 26.0 42.4 44.3 38.8 23.4 49.0 51.5 45.6 28.4 -1.5% -1.6% -1.8% 0.4% 16% 4% 25% -10% 16% 16% 17% 21%
15% 14% 19% 6%
25.9 0.0 14.3 14.0
30.0 21.0 21.4 14.0
34.0 27.0 27.4 15.5
4.0% 6.6% 3.5% 5.7%
20 0 100 100
17.4 7.2 16.0 10.5
14.0 6.2 13.6 8.7
1.1 0.5 0.9 1.6
1.53 0.64 1.41 0.92
1.34 0.59 1.30 0.83
13.6 5.6 12.9 9.3
8.8 3.4 10.1 6.5
17.5 1.4 3.3
25.0% 12.7% 28.8% 11.9%
2.0 1.1 0.9 1.2
120.9% 40.6% 37.0% 28.6%
Mark Williams Andrew Hodge Fraser McLeish Andrew Hodge
Consumer Services
EGP CWN TAH TTS Echo Entertainment Crown Tabcorp Tatts Group 2,644 6,416 2,077 3,210 Jun 11 Jun 11 Jun 11 Jun 11 3.83 8.46 2.80 2.37 3.80 9.00 2.90 2.40 3.80 9.00 2.90 2.40 -1% 6% 4% 1% Hold Buy Hold Hold 3% -10% -8% 11% -1% 1% 232.7 335.9 302.3 279.6 145.5 386.9 333.3 325.4 158.0 422.4 131.6 185.3 0.8 0.8 1.5 1.0 33.8 44.3 45.7 21.5 21.1 52.6 46.5 24.3 22.8 58.0 17.5 13.6 -2.0% 1.5% -3.5% -4.0% -37% 19% 2% 13% 8% 10% -62% -44%
-9% 15% -27% -12%
0.0 37.0 43.0 21.5
10.6 37.0 41.3 21.7
11.4 37.0 15.7 12.2
2.8% 4.4% 14.8% 9.2%
100 60 100 100
18.1 16.1 6.0 9.7
16.8 14.6 16.0 17.5
-2.1 1.1 -0.2 -0.8
1.59 1.42 0.53 0.86
1.60 1.39 1.53 1.67
12.3 15.7 5.6 7.4
8.8 10.9 4.6 6.3
4.3 2.7 -
6.0% 12.1% 25.6% 12.5%
2.7 2.0 1.6 1.4
46.8% 45.4% 81.1% 34.8%
Michael Nolan Michael Nolan Michael Nolan Michael Nolan
Construction
BLD CSR FBU.NZ JHX Boral CSR Ltd Fletcher Bldg James Hardie 2,837 1,083 4,376 3,041 Jun 11 Mar 11 Jun 11 Mar 11 3.81 2.14 6.36 6.98 4.04 2.84 7.32 7.03 4.04 2.84 5.67 7.03 6% 33% 15% 1% Hold Buy Hold Buy -21% -58% -17% 3% -12% -49% -8% 12% 173.5 90.2 275.1 123.4 203.2 85.4 286.4 137.9 275.6 105.6 393.0 171.3 0.9 1.0 0.7 0.8 24.0 17.8 42.7 28.2 28.2 16.9 41.6 32.5 38.0 20.9 57.1 41.4 -7.6% -14.3% -18.3% -2.6% 17% -5% -3% 15% 35% 24% 37% 27%
29% 16% 18% 23%
14.5 41.7 33.0 0.0
16.0 13.0 35.0 8.0
17.0 15.7 37.0 12.0
4.2% 6.1% 5.5% 1.1%
100 100 100 0
13.5 12.7 11.9 21.4
10.0 10.3 8.7 16.2
0.5 0.8 0.7 1.0
1.19 1.12 1.05 1.88
0.96 0.98 0.83 1.55
13.6 6.4 10.1 15.5
7.2 4.0 7.4 11.9
0.9 0.9 2.2 -
6.1% 6.9% 9.8% -34.9%
2.4 0.3 2.2 0.1
38.0% -6.4% 47.7% -4.9%
Andrew Scott Andrew Scott Andrew Scott Andrew Scott
Containers, Packaging & Paper

AMC Amcor 9,191 Jun 11 7.50 7.54 7.54 0% Buy 11% 20% 570.3 659.2 741.1 0.7 46.5 53.7 60.4 0.2% 15% 12%
14%
35.0
36.0
40.0
4.8%
14.0
12.4
1.0
1.23
1.19
10.9
7.7
4.7
17.5%
1.9
75.6% Andrew Scott
Diversified Financials
ASX CGF MQG PPT SUN Aust Securities Exchang Challenger Financial Svc Macquarie Group Perpetual Suncorp Group 5,409 2,260 8,568 891 11,155 Jun 11 Jun 11 Mar 11 Jun 11 Jun 11 31.63 4.47 24.60 21.25 8.67 31.77 5.10 29.75 23.13 9.80 31.77 5.10 29.75 23.13 9.80 0% 14% 21% 9% 13% Hold Buy Buy Hold Buy -16% -5% -34% -32% 1% -7% 4% -25% -23% 10% 356.6 248.0 956.0 72.9 637.6 385.9 275.4 863.0 59.6 1,054.3 424.8 300.6 1,067.3 61.3 1,219.8 0.9 4.8 n.a. 1.2 n.a. 204.0 48.1 275.0 165.5 49.7 219.3 51.2 242.4 137.6 81.9 239.2 53.4 295.3 144.3 94.8 -0.6% -1.1% -6.9% -16.5% -0.7% 7% 6% -12% -17% 65% 9% 4% 22% 5% 16%
7% 6% 8% 1% 29%
183.2 16.5 186.0 185.0 35.0
196.5 18.5 160.0 140.0 49.2
214.3 19.5 180.0 144.0 56.9
6.2% 4.1% 6.5% 6.6% 5.7%
100 100 30 100 100
14.4 8.7 10.1 15.4 10.6
13.2 8.4 8.3 14.7 9.1
2.0 1.4 1.2 12.3 0.4
1.27 0.77 0.89 1.36 0.93
1.26 0.80 0.80 1.41 0.87
9.9 6.0 7.2 7.5 47.9
9.4 5.8 6.7 6.5 29.9
7.5 1.9 0.7 8.0 1.4
12.7% 16.9% 7.2% 18.0% 6.8%
0.8 0.4 n.a. 0.6 n.a.
-13.6% -8.9% -25.4% 382.1%
Richard Coles Richard Coles Andrew Lyons Richard Coles Richard Coles
Food Beverage & Tobacco

CCL GFF C-C Amatil Goodman Fielder 8,853 915 Dec 10 Jun 11 11.71 0.52 13.43 0.60 13.43 0.80 15% 15% Buy Hold 8% -58% 17% -49% 506.6 135.2 543.5 128.9 600.0 141.5 0.8 1.0 67.3 9.8 71.7 7.1 78.8 7.2 -0.7% -15.2% 7% -27% 10% 2%
9% -9%
48.5 7.8
55.0 5.7
58.5 5.8
4.7% 10.9%
100 40
16.3 7.4
14.9 7.3
1.7 -0.8
1.27 0.65
1.31 0.69
11.4 6.1
9.2 4.7
19.1 28.3
28.8% 8.9%
1.1 2.1
64.8% Michael Nolan 43.4% Michael Nolan
Healthcare
ANN COH CSL PRY RHC RMD SHL Ansell Cochlear CSL Ltd Primary Health Ramsay Health ResMed Inc Sonic Health 2,026 3,235 17,012 1,639 3,880 3,863 4,611 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 14.62 57.16 32.25 3.33 19.20 2.53 11.87 13.92 63.05 29.31 3.20 17.95 2.84 13.12 13.92 63.97 29.31 3.20 18.15 2.84 13.13 -5% 10% -9% -4% -7% 12% 11% Hold Buy Hold Hold Hold Hold Buy 15% -29% -11% -12% 8% -28% 2% 24% -20% -2% -3% 17% -19% 11% 122.9 180.1 940.6 96.5 204.7 231.4 294.5 134.6 139.1 954.9 115.7 227.7 229.7 308.0 139.5 183.2 1,004.2 132.9 252.1 227.1 338.1 0.8 1.0 1.0 1.1 1.2 0.8 1.0 92.4 316.1 173.6 19.5 101.1 14.7 75.5 101.6 244.0 180.9 23.2 112.4 15.0 78.6 107.3 321.4 190.7 26.2 124.4 15.3 86.3 0.6% -9.4% 4.3% -1.0% 1.0% 1.6% 0.9% 10% -23% 4% 19% 11% 2% 4% 6% 32% 5% 13% 11% 2% 10%
11% 9% 5% 14% 11% 5% 8%
32.4 225.0 80.0 8.0 52.0 0.0 59.0
42.2 240.0 81.0 18.0 58.0 0.0 61.0
49.9 240.0 88.0 20.0 64.0 0.0 67.0
2.8% 4.2% 2.5% 5.4% 3.0% 0.0% 5.1%
0 100 0 100 100 0 32
14.5 23.4 17.8 14.4 17.1 17.0 15.1
12.8 17.8 16.9 12.7 15.4 15.5 13.8
1.4 2.6 3.4 1.0 1.5 3.6 1.8
1.28 2.06 1.57 1.26 1.50 1.49 1.33
1.22 1.70 1.62 1.21 1.47 1.49 1.31
13.5 16.2 13.6 10.4 11.1 12.5 12.2
11.3 14.2 11.8 7.7 8.4 9.5 9.8
13.7 17.4 5.3 7.6 2.6 -
22.7% 30.7% 24.6% 4.6% 16.6% 13.4% 12.1%
0.2 0.4 0.2 3.0 1.7 1.6 2.3
6.0% 26.3% -7.6% 41.5% 71.5% -33.0% 56.3%
Dr Derek Jellinek Dr Derek Jellinek Dr Derek Jellinek Dr Derek Jellinek Dr Derek Jellinek Dr Derek Jellinek Dr Derek Jellinek
Infrastructure
MAP TCL MAp Airports Transurban 6,607 8,243 Dec 10 Jun 11 3.55 5.71 3.68 5.90 3.68 5.90 4% 3% Buy Buy 19% 12% 28% 20% 127.2 112.5 120.0 110.6 131.9 187.8 1.1 0.9 7.1 7.9 6.4 7.7 7.1 13.0 -16.1% 12.8% -9% -3% 10% 70%
6% 27%
33.5 27.0
21.0 29.5
21.0 32.0
5.9% 5.2%
0 0
55.1 74.5
50.1 43.9
8.8 2.7
4.29 6.55
4.40 4.19
22.0 38.1
14.1 19.1
2.5% 3.1%
6.0 6.4
95.7% William Allott 115.2% William Allott
IT
CPU Computershare 4,568 Jun 11 8.22 9.40 9.40 14% Buy -24% -15% 312.3 299.9 343.0 0.8 55.9 53.7 61.4 -1.5% -4% 14%
8%
28.0
28.0
32.0
3.3%
60
15.5
12.6
1.9
1.36
1.21
13.5
11.4
23.4%
2.7
105.1% Richard Coles
Insurance
AMP IAG QBE AMP Ltd IAG QBE Insurance 8,283 6,317 16,030 Dec 10 Jun 11 Dec 10 4.39 3.05 14.37 5.50 3.27 16.34 5.50 3.27 16.34 25% 7% 14% Buy Hold Buy -17% -21% -21% -8% -12% -12% 752.0 425.0 1,447.0 898.0 545.9 1,362.3 1,082.2 756.7 1,756.9 n.a. n.a. n.a. 35.9 20.4 133.1 34.0 26.3 117.4 38.3 36.4 147.3 -4.3% -6.3% -1.6% -5% 28% -12% 13% 39% 25%
6% 26% 4%
30.0 16.0 121.2
28.6 18.0 128.0
31.5 23.0 130.0
6.5% 5.9% 8.7%
60 100 10
12.9 11.6 12.2
11.4 8.4 9.6
2.3 0.5 3.1
1.09 1.08 1.07
1.10 0.83 0.94
23.2 16.3
23.2 16.3
3.4 2.4 3.5
18.2% 11.5% 11.5%
n.a. n.a. n.a.
169.6% Richard Coles 30.2% Richard Coles 43.3% Richard Coles
Source: Company data, RBS forecasts, RBS Morgans forecasts. * Share prices as at close of trading on 5 December 2011. Target prices, forecasts and recommendations for some companies featured in 'The Bulletin' may have been updated overnight. ++ Share prices as at close of trading on 5 December 2011. Financial forecasts in NZD. # JHX, ANN and BXB price and market cap reported in AUD. Financial forecasts in USD. * Earnings Quality: Net Operating Cash Flow/(Net Profit + Depreciation & Amortisation)
141

5 December 2011
Actual
Fcst 1
Fcst 2
Actual
Fcst 1
Fcst 2
Fcst 1
Fcst 2
Fcst 1
Fcst 1
Management and development

LLC
Lend Lease Corp
4,350
Jun 11
7.62
10.75
10.75
41%
Buy
-12%
-3%
485.3
476.3
560.9 -
0.1
90.3
87.7
102.5
-2.8%
-3%
17%
10%
35.0
44.0
51.5
5.8%
70
8.7
7.4
0.9
0.76
0.71
8.3
7.4
1.7
12.8%
1.8
35.6% Andrew Hodge
Media
FXJ NWS TEN SWM
Fairfax Media News Corp Ten Network Seven West Media
1,999 46,953 972 2,265
Jun 11 Jun 11 Aug 11 Jun 11
0.85 17.88 0.93 3.48
1.37 19.70 0.81 3.47
1.51 23.97 0.90 4.41
61% 10% -13% 0%
Buy Buy Sell Hold
-39% 11% -34% -46%
-30% 20% -25% -37%
273.8 2,929.6 74.1 115.1
273.2 3,346.0 53.6 264.6
309.8 3,458.0 75.2 270.1
1.2 1.1 1.8 0.8
11.6 111.3 7.1 37.5
11.6 135.9 5.1 39.4
13.2 148.3 7.2 38.5
-2.9% 2.5% -15.7% -2.6%
0% 22% -28% 5%
13% 9% 40% -2%
7% 14% 6% 1%
3.0 17.0 5.3 45.0
7.6 18.7 3.8 35.0
8.6 20.6 5.4 35.0
8.9% 1.0% 4.1% 10.1%
100 0 100 100
7.3 13.3 18.1 8.8
6.5 11.3 12.9 9.0
1.0 0.9 2.8 8.3
0.64 1.17 1.59 0.78
0.62 1.08 1.24 0.86
6.2 9.1 11.9 7.7
5.3 6.5 10.1 6.8
10.4 -
6.1% 11.9% 6.6% 10.2%
1.7 0.6 2.8 3.0
21.5% 15.6% 49.7% 67.1%
Fraser McLeish Fraser McLeish Fraser McLeish Fraser McLeish
Other Capital Goods

BLY LEI UGL
Boart Longyear Leighton UGL
1,536 7,175 2,148
Dec 10 Jun 11 Jun 11
3.33 21.32 12.83
4.37 21.67 14.63
3.80 21.67 13.15
31% 2% 14%
Buy Hold Buy
-27% -29% -11%
-18% -20% -2%
91.8 -107.7 164.4
145.1 609.7 171.2
202.5 672.2 196.7
0.3 1.7 0.7
20.1 -35.1 98.8
31.9 181.2 102.4
44.5 199.7 117.3
1.8% 0.9% -1.5%
58% 4%
40% 10% 15%
35% 84% 10%
5.5 60.0 70.0
9.8 116.0 71.5
13.9 128.0 81.5
2.9% 5.4% 5.6%
35 100 100
10.4 11.8 12.5
7.4 10.7 10.9
0.3 0.1 1.2
0.81 1.03 1.17
0.65 1.02 1.09
8.0 7.5 8.7
5.5 3.9 7.2
2.0 2.9 12.6
13.4% 25.0% 13.8%
0.9 0.1 0.4
25.6% Andrew Hodge 6.5% Andrew Hodge 9.1% Andrew Hodge
Real Estate
WDC GMG
Westfield Group Goodman Group
19,105 4,511
Dec 10 Jun 11
8.27 0.61
8.69 0.81
8.69 0.76
5% 33%
Hold Buy
-14% -6%
-5% 3%
1,745.7 383.9
1,482.4 476.3
1,575.7 527.9
1.0 0.8
75.7 5.3
64.2 6.2
68.2 6.6
-2.0% -1.0%
-15% 17%
6% 7%
-2% 9%
63.6 3.5
48.4 3.8
50.6 4.2
5.9% 6.1%
0 0
12.9 9.8
12.1 9.2
-8.3 1.1
1.00 0.86
1.07 0.88
16.7 17.8
16.7 17.6
1.1 1.2
8.8% 10.2%
7.0 4.5
79.9% Andrew Hodge 30.2% Andrew Hodge
Retail
BBG DJS HVN JBH MTS MYR WES WOW
Billabong David Jones Harvey Norman JB Hi-Fi Metcash Myer Wesfarmers Woolworths
1,003 1,450 2,304 1,575 3,268 1,522 37,855 31,512
Jun 11 Jul 11 Jun 11 Jun 11 Apr 11 Jul 11 Jun 11 Jun 11
3.93 2.88 2.16 15.95 4.25 2.61 32.60 25.52
3.65 2.70 2.50 17.25 4.10 2.80 29.45 29.80
3.65 2.70 2.50 17.25 4.10 2.80 29.45 29.80
-7% -6% 16% 8% -4% 7% -10% 17%
Hold Hold Buy Buy Hold Buy Hold Buy
-52% -35% -27% -11% 3% -26% 2% -5%
-43% -26% -18% -2% 12% -18% 11% 4%
118.0 168.1 242.0 134.4 248.3 163.2 1,870.0 2,124.0
111.7 140.7 227.8 137.7 257.5 142.0 2,370.4 2,222.8
124.6 135.8 256.9 155.6 276.8 160.7 2,787.9 2,490.2
0.2 0.9 1.1 0.7 1.2 0.9 1.0 1.0
46.3 33.0 22.8 120.2 32.3 28.0 161.6 171.5
43.7 27.5 21.4 138.4 33.5 24.3 203.1 179.5
48.6 26.3 24.2 155.1 36.0 27.6 234.6 201.1
0.3% -3.8% -5.9% -1.0% -2.2% -4.4% -1.4% -1.0%
-6% -17% -6% 15% 4% -13% 26% 5%
11% -4% 13% 12% 7% 13% 16% 12%
3% -7% 6% 12% 6% 2% 18% 9%
29.0 28.0 12.0 77.0 27.0 22.5 150.0 122.0
29.0 23.0 11.0 85.0 27.5 20.0 180.0 131.0
31.0 22.0 12.0 96.0 29.0 22.5 200.0 143.0
7.4% 8.0% 5.1% 5.3% 6.5% 7.7% 5.5% 5.1%
100 100 100 100 100 100 100 100
9.0 10.5 10.1 11.5 12.7 10.7 16.1 14.2
8.1 10.9 8.9 10.3 11.8 9.5 13.9 12.7
3.0 -1.5 1.6 1.0 2.3 4.4 0.9 1.5
0.79 0.92 0.89 1.01 1.12 0.94 1.41 1.25
0.77 1.05 0.85 0.98 1.13 0.91 1.33 1.21
8.7 7.7 7.1 8.4 9.8 8.3 10.8 10.5
7.0 6.2 5.6 7.2 8.9 6.0 8.6 8.1
2.0 1.0 13.7 6.3 10.8
9.2% 18.2% 10.1% 79.4% 18.8% 16.9% 9.1% 28.2%
2.3 0.6 0.7 0.7 2.3 1.3 0.9 0.9
40.6% 19.1% 13.7% 88.0% 81.6% 50.8% 16.8% 48.7%
Daniel Broeren Daniel Broeren Daniel Broeren Daniel Broeren Daniel Broeren Daniel Broeren Daniel Broeren Daniel Broeren
Telecommunication Services
TLS
Telstra
40,067
Jun 11
3.22
3.50
3.50
9%
Buy
15%
24%
3,231.0
3,551.0
3,666.1
1.0
25.9
28.5
29.4
0.1%
10%
3%
5%
28.0
28.0
28.0
8.7%
100
11.3
10.9
2.1
0.99
1.05
8.8
5.1
8.0
29.3%
1.3
107.3% Fraser McLeish
Transportation
AIO QAN QRN TOL
Asciano Group Qantas Airways QR National Toll Holdings
4,701 3,726 8,345 3,458
Jun 11 Jun 11 Jun 11 Jun 11
4.82 1.64 3.42 4.87
5.57 1.63 3.31 5.42
6.19 1.92 3.45 5.49
16% -1% -3% 11%
Buy Hold Hold Buy
201% -35% 24% -15%
210% -26% 33% -6%
189.9 416.0 172.4 269.0
259.0 255.9 371.6 309.4
349.7 410.8 466.0 356.9
1.3 1.1 0.9 1.1
6.5 18.4 7.1 38.1
26.6 11.3 15.2 42.7
35.8 18.1 19.1 48.6
-21.3% -1.0% -1.9%
309% -38% 116% 12%
35% 60% 25% 14%
87% 13% 41% 13%
2.0 0.0 3.7 25.0
9.0 0.0 8.3 27.0
10.5 6.0 8.6 31.0
1.9% 0.0% 2.4% 5.5%
0 100 0 100
18.1 14.6 22.5 11.4
13.4 9.1 17.9 10.0
0.2 1.1 0.6 0.9
1.60 1.28 1.97 1.00
1.28 0.87 1.71 0.96
11.6 14.8 17.2 10.1
7.9 3.9 9.3 6.4
7.3 0.6 1.2 3.1
7.8% 4.1% 5.3% 10.8%
2.7 1.9 1.6 1.8
71.8% 54.4% 23.3% 43.4%
Mark Williams Mark Williams Mark Williams Mark Williams
Utilities
AGK APA DUE SKI
AGL Energy APA Group DUET Spark Infra
6,763 2,967 1,932 1,751
Jun 11 Jun 11 Jun 11 Dec 10
14.66 4.64 1.77 1.32
16.55 4.80 2.00 1.35
16.55 2.00 1.35
13% 3% 13% 2%
Buy Buy Buy Hold
-4% 15% 6% 17%
5% 24% 15% 26%
431.1 108.5 124.9 78.4
486.2 117.4 86.5 153.0
533.6 132.9 80.9 165.2
1.0 1.4 1.0 0.6
94.4 19.7 14.1 6.7
105.0 18.2 8.7 11.5
114.4 20.1 7.4 12.4
0.9% 0.2% 1.7% 0.8%
11% -7% -38% 73%
9% 10% -16% 8%
10% 4% -23% 23%
60.0 34.4 20.0 13.5
64.0 35.4 16.0 9.5
68.0 36.5 16.5 9.7
4.4% 7.6% 9.0% 7.2%
100 0 0 0
14.0 25.4 20.3 11.4
12.8 23.1 24.0 10.6
1.4 7.1 -0.9 0.5
1.23 2.24 1.78 0.89
1.22 2.21 2.30 0.93
10.6 13.9 12.6 10.6
8.8 10.9 9.3 10.6
2.0 3.5 1.2
7.5% 7.3% 6.2% 10.7%
1.2 5.4 6.9 3.8
16.8% 189.2% 293.3% 67.6%
Jason Mabee, CFA Jason Mabee, CFA William Allott William Allott
Source: Company data, RBS forecasts, RBS Morgans forecasts * Share prices as at close of trading on 5 December 2011. Target prices, forecasts and recommendations for some companies featured in 'The Bulletin' may have been updated overnight. ++ Share prices as at close of trading on 5 December 2011. Financial forecasts in NZD. * Earnings Quality: Net Operating Cash Flow/(Net Profit + Depreciation & Amortisation)
142

5 December 2011
Actual
Fcst 1
Fcst 2
Actual
Fcst 1
Fcst 2
Fcst 1
Fcst 2
Fcst 1
Fcst 1
Aluminium & Steel

AWC BSL OST SGM Alumina BlueScope Steel OneSteel Sims Metal Mgt 3,538 1,340 1,151 2,779 Dec 10 Jun 11 Jun 11 Jun 11 1.45 0.40 0.86 13.53 1.64 0.53 1.08 19.10 1.64 0.70 1.20 19.10 13% 32% 25% 41% Buy Hold Hold Buy -42% -79% -67% -37% -33% -70% -58% -28% 39.9 -113.8 235.0 182.0 148.7 -89.9 144.7 279.6 35.0 87.9 214.9 364.1 5.5 0.1 1.0 0.5 1.6 -6.2 17.6 88.9 6.1 -3.3 10.8 136.1 1.4 2.6 16.1 177.3 -43.2% -43.8% -25.2% -7.1% 273% 88% -38% 53% -76% 48% 30%
52% -6% 9% 32%
6.0 2.0 10.0 47.0
6.0 0.0 4.3 68.0
2.0 0.9 8.0 88.6
4.0% 0.0% 5.0% 5.0%
100 100 51 45
23.7 7.9 9.9
99.5 15.2 5.3 7.6
0.5 0.9 0.3
1.84 0.70 0.87
8.75 1.46 0.51 0.73
22.0 -63.4 10.8 6.6
22.0 7.7 6.5 5.2
1.1 0.4 0.6 1.4
4.8% -2.1% 3.2% 9.3%
2.3 2.7 4.4 0.2
13.3% 16.4% 52.4% 4.1%
Lyndon Fagan Todd Scott Todd Scott Todd Scott
Energy
OSH ORG PDN STO WPL WOR Oil Search Origin Energy Paladin Santos Woodside WorleyParsons 8,512 15,865 1,330 12,879 27,406 6,715 Dec 10 Jun 11 Jun 11 Dec 10 Dec 10 Jun 11 6.55 14.89 1.71 13.54 34.19 27.33 7.50 16.50 1.53 15.00 38.00 26.60 7.50 18.35 1.69 16.50 46.00 21.81 15% 11% -11% 11% 11% -3% Buy Buy Hold Buy Buy Hold -7% -8% -65% 3% -20% 2% 2% 1% -56% 12% -11% 11% 156.6 673.0 -59.5 356.1 1,540.5 321.6 181.8 911.4 -69.8 520.5 1,736.5 377.7 150.3 1,038.6 -9.3 558.5 1,756.2 443.5 2.1 0.6 4.5 1.4 1.0 0.7 11.9 71.0 -8.0 50.3 201.1 130.0 13.7 84.1 -9.0 61.0 216.6 152.4 11.2 92.5 -1.2 61.2 214.1 178.9 -4.2% -2.0% -41.9% -9.2% -14.8% -0.9% 15% 18% -11% 21% 8% 17% -18% 10% 653% 0% -1% 17%
-12% 11% -13% 13% 4% 17%
4.0 50.0 0.0 30.0 105.0 86.0
4.0 52.0 0.0 30.0 110.0 93.0
4.0 56.0 0.0 31.0 125.0 113.0
0.6% 3.5% 0.0% 2.2% 3.1% 3.4%
0 100 0 100 100 55
47.5 17.7 22.2 15.7 17.9
57.4 16.1 22.1 15.7 15.3
-4.1 1.6 1.7 4.1 1.0
3.70 1.56 1.73 1.22 1.73
5.04 1.54 1.95 1.38 1.51
24.9 12.2 -103.9 14.4 12.7 12.9
22.1 8.8 116.1 8.5 10.4 11.6
3.0 2.3 1.2 1.5 2.1 21.4
6.5% 7.3% -5.9% 6.6% 14.7% 18.6%
2.0 2.0 41.7 0.0 1.5 0.6
29.4% 33.3% 63.1% -0.1% 36.5% 19.3%
Jason Mabee, CFA Jason Mabee, CFA Lyndon Fagan Jason Mabee, CFA Jason Mabee, CFA Andrew Hodge
Diversified Metals & Mining

BHP FMG ILU LYC MCC OZL PNA RIO BHP Billiton Fortescue Meta Iluka Resources Lynas Macarthur Coa OZ Minerals PanAust Rio Tinto 198,356 15,100 6,548 2,330 4,836 3,695 2,055 128,385 Jun 11 Jun 11 Dec 10 Jun 11 Jun 11 Dec 10 Dec 10 Dec 10 37.26 4.85 15.64 1.36 16.01 11.41 3.46 67.00 45.87 7.57 18.80 1.83 16.00 12.10 4.14 99.48 45.87 7.57 18.80 1.83 12.88 12.10 4.14 99.48 23% 56% 20% 35% 0% 6% 20% 48% Buy Buy Hold Buy Hold Hold Buy Buy -18% -26% 71% -34% 25% -34% -22% -22% -9% -17% 80% -25% 34% -25% -13% -13% 21,889.8 23,130.0 22,678.9 1,649.2 2,122.6 1,729.3 36.1 509.1 1,275.9 -59.1 -18.1 613.3 241.4 255.8 283.9 398.2 273.6 252.4 173.9 169.2 275.0 15,195.0 14,653.1 15,642.8 1.2 1.6 0.8 0.6 0.1 1.1 1.3 1.0 411.2 53.0 8.6 -3.4 79.9 127.6 5.9 770.3 438.6 68.2 121.6 -1.1 84.7 88.4 28.1 783.7 430.0 55.5 304.7 35.8 94.0 81.5 44.9 848.0 -9.3% -10.1% 4.7% -55.4% -24.9% -10.8% -11.0% 7% 29% 1310% 227% 6% -31% 378% 2% -2% -19% 151% 11% -8% 60% 8%
2% 13% 11% -16% 2%
101.0 6.9 8.0 0.0 40.0 190.0 0.0 108.0
116.0 8.0 50.0 0.0 42.3 42.3 0.0 119.0
124.0 8.0 152.0 0.0 47.0 36.7 1.0 125.5
3.0% 1.6% 3.2% 0.0% 2.6% 3.7% 0.0% 1.7%
100 0 100 0 100 0 0 100
8.6 7.2 12.9 18.9 12.9 12.3 8.5
8.1 8.2 5.1 3.8 17.0 14.0 7.6 7.8
5.4 0.5 1.8 -0.8 3.7
0.75 0.63 1.00 1.66 1.01 0.96 0.66
0.78 0.78 0.45 0.36 1.63 1.23 0.67 0.68
6.1 5.9 8.6 -476.0 13.1 8.6 8.2 7.2
5.3 5.6 6.8 -476.0 11.8 5.8 6.7 6.1
2.9 3.3 3.6 3.7 2.5 1.4 2.7 2.9
36.6% 60.8% 34.6% -2.9% 13.7% 9.5% 24.3% 23.9%
0.4 1.5 0.2 n.a. 0.9 1.3 0.3 0.5
25.7% 121.3% -12.8% -7.3% -17.9% -26.3% -8.6% 14.3%
Lyndon Fagan Lyndon Fagan Sam Berridge Sam Berridge Tom Sartor Lyndon Fagan Tom Sartor Lyndon Fagan
Gold & Precious Metals

NCM Newcrest Mining
Exchange rate (A$/US$)
27,079
Gold
Jun 11
35.39
38.31
Copper LME (US$/lb)
27.36
8%
Buy
-12%
Nickel LME (US$/lb) 8.79 9.89 10.87 10.92 10.41 11.00 11.95 12.98 8.50
-4%
908.0
1,660.5
1,790.9
1.2
118.7
217.0
234.0
6.8%
83%
8%
31%
18.0
43.0
47.0
1.2%
100
16.3
15.1
0.5
1.43
1.44
11.1
9.0
1.7
11.3%
0.2
4.4% Sam Berridge
Oil WTI (US$/oz) (US$/bbl) 1092 1223 1370 1637 1838 1750 1600 1525 1100 77.2 82.6 93.2 94.4 87.8 91.0 94.3 96.0 90.0
Aluminium Zinc LME LME (US$/lb) (US$/lb) 0.91 0.99 1.08 1.15 1.15 1.19 1.25 1.35 1.15 0.94 0.98 1.02 1.05 1.04 1.10 1.18 1.33 1.00
Coal coking steaming (US$/t) (US$/t) 146.0 190.5 247.3 287.5 301.3 305.0 290.0 270.0 180.0 76.3 90.0 108.3 120.0 118.8 116.3 112.5 107.5 100.0
Iron ore lump fines (US$/t) (US$/t) 86.4 219.9 279.3 219.9 281.0 219.9 252.9 219.9 151.5 73.7 118.1 154.1 162.9 161.8 153.2 145.4 137.9 84.8
FY10 CY10 FY11 CY11 FY12 CY12 FY13 CY13 LT (2015+)
0.88 0.92 0.99 1.03 1.01 1.04 1.09 1.09 0.80
3.03 3.42 3.93 4.25 4.33 4.50 4.65 4.86 3.00
Source: Company data, RBS forecasts, RBS Morgans forecasts. Share prices as at close of trading on 5 December 2011. Target prices, forecasts and recommendations for some companies featured in 'The Bulletin' may have been updated overnight. ** BHP, LGL, PDN & RIO price and market cap reported in AUD. Financial forecasts in USD. * Earnings Quality: Net Operating Cash Flow/(Net Profit + Depreciation & Amortisation)
143
RBS Ex-100 Earnings Forecasts

5 December 2011
ASX code Company name Market cap (A$m) Last year end Price (A$) Target FV (A$) Up/ price down (A$) Rec YTD -Abs. 12m YTD Rel.
NPAT pre abnormals (A$m) Earnings Quality * Actual EPS pre goodwill (c) EPS ANALYSIS EPS growth IBES 3m EPS (pre goodwill) revisions 12m fwd Fcst 1 Fcst 2 EPS CAGR 3 yr Actual DIVIDEND ANALYSIS Div yield DPS (c) Div frank (%) Fcst 1 PE (x) (pre goodwill) Fcst 1 Fcst 2 PEG VALUATION PE rel (pre goodwill) Fcst 1 Fcst 2 EV/ EV / P/ NTA EBIT (x) EBITDA (x) Fcst 1 Fcst 1 Fcst 1 B/SHEET ANALYSIS ROE Gearing (Tier 1 Analyst ND/EBITDA ratio for banks) Fcst 1 Fcst 1 Fcst 1
Actual
Fcst 1
Fcst 2
Actual
Fcst 1
Fcst 2
Fcst 1
Fcst 2
Fcst 1
Fcst 1
Chemicals
DLX NUF Duluxgroup Nufarm 1,058 1,242 Sep 11 Jul 11 2.88 4.74 3.12 5.08 3.12 5.08 8% 7% Buy Hold 5% -8% 14% 1% 77.6 86.1 79.7 101.8 84.9 120.7 0.3 1.0 21.1 32.9 21.7 38.9 23.1 46.1 0.3% -7.8% 3% 18% 7% 19%
5% 16%
15.0 0.0
16.0 11.7
17.0 13.8
5.6% 2.5%
100 50
13.3 12.2
12.5 10.3
2.9 0.8
1.17 1.07
1.19 0.98
9.2 8.1
7.8 6.2
16.1 1.3
55.0% 6.4%
1.2 1.7
123.0% Julian Guido 30.0% Andrew Scott
Commercial Services & Supplies

CAB CPB CND CLQ COF CUS CLH DCG MIN PRG RUL SAI SLM SKE SPT TOX TPI TWO WLL Cabcharge Campbell Bros Clarius Group Clean TeQ Coffey Customers Collection Hse Decmil Group Mineral Resources Programmed Group Runge SAI Global Salmat Skilled Group Spotless Group Tox Free Transpacific Industries Talent2 Wellcom Group 556 3,572 42 3 108 156 71 348 2,203 266 42 959 391 468 636 206 1,009 146 92 Jun 11 Mar 11 Jun 11 Jun 10 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Mar 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 4.62 52.91 0.49 0.05 0.45 1.16 0.72 2.10 11.99 2.25 0.34 4.81 2.45 2.01 2.42 2.14 0.80 1.01 2.35 6.63 48.88 0.65 0.30 0.46 1.68 0.87 2.98 10.75 2.34 0.64 5.20 4.49 2.30 2.25 2.44 0.79 1.65 2.74 6.63 48.88 0.65 0.30 0.46 1.68 0.87 2.98 10.75 2.34 0.64 5.20 4.49 2.30 2.25 2.44 1.18 1.65 2.74 44% -8% 32% 492% 2% 45% 21% 42% -10% 4% 88% 8% 83% 14% -7% 14% -1% 63% 17% Buy Hold Hold Buy Hold Buy Buy Buy Hold Buy Buy Buy Buy Buy Hold Buy Buy Buy Buy -21% 34% -31% -44% -54% -37% 6% -20% -3% 30% -39% -1% -44% 10% 15% 0% -34% -34% 8% -12% 43% -22% -36% -45% -28% 15% -12% 6% 39% -30% 7% -35% 19% 24% 9% -25% -25% 17% 65.6 132.1 4.7 1.3 4.8 21.5 10.1 23.5 151.0 28.6 4.9 57.8 51.6 26.1 43.1 13.1 50.0 13.8 9.1 66.0 207.9 6.9 1.3 17.6 17.0 11.5 30.3 190.1 31.3 6.4 66.4 60.7 43.8 52.0 18.1 84.2 14.5 9.8 70.6 231.0 8.2 1.7 25.9 23.8 12.7 43.8 211.7 35.8 6.7 77.9 68.2 51.9 58.8 19.1 111.4 19.5 10.4 0.3 0.9 1.6 1.1 0.6 1.1 1.0 1.1 0.7 0.1 0.7 0.8 0.5 1.0 0.7 0.9 1.1 0.5 1.1 54.5 202.4 5.4 1.8 3.5 15.9 10.3 18.9 89.8 24.2 3.9 29.8 32.4 12.5 16.5 13.9 4.4 9.7 23.3 54.8 307.9 8.0 2.1 7.4 12.6 11.5 20.4 104.9 26.5 5.2 33.3 37.9 18.3 19.8 18.3 6.0 9.9 24.9 58.7 342.2 9.4 2.7 10.8 17.7 12.3 26.5 116.8 30.3 5.4 39.0 42.6 21.7 22.3 18.8 8.6 13.1 26.6 0.3% 11.2% -23.3% -5.2% 0.4% -0.8% 3.9% 0.7% -13.4% -1.7% -2.6% 0.8% -12.1% -7.2% 0% 52% 48% 20% 107% -20% 12% 8% 17% 9% 31% 12% 17% 47% 20% 32% 35% 2% 7% 7% 11% 18% 29% 47% 40% 7% 30% 11% 14% 4% 17% 12% 18% 13% 3% 43% 32% 7%
4% 21% 23% 24% 50% 9% 9% 22% 4% 12% 12% 16% 11% 27% 13% 13% 30% 20% 6%
30.0 140.0 4.0 0.0 0.0 5.0 6.2 6.0 42.0 9.0 2.0 14.3 24.0 3.0 11.0 3.0 0.0 5.5 16.5
37.5 200.0 5.5 0.0 0.0 6.5 6.7 7.0 52.6 13.0 4.0 16.3 27.1 7.0 13.0 4.0 0.0 5.5 17.5
38.0 222.0 6.5 0.0 3.0 10.2 7.0 8.0 57.6 15.0 4.0 20.3 31.2 13.0 14.5 4.0 0.0 6.5 18.6
8.1% 3.8% 11.3% 0.0% 0.0% 5.6% 9.3% 3.3% 4.4% 5.8% 11.8% 3.4% 11.1% 3.5% 5.4% 1.9% 0.0% 5.4% 7.4%
100 50 100 0 100 0 100 0 0 100 100 100 100 100 40 100 100 50 100
8.4 17.2 6.1 5.0 6.1 9.2 6.2 10.3 11.4 8.5 6.6 14.4 6.5 11.0 12.2 11.7 13.2 10.2 9.4
7.9 15.5 5.1 3.9 4.2 6.6 5.8 7.9 10.3 7.4 6.3 12.3 5.8 9.3 10.8 11.4 9.3 7.7 8.8
1.9 0.8 0.3 0.2 0.1 1.0 0.7 0.5 2.8 0.7 0.6 0.9 0.6 0.4 1.0 0.9 0.4 0.5 1.6
0.74 1.51 0.53 0.17 0.54 0.81 0.55 0.90 1.01 0.75 0.58 1.27 0.68 0.99 1.07 1.03 1.16 0.89 0.83
0.75 1.48 0.49 0.15 0.40 0.63 0.56 0.76 0.98 0.71 0.60 1.18 0.64 0.90 1.04 1.08 0.88 0.74 0.84
9.2 12.4 3.5 -1.2 4.8 6.4 7.0 7.8 7.9 6.4 3.4 11.3 5.9 7.9 8.2 8.2 8.3 8.4 5.5
7.5 10.8 3.3 -0.8 3.9 3.9 2.4 7.0 6.5 5.4 2.6 10.0 4.7 6.5 4.8 5.5 5.0 5.2 4.9
2.2 9.1 1.9 1.3 4.1 11.1 0.9 1.8 3.1 2.3 2.4 8.3 2.3 7.6 8.0 3.9
20.8% 24.2% 7.7% 8.5% 11.7% 9.9% 11.7% 18.2% 27.8% 8.7% 13.3% 20.1% 18.0% 9.8% 11.3% 16.0% 4.8% 8.8% 18.0%
1.3 0.8 0.4 1.7 1.5 0.6 1.3 1.5 0.1 1.6 0.5 1.3 1.7 1.1 1.2 0.5 2.8 0.2 1.3
34.7% 31.7% -5.3% -29.1% 37.9% 16.9% 87.2% -27.6% -4.5% 30.2% -13.2% 39.1% 75.5% 22.0% 45.8% 16.1% 56.9% 4.1% -34.2%
Julian Guido Roger Leaning Matthew Nicholas Roger Leaning Roger Leaning Julian Guido Scott Murdoch Alexandra Clarke Todd Scott Julian Guido Roger Leaning Julian Guido Julian Guido Julian Guido Julian Guido Alexandra Clarke Roger Leaning Matthew Nicholas Josephine Little
Construction
ABC BKW CLO EAL MAH MND NWH Adel Brighton Brickworks Clough E&A Macmahon Monadelphous NRW Holdings 1,969 1,631 571 15 426 1,860 812 Dec 10 Jul 11 Jun 11 Jun 10 Jun 11 Jun 11 Jun 11 3.10 11.05 0.74 0.16 0.58 21.24 2.91 3.20 11.15 0.92 0.18 0.64 22.97 3.37 3.20 11.15 0.92 0.18 0.64 22.97 3.37 3% 1% 25% 11% 11% 8% 16% Hold Hold Buy Hold Hold Buy Buy -6% -2% -1% -20% 12% 16% 35% 3% 7% 8% -11% 20% 25% 44% 151.5 100.8 53.6 2.5 1.0 96.3 41.2 153.1 102.3 58.6 3.1 42.8 114.5 83.3 165.5 121.2 64.0 4.2 45.7 135.1 91.6 0.9 0.7 0.7 1.3 1.0 0.7 1.1 23.9 68.3 6.7 2.7 0.2 110.2 16.1 24.1 69.3 7.4 3.2 5.8 130.3 29.9 26.1 82.1 8.0 4.4 6.1 153.2 32.9 -0.6% -20.8% -0.1% 1.2% 2.3% 18.8% 1% 1% 9% 21% 2453% 18% 86% 8% 18% 9% 36% 7% 18% 10%
9% 8% 8% 23% 17% 29%
21.5 40.5 3.0 1.5 0.0 95.0 9.0
19.0 42.5 3.0 1.5 3.0 112.0 16.0
23.6 44.5 3.0 1.5 3.0 130.0 18.0
6.1% 3.8% 4.1% 9.4% 5.2% 5.3% 5.5%
100 100 0 0 100 100 0
12.9 15.9 10.1 5.0 10.1 16.3 9.7
11.9 13.5 9.2 3.6 9.4 13.9 8.9
1.4 2.0 1.3 0.2 1.0 0.3
1.00 1.40 0.88 0.39 0.89 1.43 0.86
1.05 1.29 0.88 0.32 0.90 1.33 0.85
11.4 26.1 7.3 5.7 6.4 10.7 6.7
8.8 18.8 6.9 4.7 3.4 9.4 4.6
2.5 1.1 1.8 1.4 8.8 2.8
16.2% 6.0% 18.2% 5.9% 12.6% 55.7% 28.5%
0.8 2.4 3.6 2.8 0.2 0.9 0.3
21.2% 13.8% -58.7% 41.7% 6.1% -74.6% 19.0%
Andrew Scott Alexandra Clarke Alexandra Clarke Alexandra Clarke Scott Murdoch Andrew Hodge Scott Murdoch
Consumer products
GUD MCP SYM GUD Holdings McPherson's Symex 517 132 32 Jun 11 Jun 11 Jun 11 7.49 1.83 0.17 8.10 2.17 0.24 8.10 2.17 0.24 8% 19% 44% Hold Hold Hold -25% -42% -67% -16% -33% -58% 49.0 28.0 10.0 46.6 21.2 2.7 53.2 21.7 3.6 1.0 1.1 0.2 71.7 39.0 7.3 67.2 29.6 1.4 76.4 30.2 1.9 -2.9% -19.5% -6% -24% -81% 14% 2% 35%
5% -8% -32%
64.0 26.0 2.5
61.0 19.0 1.0
68.0 20.0 1.0
8.1% 10.4% 5.9%
100 100 100
11.1 6.2 12.1
9.8 6.1 8.9
2.1 -0.8 -0.4
0.98 0.54 1.06
0.94 0.58 0.85
8.1 5.1 9.1
6.6 4.3 7.0
5.5 5.1 1.8
17.8% 10.4% 2.5%
1.0 1.2 4.6
32.9% Matthew Nicholas 23.3% Josephine Little 58.2% Josephine Little
Diversified Financials
BTT EQT HGG IMF IFL MOC PTM TRU TSM SOL WHG BT Investment Mgt Equity Trustees Henderson Group IMF Aust IOOF Holdings Mortgage Choice Platinum Asset Mgt The Trust Company ThinkSmart WH Soul Pattinson & Co WHK Group 386 114 1,919 186 1,356 159 2,266 172 59 3,293 226 Sep 10 Jun 11 Dec 10 Jun 11 Jun 11 Jun 11 Jun 10 Feb 11 Dec 10 Jul 11 Jun 11 1.97 13.36 1.79 1.37 5.90 1.34 4.04 5.30 0.44 13.80 0.84 3.02 13.17 2.72 2.17 7.50 1.38 5.25 5.41 1.00 16.06 1.15 3.02 14.63 2.72 2.17 7.50 1.38 5.25 5.41 1.00 20.07 1.15 53% -1% 52% 58% 27% 3% 30% 2% 127% 16% 37% Buy Hold Buy Buy Buy Hold Hold Hold Buy Buy Buy -31% -15% -14% -6% -24% 1% -19% -16% -40% 10% -22% -22% -7% -5% 3% -15% 10% -10% -7% -31% 18% -13% 30.9 7.8 142.1 22.9 111.5 15.9 155.0 12.4 8.9 161.2 25.8 30.5 9.2 191.0 36.4 120.2 16.2 190.5 12.1 8.7 226.3 29.6 35.9 10.0 234.1 27.5 130.7 16.8 211.2 13.1 12.0 215.6 32.8 0.7 1.0 1.3 0.6 1.2 0.8 1.3 0.8 0.5 1.1 1.1 19.3 91.7 16.7 16.8 48.1 13.2 26.6 38.4 8.3 67.5 9.6 15.6 106.9 18.5 29.2 51.6 13.4 32.4 36.7 6.6 94.8 11.0 22.4 114.3 21.3 22.0 55.8 13.9 35.9 38.7 9.1 90.3 12.2 -16.6% 5.6% 4.0% -6.2% -4.1% -5.9% -17.8% -7.6% -1.5% -19% 17% 11% 74% 7% 2% 22% -4% -20% 40% 14% 44% 7% 15% -25% 8% 4% 11% 5% 38% -5% 11%
8% 10% 12% 0% 7% 4% 13% 2% 17% 7% 10%
28.0 100.0 6.5 15.0 43.0 13.0 23.5 35.0 3.5 40.0 7.0
16.0 96.0 7.2 32.0 47.0 13.4 27.5 35.0 3.5 46.0 7.6
20.0 100.0 9.2 18.4 50.0 13.9 30.5 36.0 4.8 52.0 8.6
8.1% 7.2% 6.1% 23.4% 8.0% 10.0% 6.8% 6.6% 8.0% 3.3% 9.0%
100 100 0 100 0 100 100 100 0 100 100
12.7 12.5 9.9 4.7 11.4 9.9 12.5 14.4 6.7 14.6 7.6
8.8 11.7 8.5 6.2 10.6 9.6 11.3 13.7 4.8 15.3 6.9
1.5 1.2 0.8 -16.0 1.6 2.5 0.9 5.8 0.4 2.0 0.8
0.99 1.10 0.87 0.41 1.01 0.87 0.97 1.27 0.52 1.28 0.67
0.77 1.12 0.82 0.59 1.01 0.91 0.99 1.31 0.43 1.46 0.66
2.3 8.2 7.6 2.8 7.4 5.3 7.2 9.8 4.4 4.9 5.8
2.3 7.6 7.5 2.8 7.2 5.0 7.2 8.7 3.8 4.1 5.0
2.0 7.3 3.5 8.9 1.8 6.2 4.5 1.8 1.1 5.0
7.8% 16.5% 20.9% 37.1% 13.5% 17.9% 63.3% 10.9% 19.7% 7.9% 10.5%
6.5 0.4 0.0 0.8 1.1 1.5 1.4 0.1 0.2 8.2 0.8
-56.4% -11.1% -0.8% -37.7% -20.4% -40.6% -96.7% -2.7% -8.5% -53.4% 14.2%
Julian Guido Scott Murdoch Julian Guido Julian Guido Julian Guido Julian Guido Julian Guido Scott Murdoch Matthew Nicholas Roger Leaning Julian Guido
Consumer Services
ALL CTD DMP FWD FLT IVC JET NVT SGH WEB Aristocrat Corp Trave Domino's Pizza Fleetwood Flight Centre Invocare Jetset Navitas Slater & Gordon Webjet 1,394 130 547 707 1,948 803 329 1,287 274 185 Dec 10 Jun 11 Jun 11 Jun 11 Jun 11 Dec 10 Jun 11 Jun 11 Jun 11 Jun 11 2.56 1.82 8.00 12.34 19.48 7.39 0.75 3.43 1.80 2.47 2.60 2.50 7.54 13.56 25.25 7.60 1.16 4.12 2.50 2.50 2.60 2.50 7.54 15.05 25.25 7.60 1.16 4.12 2.50 2.50 2% 37% -6% 10% 30% 3% 55% 20% 39% 1% Buy Buy Buy Buy Buy Hold Buy Hold Buy Buy -14% 7% 28% -5% -21% 2% -17% -11% -10% 2% -5% 16% 37% 4% -12% 10% -8% -2% -2% 11% 54.4 8.6 21.4 52.1 170.7 34.1 25.6 76.0 27.9 11.3 56.6 12.0 25.0 58.2 193.5 40.4 35.5 88.0 37.3 12.6 94.6 14.8 27.7 64.0 210.2 46.7 38.5 103.8 41.2 14.0 1.8 1.3 1.2 0.8 0.7 1.0 1.6 0.8 0.7 1.3 10.2 14.0 31.3 90.0 169.6 33.6 6.6 21.3 18.3 14.5 10.5 16.9 36.6 100.6 192.2 38.9 8.1 23.4 23.6 17.0 17.4 20.7 40.4 109.7 208.9 43.1 8.8 27.6 25.5 19.5 -0.6% 0.6% 2.5% 1.9% -0.3% 1.5% -2.9% -0.3% 2.1% 3% 20% 17% 12% 13% 16% 22% 10% 29% 17% 66% 23% 11% 9% 9% 11% 9% 18% 8% 15%
28% 19% 14% 8% 10% 12% 12% 14% 16% 14%
5.0 5.0 21.9 73.0 84.0 28.3 3.0 20.7 5.5 11.0
5.4 8.4 25.6 86.0 96.1 31.3 3.8 23.5 7.5 12.4
8.7 10.3 28.3 93.0 104.4 36.0 4.4 27.6 8.6 13.7
2.1% 4.6% 3.2% 7.0% 4.9% 4.2% 5.1% 6.9% 4.1% 5.0%
0 100 100 100 100 100 100 100 0 100
24.4 10.8 21.9 12.3 10.1 19.0 9.3 14.6 7.6 14.5
14.7 8.8 19.8 11.2 9.3 17.1 8.5 12.4 7.1 12.6
0.9 0.6 1.6 1.5 1.1 1.6 0.8 1.0 0.5 1.0
1.90 0.95 1.92 1.08 0.89 1.48 0.82 1.29 0.67 1.27
1.29 0.84 1.89 1.07 0.89 1.51 0.82 1.19 0.67 1.21
17.8 7.1 15.1 8.4 6.3 14.1 5.9 10.6 5.5 9.7
12.7 6.5 11.6 7.1 5.3 12.1 4.9 9.6 5.2 9.4
10.6 36.4 8.3 4.7 3.9 35.2 14.0 1.8 7.0
26.7% 28.6% 22.9% 27.4% 24.5% 40.4% 8.0% 36.3% 17.8% 34.1%
1.8 0.5 0.4 0.0 0.8 2.6 0.2 0.7 0.7 2.2
102.8% -22.0% -14.3% -1.0% -29.7% 209.7% -3.4% 44.7% 20.6% -105.2%
Michael Nolan Belinda Moore Josephine Little Alexandra Clarke Belinda Moore Julian Guido Belinda Moore Julian Guido Julian Guido Belinda Moore
Source: Company data, RBS forecasts, RBS Morgans forecasts. * Share prices as at close of trading on 5 December 2011. Target prices, forecasts and recommendations for some companies featured in 'The Bulletin' may have been updated overnight. * Earnings Quality: Net Operating Cash Flow/(Net Profit + Depreciation & Amortisation)
144

5 December 2011
NPAT pre abnormals (A$m) Earnings Quality * Actual EPS pre goodwill (c) EPS ANALYSIS IBES 3m EPS growth EPS (pre goodwill) revisions 12m fwd Fcst 1 Fcst 2 EPS CAGR 3 yr Actual DIVIDEND ANALYSIS Div yield DPS (c) Div frank (%) Fcst 1 PE (x) (pre goodwill) Fcst 1 Fcst 2 PEG VALUATION PE rel (pre goodwill) Fcst 1 Fcst 2 EV/ EV / P/ NTA EBIT (x) EBITDA (x) Fcst 1 Fcst 1 Fcst 1 B/SHEET ANALYSIS ROE Gearing (Tier 1 Analyst ND/EBITDA ratio for banks) Fcst 1 Fcst 1 Fcst 1
Actual
Fcst 1
Fcst 2
Actual
Fcst 1
Fcst 2
Fcst 1
Fcst 2
Fcst 1
Fcst 1
Food Beverage & Tobacco

AAC ELD GNC MSF PAG RIC TGR WCB Aust Agricultural Co Elders GrainCorp MSF Sugar PrimeAg Australia Ridley Corp Tassal Group Warrnambool Cheese 437 96 1,511 308 290 302 222 205 Dec 10 Sep 11 Sep 11 Dec 10 Jun 11 Jun 11 Jun 11 Jun 11 1.40 0.22 7.62 4.46 1.09 0.98 1.51 3.80 1.55 0.26 9.05 4.06 1.25 1.33 1.30 4.05 2.07 0.26 9.05 4.06 1.57 1.33 1.30 4.05 11% 18% 19% -9% 15% 36% -14% 7% Hold Hold Buy Buy Hold Buy Hold Hold -1% -62% 15% 31% -18% -20% -11% 9% 8% -53% 24% 40% -9% -11% -2% 18% 0.9 4.7 171.6 6.9 5.9 29.3 21.6 18.5 7.2 12.0 162.4 -2.5 17.4 31.5 25.0 15.0 9.6 19.0 131.5 11.1 20.9 33.8 27.4 15.0 5.0 0.8 1.2 2.3 0.2 0.8 1.2 1.5 0.3 1.0 86.6 13.5 3.9 9.5 14.8 38.5 2.5 2.7 82.0 -3.6 6.8 10.2 17.1 27.9 3.1 4.2 66.4 16.1 7.9 11.0 18.6 27.9 -25.7% 4.4% -29.7% 5.8% -0.1% 0.7% 0.0% 627% 156% -5% -127% 73% 7% 16% -28% 23% 58% -19% 16% 7% 9% 0%
69% -13% 11% 24% 6% 11% -7%
0.0 0.0 55.0 6.5 1.0 7.5 2.0 15.0
0.0 0.0 49.2 5.9 2.7 7.8 6.0 11.2
0.0 0.0 36.5 8.0 3.1 8.0 7.0 11.1
0.0% 0.0% 6.5% 1.3% 2.5% 7.9% 4.0% 2.9%
0 0 100 100 100 25 100 100
56.3 8.0 9.3 16.1 9.6 8.9 13.6
45.6 5.1 11.5 27.8 13.9 8.9 8.2 13.6
0.1 -0.7 0.7 1.5 0.8 -2.1
4.38 0.70 0.82 1.41 0.84 0.78 1.20
4.01 0.49 1.10 2.44 1.33 0.85 0.78 1.30
18.2 8.4 7.2 276.3 8.4 8.2 7.7 10.7
15.1 5.7 5.4 41.7 7.4 6.3 5.6 6.7
0.6 0.3 1.4 1.8 0.8 1.2 0.9 1.3
1.1% 2.0% 11.5% -1.5% 4.8% 10.7% 8.8% 9.7%
6.0 4.3 0.9 5.9 6.6 1.7 1.5 0.8
42.8% 47.9% 20.9% 28.3% -31.6% 36.3% 28.7% 17.9%
Belinda Moore Belinda Moore Belinda Moore Belinda Moore Belinda Moore Belinda Moore Matthew Nicholas Belinda Moore
Healthcare
ACR ACL API BTA BKL IPD MSB PXS QRX TIS Acrux Alchemia Aust Pharma Biota Blackmores ImpediMed Mesoblast Pharmaxis QRxPharma Tissue Therap 487 78 114 140 461 69 1,028 268 172 72 Jun 11 Jun 11 Aug 11 Jun 11 Jun 11 Jun 11 Jun 10 Jun 11 Jun 11 Jun 11 3.06 0.28 0.23 0.79 27.55 0.51 7.50 1.09 1.37 0.43 4.59 0.89 0.35 1.98 29.86 1.14 2.08 2.46 2.95 0.87 4.59 0.89 0.35 2.47 29.86 1.50 2.08 3.08 2.95 0.87 50% 217% 52% 150% 8% 123% -72% 126% 115% 103% Buy Buy Hold Buy Hold Buy Buy Buy Buy Buy -14% -56% -48% -20% -2% -37% 61% -62% -1% -39% -5% -47% -39% -11% 7% -28% 70% -53% 7% -31% 57.1 -13.4 20.8 -28.1 27.3 -14.8 -13.2 -45.8 -25.6 -5.3 5.5 -10.0 22.8 -9.3 30.4 -13.2 -14.5 -22.4 -22.5 -8.3 28.1 11.7 28.8 20.0 33.4 4.5 -1.6 -16.2 4.2 -4.7 1.1 1.0 1.2 1.5 0.7 0.8 0.8 0.9 0.9 0.8 34.4 -7.0 4.3 -15.7 162.9 -9.5 -9.6 -20.0 -20.5 -3.4 3.3 -3.6 4.7 -5.2 181.8 -8.4 -9.4 -9.1 -15.6 -4.9 16.9 4.3 5.9 11.2 199.7 2.9 -1.0 -6.6 2.9 -2.8 -13.2% -0.8% -0.6% -90% 92% 9% 202% 12% 12% 2% 121% 31% -31% 415% 26% 10% 800% 38% 76%
16% 41% 12% 4% 11% 32% -24% -8% -29% 8%
60.0 0.0 2.5 0.0 122.0 0.0 0.0 0.0 0.0 0.0
1.0 0.0 3.0 0.0 136.0 0.0 0.0 0.0 0.0 0.0
7.0 0.0 3.0 0.0 150.0 0.0 0.0 0.0 0.0 0.0
0.3% 0.0% 12.8% 0.0% 4.9% 0.0% 0.0% 0.0% 0.0% 0.0%
0 0 100 100 100 100 0 0 0 0
93.1 5.0 15.2 -
18.1 6.7 4.0 7.0 13.8 17.7 46.5 -
5.9 0.4 1.3 -
8.18 0.44 1.33 -
1.73 0.64 0.38 0.67 1.32 1.69 4.44 -
94.6 -6.4 4.1 -6.6 10.5 -4.8 -80.7 -10.8 -7.1 -7.0
59.1 -6.5 2.9 -10.8 9.6 -5.0 -80.8 -12.4 -7.1 -7.0
10.1 0.0% 6.9 -42.1% 0.3 4.0% 2.1 -12.9% 5.4 36.5% 14.0 -93.2% 42.8 -51.9% 4.2 -33.3% 19.0 -267.1% 8.6 -64.8%
5.6 n.a. 1.3 n.a. 0.3 n.a. n.a. n.a. n.a. n.a.
-84.0% -45.4% 16.3% -97.1% 14.8% -60.2% -88.9% -26.0% -86.8% -95.0%
Scott Power Scott Power Scott Power Scott Power Scott Power Scott Power Dr Derek Jellinek Scott Power Scott Power Scott Power
Infrastructure
AIX AIA.NZ LAU MQA SWL Aust Infrastructure Fund Auckland Int'l Airport Lindsay Macquarie Atlas Seymour Whyte 1,229 3,049 25 667 139 Jun 11 Jun 11 Jun 11 Dec 10 Jun 11 1.98 2.35 0.14 1.48 1.79 1.92 2.20 0.20 1.88 2.70 1.92 1.87 0.20 1.88 2.70 -3% -6% 45% 27% 51% Hold Hold Buy Buy Buy 5% 8% -26% -3% -19% 14% 17% -17% 6% -10% 212.3 92.6 1.4 -281.7 12.2 160.6 104.1 3.2 -57.0 14.8 166.5 115.6 5.2 108.5 17.9 0.2 1.0 0.9 0.0 0.7 34.2 7.0 0.6 -62.3 15.6 25.9 7.9 1.5 -12.6 19.0 26.8 8.7 2.4 24.0 22.9 -11.1% -0.3% 119.6% -24% 12% 131% 394% 22% 4% 11% 62% 21%
-8% 11% 79% -57% 21%
10.0 8.7 0.7 0.0 8.0
10.5 9.5 1.0 0.0 11.0
11.0 10.5 1.6 7.0 11.0
5.3% 4.0% 6.6% 0.0% 6.1%
50 100 100 0 100
7.7 23.3 9.8 9.4
7.4 21.1 6.0 6.1 7.8
-0.9 2.1 0.1 0.4
0.67 2.05 0.86 0.83
0.71 2.01 0.58 0.54 0.75
6.6 15.5 10.3 -228.0 4.8
6.6 12.5 3.8 -253.2 4.5
0.7 1.3 0.7 3.1
8.9% 5.4% 6.2% 20.5% 36.1% -
0.3 3.3 2.5 n.a. 1.8
-3.2% 42.0% 94.5% -865.2% -89.8%
William Allott William Allott Alexandra Clarke William Allott Alexandra Clarke
IT
ASZ CRZ CSV DTL DWS IRE MLB NXT OKN OTH RKN SLX SMX TNE ASG Group Carsales CSG Ltd Data#3 DWS Adv Business Soln IRESS Melbourne IT NEXTDC Oakton Onthehouse Reckon Silex Systems SMS Mgt & Technology Technology One 136 1,095 292 184 165 996 106 229 133 31 303 320 312 317 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Dec 10 Dec 10 Jun 11 Jun 11 Jun 11 Dec 10 Jun 11 Jun 11 Sep 11 0.84 4.68 1.02 1.20 1.25 7.62 1.32 1.60 1.41 0.38 2.27 1.98 4.60 1.04 1.30 5.38 1.20 1.46 1.42 8.70 1.50 2.44 1.52 1.50 2.37 6.87 5.26 1.07 1.30 5.38 1.36 1.46 1.42 8.70 1.50 2.44 1.52 1.50 2.37 6.87 5.26 1.07 55% 15% 18% 22% 13% 14% 13% 52% 8% 295% 4% 247% 14% 3% Buy Buy Hold Buy Hold Hold Hold Buy Hold Buy Hold Buy Hold Hold -29% 0% -32% -2% -12% -13% -31% -9% -41% -3% -66% -31% 8% -20% 9% -23% 7% -3% -4% -22% 0% -32% 6% -57% -22% 17% 15.7 58.2 40.6 15.0 17.4 58.4 16.1 -1.7 16.8 -1.8 15.7 -31.5 29.8 20.3 18.7 67.1 41.8 16.5 19.1 63.0 13.2 -8.3 15.8 2.0 18.1 -33.1 31.5 22.9 21.7 76.0 45.3 17.6 20.7 75.2 15.4 0.3 17.3 3.7 21.0 -5.8 34.4 26.0 0.9 1.0 0.3 0.3 0.8 1.2 0.8 0.5 0.7 0.4 1.2 1.2 0.7 0.8 9.7 24.9 15.6 9.8 13.1 46.3 20.2 -1.7 18.0 -19.1 11.8 -19.5 44.3 6.7 10.7 28.5 14.7 10.7 14.4 48.6 16.4 -5.8 16.8 2.4 13.6 -20.5 46.4 7.5 12.0 32.0 15.8 11.4 15.6 57.0 18.9 0.2 18.3 4.6 15.8 -3.6 50.5 8.5 -2.4% -0.5% -3.0% -4.4% -1.5% -3.4% -2.8% -7.3% 0.0% -4.5% -4.7% 11% 14% -6% 10% 10% 5% -19% -70% -7% 16% -5% 5% 12% 12% 12% 8% 7% 9% 17% 16% 9% 91% 16% 470% 9% 13%
9% 12% 4% 7% 8% 10% -2% 83% 6% -30% 13% 10% 11%
7.5 19.9 6.0 7.8 12.0 41.5 15.0 0.0 8.5 0.0 8.0 0.0 30.0 6.2
8.0 22.8 5.6 8.5 11.0 39.0 11.0 0.0 10.5 0.6 8.5 0.0 31.5 5.3
9.0 25.6 6.1 9.1 12.0 45.5 13.0 0.0 13.5 1.1 9.5 0.0 34.5 6.0
9.5% 4.9% 5.5% 7.1% 8.8% 5.1% 8.3% 0.0% 7.4% 1.6% 3.7% 0.0% 6.8% 5.1%
100 23 100 100 100 100 100 0 100 0 90 100 100 100
7.8 16.4 7.0 11.2 8.7 15.7 8.1 8.4 16.1 16.7 9.9 13.8
7.0 14.6 6.5 10.5 8.0 13.4 7.0 7.7 8.4 14.4 9.1 12.2
0.9 1.4 2.0 1.6 1.0 1.5 -4.6 1.5 -0.5 1.2 1.0 1.3
0.69 1.44 0.61 0.98 0.76 1.22 0.63 0.74 1.41 1.30 0.87 1.21
0.67 1.40 0.62 1.00 0.76 1.17 0.61 70.01 0.74 0.80 1.27 0.87 1.17
5.9 11.1 7.3 5.0 5.6 10.6 7.2 -18.2 5.4 8.7 11.7 -6.9 6.8 9.2
4.6 10.7 5.6 4.7 5.6 9.9 4.6 -26.3 4.8 3.5 8.8 -9.0 6.6 7.8
22.7 124.4 6.3 4.7 13.1 1.6 4.1 13.0 35.7 3.1 7.4 5.2
16.8% 56.2% 13.5% 51.4% 32.0% 46.4% 14.2% -6.6% 14.4% 3.3% 34.9% -23.8% 28.5% 31.9%
0.9 0.6 1.9 2.7 0.5 0.8 1.0 n.a. 0.7 0.4 0.3 n.a. 0.5 1.0
29.1% -41.3% 45.8% -196.3% -21.1% -53.0% 32.5% -7.5% -14.4% -5.1% -16.2% -42.2% -18.8% -46.2%
Nick Harris Ashley Wallace Nick Harris Nick Harris Julian Guido Julian Guido Nick Harris Nick Harris Julian Guido Belinda Moore Julian Guido Scott Power Julian Guido Nick Harris
Insurance
AUB Austbrokers 344 Jun 11 6.20 6.46 6.46 4% Buy 21% 30% 23.9 26.8 29.5 1.2 43.6 48.4 53.1 -0.1% 11% 10%
8%
25.5
30.0
32.0
4.8%
12.8
11.7
1.6
1.30
1.26
16.2
14.4
4.1
16.1% -
3.3
-37.5% Julian Guido
Media
APN AUN CMJ SXL PRT REA SGN TEN APN Austar United Comms Consolidated Media Southern Cross Media Prime Media REA Group STW Group Ten Network 460 1,512 1,427 889 234 1,643 311 972 Dec 10 Dec 10 Jun 11 Jun 11 Jun 11 Jun 11 Dec 10 Aug 11 0.75 1.19 2.54 1.26 0.64 12.60 0.87 0.93 1.37 1.37 2.68 1.50 0.72 11.25 1.34 0.81 1.53 1.20 2.98 1.79 0.80 11.77 1.34 0.90 83% 15% 6% 19% 13% -11% 55% -13% Buy Buy Hold Buy Hold Hold Buy Sell -61% 25% -19% -34% -2% 2% -18% -34% -52% 34% -10% -25% 7% 11% -9% -25% 103.1 54.1 94.8 68.6 27.2 68.7 38.7 74.1 83.1 82.4 92.7 98.9 28.8 80.2 40.6 53.6 96.4 98.0 96.6 110.3 29.2 95.0 40.4 75.2 1.2 1.0 1.3 0.6 0.9 1.0 2.0 1.8 17.2 4.2 16.6 14.8 7.4 53.1 10.8 7.1 13.5 6.3 16.5 14.0 7.9 61.1 11.4 5.1 15.6 7.5 17.2 15.6 8.0 71.3 11.5 7.2 -0.4% 1.4% 0.5% -4.2% -0.3% -0.1% -1.0% -15.7% -21% 51% -1% -6% 6% 15% 6% -28% 15% 19% 4% 11% 1% 17% 1% 40%
0% 32% 5% 7% 3% 15% 4% 6%
12.0 0.0 16.5 10.0 4.5 26.0 6.5 5.3
8.1 0.0 16.5 9.1 5.5 30.5 7.4 3.8
9.3 0.0 16.5 10.9 5.6 42.8 8.1 5.4
10.9% 0.0% 6.5% 7.2% 8.6% 2.4% 8.5% 4.1%
30 0 0 100 100 100 100 100
5.5 18.8 15.4 9.0 8.1 20.6 7.6 18.1
4.8 15.8 14.8 8.1 8.0 17.7 7.5 12.9
-38.5 0.6 3.4 1.4 3.2 1.4 1.9 2.8
0.43 1.47 1.35 0.79 0.71 1.81 0.59 1.59
0.42 1.39 1.41 0.77 0.77 1.69 0.66 1.24
5.9 14.6 -240.1 7.6 7.0 13.4 6.3 11.9
5.8 7.9 7.1 6.6 5.8 12.1 5.8 10.1
4.4 10.4 329.6 -
9.2% -39.2% 28.3% 6.5% 18.3% 37.4% 11.1% 6.6%
2.9 1.9 n.a. 2.7 2.0 1.4 1.1 2.8
59.3% -279.8% -25.4% 39.1% 75.8% -70.4% 20.1% 49.7%
Fraser McLeish Fraser McLeish Fraser McLeish Ashley Wallace Ashley Wallace Ashley Wallace Matthew Nicholas Fraser McLeish
145

5 December 2011
Actual
Fcst 1
Fcst 2
Actual
Fcst 1
Fcst 2
Fcst 1
Fcst 2
Fcst 1
Fcst 1
Other Capital Goods

AJL ALS AAX ASB ASL BOL BKN CDD EGN EHL GWA HST HIL LDW NFK RFX RQL SDM WTP AJ Lucas Alesco Ausenco Austal Ausdrill BOOM Logistics Bradken Cardno Engenco Emeco GWA Group Hastie Group Hills Ludowici Norfolk Group Redflow Resource Equip Sedgman Watpac 89 115 343 408 938 116 1,246 585 130 672 754 1,231 282 94 172 59 74 417 190 Jun 11 May 11 Dec 10 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Dec 10 Mar 11 Jun 11 Jun 11 Jun 11 Jun 11 1.35 1.22 2.79 2.17 3.11 0.25 7.70 5.30 1.05 1.07 2.50 0.90 1.14 3.56 1.09 0.71 0.35 1.99 1.03 2.28 1.33 3.97 3.75 3.80 0.49 9.85 7.28 1.25 1.23 2.16 1.20 1.07 4.92 1.49 2.04 0.99 1.93 1.96 2.28 1.33 6.08 3.75 3.80 0.49 9.85 7.28 1.33 1.23 2.16 0.12 1.53 4.92 1.49 2.07 1.28 1.93 1.96 69% 9% 42% 73% 22% 95% 28% 37% 19% 15% -14% 33% -6% 38% 37% 187% 182% -3% 90% Hold Hold Buy Buy Buy Buy Buy Buy Buy Buy Hold Hold Hold Buy Buy Buy Buy Hold Buy -44% -54% -9% -38% 0% -34% -15% -5% -30% -1% -19% -89% -39% -27% -14% -58% -40% -13% -43% -35% -46% 0% -29% 9% -25% -6% 4% -21% 8% -10% -80% -30% -19% -5% -49% -31% -4% -34% -8.5 15.6 0.8 40.5 78.5 5.4 90.1 58.8 7.2 56.3 63.4 18.7 24.7 11.6 21.1 -7.3 12.2 28.9 16.8 6.2 14.0 22.9 49.7 96.7 17.4 120.3 69.2 15.9 68.7 56.6 23.6 26.8 13.5 22.2 -10.8 13.4 36.7 28.3 10.4 16.9 35.5 50.2 116.0 21.6 143.9 75.0 21.2 78.2 60.4 31.8 31.7 16.7 24.7 3.4 14.4 37.9 35.0 1.4 1.2 1.8 3.3 0.7 0.9 0.2 1.0 1.5 1.2 1.1 1.8 0.3 0.5 1.1 0.9 0.9 0.6 1.3 -12.5 16.5 0.7 21.5 29.0 1.2 63.5 55.4 0.6 8.9 21.0 7.4 9.9 44.7 13.3 -8.8 5.6 13.8 9.2 9.0 14.8 18.6 26.4 32.1 3.7 72.3 62.7 12.5 10.9 18.8 1.7 11.0 46.0 14.0 -13.0 5.7 17.5 15.4 15.2 17.8 28.9 26.7 38.5 4.6 84.0 67.4 16.7 12.4 20.0 2.3 13.3 57.0 15.5 4.1 6.1 18.1 18.9 3.6% -0.8% -2.4% 0.5% 1.0% 0.1% 2.7% -1.3% -9.1% -7.8% -9.8% -3.8% 0.9% -5.3% -10% 2719% 23% 11% 219% 14% 13% 2071% 22% -11% -77% 11% 3% 5% -32% 2% 27% 67% 68% 20% 55% 1% 20% 24% 16% 7% 34% 14% 7% 35% 21% 24% 11% 8% 3% 23%
17% 14% 12% 13% 62% 17% 9% 14% 1% -27% 16% 13% 11% 9% 5% 11% 31%
0.0 14.0 0.0 6.0 12.0 0.0 39.5 34.0 0.0 10.0 18.0 0.0 10.0 20.0 2.0 0.0 0.0 7.0 6.0
0.0 8.5 9.3 7.0 13.0 0.0 45.0 36.0 0.0 6.0 18.0 0.0 10.0 23.0 3.5 0.0 0.0 8.0 10.0
0.0 10.5 14.4 8.0 14.5 0.0 52.5 38.5 0.0 6.5 18.0 0.3 11.5 29.0 4.5 0.0 1.0 8.5 12.0
0.0% 7.0% 3.3% 3.2% 4.2% 0.0% 5.8% 6.8% 0.0% 5.6% 7.2% 0.0% 8.8% 6.5% 3.2% 0.0% 0.0% 4.0% 9.7%
100 100 75 100 100 100 100 60 0 100 100 100 100 100 100 100 0 100 100
15.0 8.2 15.0 8.2 9.7 6.7 10.7 8.4 8.4 9.8 13.3 52.2 10.4 7.7 7.8 6.2 11.4 6.7
8.9 6.8 9.7 8.1 8.1 5.4 9.2 7.9 6.3 8.6 12.5 38.7 8.6 6.2 7.0 17.5 5.7 11.0 5.5
0.9 0.6 0.7 0.8 0.1 0.6 1.0 0.7 9.5 -1.9 0.7 0.6 0.7 1.3 1.0 0.2
1.31 0.72 1.17 0.72 0.88 0.59 0.94 0.74 0.74 0.86 1.17 4.59 0.91 0.60 0.68 0.54 1.07 0.59
0.85 0.65 0.85 0.78 0.79 0.52 0.88 0.75 0.60 0.82 1.19 3.70 0.82 0.55 0.67 1.67 0.55 1.12 0.52
8.3 6.7 9.6 5.2 7.1 6.6 8.2 7.0 5.6 8.3 9.8 26.5 8.3 6.1 4.6 -4.7 4.6 7.8 5.6
4.4 4.4 7.0 4.2 4.3 3.5 6.7 6.2 4.0 4.0 8.1 20.8 5.7 4.7 3.8 -5.6 3.7 5.7 3.8
1.0 1.3 4.6 1.2 1.4 0.5 2.3 0.9 1.5 12.6 16.1 0.8 1.4 3.1 5.8 1.1 3.0 0.7
3.0% 3.0% 9.5% 15.7% 13.7% 5.7% 16.6% 18.5% 8.5% 11.1% 12.8% 6.9% 7.0% 13.9% 22.6% -61.9% 15.1% 21.5% 9.1%
2.4 1.7 0.1 0.8 0.4 1.8 1.7 1.1 0.5 1.4 1.6 1.8 1.6 1.4 0.4 n.a. 0.4 0.7 1.0
49.6% 16.0% -1.0% -20.0% 11.9% 40.3% 56.2% 32.2% 9.6% 56.0% 41.7% 29.4% 26.9% 36.2% -14.7% -35.1% 9.7% -27.1% 21.6%
Alexandra Clarke Julian Guido Roger Leaning Julian Guido Matthew Nicholas Matthew Nicholas Matthew Nicholas Roger Leaning Alexandra Clarke Matthew Nicholas Julian Guido Julian Guido Matthew Nicholas Roger Leaning Julian Guido Scott Power Alexandra Clarke Roger Leaning Scott Murdoch
Property
AAD CWP CMW DVN FKP PPC SDG Ardent Leisure Cedar Woods Cromwell Devine FKP Property Peet Sunland Group 347 213 727 137 599 256 179 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 1.09 3.45 0.66 0.84 0.50 0.81 0.90 1.45 5.24 0.77 1.10 0.87 1.45 0.92 1.45 5.24 0.77 1.10 0.87 1.45 0.92 33% 52% 17% 31% 74% 80% 2% Buy Buy Buy Buy Buy Buy Hold 8% -1% -13% -26% -42% -60% 20% 17% 8% -4% -17% -33% -51% 29% 39.4 28.1 65.0 20.2 121.0 44.0 17.9 41.3 34.6 76.2 21.0 121.5 19.8 18.7 44.7 38.4 83.0 23.4 125.2 31.2 21.0 1.0 1.4 1.0 3.6 0.4 1.3 2.1 12.5 45.8 7.1 12.6 10.3 14.5 7.8 13.0 55.2 7.3 12.9 10.1 6.3 9.4 13.8 60.8 7.4 14.2 10.4 9.8 12.9 -6.1% -1.4% -1.5% -2.4% -45.4% 6.7% 3% 20% 3% 2% -2% -57% 22% 6% 10% 1% 11% 2% 57% 37%
6% 15% 3% 9% 5% -10% 26%
11.5 23.0 7.0 8.0 3.0 8.5 0.0
11.7 28.0 7.0 8.4 3.3 3.5 0.0
12.4 30.0 7.0 9.3 3.3 6.0 4.0
10.7% 8.1% 10.6% 9.9% 6.6% 4.3% 0.0%
0 100 17 100 70 100 100
8.4 6.3 9.0 6.5 4.9 13.0 9.6
7.9 5.7 9.0 5.9 4.8 8.2 7.0
1.4 0.4 2.8 0.7 0.9 -1.3 0.4
0.74 0.55 0.80 0.57 0.43 1.14 0.84
0.76 0.54 0.86 0.56 0.46 0.79 0.67
8.9 5.2 12.1 6.3 7.4 12.7 6.5
5.7 5.2 12.0 6.2 7.3 11.9 5.9
1.1 1.5 0.8 0.4 0.5 1.0 0.5
9.6% 24.9% 10.0% 6.0% 10.9% 7.5% 5.6%
1.8 1.0 6.5 2.8 4.2 5.3 0.3
37.5% 34.4% 103.3% 32.8% 49.9% 72.0% 3.0%
Josephine Little Scott Murdoch Fiona Buchanan Scott Murdoch Josephine Little Matthew Nicholas Fiona Buchanan
Retail
APE ARP AHE KMD ORL PBG PMV TRS RFG RHL SUL TGA WTF AP Eagers ARB Corp Automotive Holdings Kathmandu OrotonGroup Pacific Brands Premier Inv Reject Shop Retail Food Ruralco Super Retail Thorn Group Wotif.com 372 566 485 372 346 549 843 271 281 193 737 251 756 Dec 10 Jun 11 Jun 11 Jul 11 Jul 11 Jun 11 Jul 11 Jun 11 Jun 11 Sep 11 Jun 11 Mar 11 Jun 11 11.80 7.81 1.87 1.86 8.49 0.59 5.44 10.44 2.60 3.50 5.50 1.72 3.58 15.00 8.65 2.23 2.16 9.18 0.92 5.58 12.70 2.65 4.45 7.40 2.07 4.07 15.00 8.65 2.22 2.16 9.18 0.92 5.58 12.70 2.83 4.45 7.40 2.07 4.07 27% 11% 19% 16% 8% 56% 3% 22% 2% 27% 35% 20% 14% Buy Hold Hold Hold Buy Buy Hold Hold Hold Buy Buy Buy Hold -6% 6% -24% 37% -1% -40% -12% -24% -10% 27% -4% -13% -28% 3% 15% -15% 46% 8% -31% -3% -15% -1% 36% 5% -4% -19% 32.6 37.9 52.4 30.0 24.8 103.4 61.1 16.1 28.0 17.6 55.6 23.0 51.0 39.3 42.0 59.7 34.6 27.0 86.5 61.1 23.7 30.4 19.7 89.8 27.4 56.0 39.6 46.1 69.5 39.0 30.0 104.3 71.3 29.1 32.7 21.3 114.9 30.4 61.7 0.8 0.9 0.9 0.9 0.7 0.8 1.0 0.7 0.9 2.3 0.5 0.6 1.5 108.7 52.2 22.7 14.7 60.8 11.1 39.4 61.4 26.1 32.0 43.1 17.6 23.9 124.5 58.0 23.0 17.3 66.3 9.3 39.4 89.6 27.9 35.8 51.4 19.1 26.3 125.4 63.6 26.8 19.5 73.7 11.2 46.0 109.4 29.5 38.7 58.8 20.7 29.0 1.3% -3.1% -2.1% 0.6% 5.2% -6.1% -4.0% -4.4% -1.7% 7.1% 4.0% -3.6% -2.4% 15% 11% 1% 17% 9% -16% 0% 46% 7% 12% 19% 8% 10% 1% 10% 17% 13% 11% 20% 17% 22% 6% 8% 14% 9% 10%
7% 10% 8% 12% 9% 2% 8% 25% 5% 9% 16% 10% 10%
64.0 23.0 17.0 10.0 50.0 6.2 36.0 31.0 14.5 18.0 29.0 8.5 22.0
78.0 26.5 17.0 11.3 54.0 6.1 35.5 68.0 16.7 20.0 31.0 9.8 24.0
80.0 29.5 19.0 12.7 60.0 7.4 36.5 83.0 18.0 22.0 35.0 10.7 26.5
6.6% 3.4% 9.1% 4.6% 6.4% 10.3% 6.5% 6.5% 6.4% 5.7% 5.6% 5.7% 6.7%
100 100 100 0 0 100 0 100 100 100 100 100 100
9.5 13.5 8.1 11.0 12.8 6.3 13.8 11.7 9.3 9.8 10.7 9.0 13.6
9.4 12.3 7.0 9.8 11.5 5.3 11.8 9.5 8.8 9.0 9.4 8.3 12.3
1.3 1.4 1.0 0.9 1.4 2.9 1.7 0.5 1.7 1.1 0.7 0.9 1.3
0.74 1.18 0.71 0.97 1.13 0.56 1.22 1.02 0.82 0.86 0.94 0.79 1.20
0.83 1.17 0.67 0.94 1.10 0.50 1.13 0.91 0.84 0.86 0.89 0.79 1.18
7.0 9.2 7.9 7.7 8.9 4.7 8.2 8.4 6.9 4.5 7.6 6.0 7.7
6.2 8.2 6.5 6.9 7.3 4.3 6.5 6.3 6.7 4.0 6.3 5.4 7.2
1.4 4.0 1.8 15.6 11.5 4.2 2.4 4.1 1.9 24.4 2.4 138.9
10.7% 29.9% 13.0% 16.6% 83.1% 7.2% 4.9% 39.1% 18.2% 12.2% 18.5% 23.3% 60.7%
4.3 0.7 3.1 0.5 0.1 1.2 2.0 0.8 1.1 0.2 2.2 0.1 1.7
108.0% -28.6% 95.3% 13.6% 17.4% 16.8% -16.4% 61.9% 32.3% 4.9% 59.1% -4.0% -153.5%
Josephine Little Matthew Nicholas Josephine Little Josephine Little Josephine Little Julian Guido Julian Guido Julian Guido Scott Murdoch Belinda Moore Josephine Little Scott Murdoch Belinda Moore
Telecommunication Services
AMM HTA IIN MAQ
SGT TEL.NZ
TPM
Amcom Hutchison Telecom (Aus iiNet Macq Telecom SingTel Telecom Corp TPG Telecom
208 746 430 157 49,665 3,822 1,134
Jun 11 Dec 10 Jun 11 Jun 11 Mar 11 Jun 11 Jul 11
0.87 0.05 2.82 7.50 3.12 2.00 1.42
1.09 0.13 3.28 10.00 3.16 2.45 1.48
1.09 0.13 3.26 12.50 2.48 1.90 1.48
25% 160% 16% 33% 1% 23% 4%
Buy Buy Buy Buy Hold Hold Hold
23% -50% -3% -16% 2% 21% -13%
31% -41% 6% -7% 11% 30% -4%
21.6 41.5 38.0 17.7 3,024.8 296.6 78.2
16.4 -90.6 47.2 15.0 2,962.8 356.6 110.0
21.2 28.0 52.4 16.6 3,193.8 384.3 124.5
0.8 0.0 1.2 1.2 1.0 1.0 0.8
9.0 0.3 25.0 84.5 19.0 15.5 10.1
6.8 -0.7 31.6 71.8 18.6 18.5 13.8
8.8 0.2 36.0 79.6 20.0 20.0 15.5
3.5% 5.3% -18.4% -0.2% -16.8% -0.6%
-25% -318% 27% -15% -2% 20% 37%
29% 14% 11% 8% 8% 12%
5% 37% 16% 3% 4% 13% 19%
4.8 0.0 12.0 22.0 18.0 4.5
3.4 0.0 16.0 19.0 21.0 7.0
4.4 0.0 18.0 21.0 23.0 8.0
3.9% 0.0% 5.7% 2.5% 5.1% 10.5% 4.9%
0 0 0 100 0 100 100
12.8 8.9 10.5 13.5 8.4 10.3
9.9 50.9 7.8 9.4 12.7 7.8 9.2
2.8 0.6 3.4 3.3 0.6 0.6
1.12 0.78 0.92 1.18 0.74 0.91
0.95 2.34 0.75 0.90 1.22 0.75 0.88
9.1 -570.7 7.5 6.6 10.3 7.7 7.6
6.4 -570.7 4.5 3.5 7.5 3.5 5.1
2.7 1.0 1.9 3.4 3.2 27.8
11.7% -6.4% 19.0% 18.1% 15.0% 19.9% 20.1%
0.3 n.a. 1.1 0.7 0.9 1.3 0.7
8.4% -0.3% 53.3% -27.5% 18.3% 101.9% 29.6%
Alan Stuart Alan Stuart Alan Stuart Nick Harris Ian Martin Alan Stuart Nick Harris
Transportation
MRM RCR REX VBA Mermaid Marine Aust RCR Tomlinson Regional Express Virgin Blue 608 224 113 784 Jun 11 Jun 11 Jun 11 Jun 11 3.10 1.70 1.03 0.35 3.66 2.13 1.26 0.41 3.66 2.13 1.58 0.45 18% 25% 23% 19% Buy Buy Buy Buy 3% 16% -6% -19% 12% 25% 3% -10% 43.2 19.5 17.4 -48.1 53.0 21.2 21.7 64.5 58.3 25.8 24.0 114.9 1.3 0.4 1.2 1.4 20.8 14.8 15.7 -2.2 23.6 16.0 19.7 2.9 25.6 19.5 21.9 5.2 0.9% 7.8% 9.3% 13% 8% 26% 8% 22% 11% 79%
11% 14% 16% 50%
9.0 4.0 7.1 0.0
10.0 5.0 7.6 0.0
11.0 6.0 8.6 0.0
3.2% 2.9% 7.4% 0.0%
0 100 100 0
13.1 10.6 5.2 12.2
12.1 8.7 4.7 6.8
1.2 0.7 0.3 0.2
1.15 0.93 0.46 1.07
1.16 0.83 0.45 0.65
9.1 7.5 3.5 11.4
7.1 5.0 2.4 4.4
2.3 1.6 0.7 0.9
18.5% 9.8% 12.9% 6.7%
1.3 0.1 0.1 2.5
46.5% 1.0% -1.8% 100.8%
Alexandra Clarke Alexandra Clarke Michael Newbold, CFA Mark Williams
Utilities
CIF ENV EPW GDY HDF SPN Challenger Infrastructure Envestra ERM Power Geodynamics Hastings Diversified SP AusNet 356 1,016 246 56 937 2,725 Jun 11 Jun 11 Jun 11 Jun 10 Dec 10 Mar 11 1.13 0.71 1.50 0.19 1.80 0.98 1.35 0.80 2.00 1.48 1.95 1.00 1.35 0.80 2.23 1.74 1.95 1.15 19% 13% 33% 677% 8% 2% Buy Buy Buy Buy Buy Hold -6% 37% -24% -50% 7% 13% 3% 45% -15% -41% 15% 22% -0.8 47.2 2.0 -14.8 35.6 252.9 11.0 63.0 31.5 -50.9 39.7 233.5 22.3 69.7 37.2 -52.8 26.8 245.0 1.6 1.4 6.6 0.4 1.6 0.9 -0.3 3.3 1.5 -5.1 7.1 9.0 3.5 4.1 19.3 -13.8 7.7 8.3 7.0 4.3 22.6 -11.9 5.1 8.5 12.5% 0.8% -1.9% 0.2% -3.1% 25% 1214% -63% 8% -9% 102% 4% 17% 16% -33% 3%
13% -19% 0%
14.0 5.8 3.5 0.0 12.0 8.0
10.0 5.9 7.7 0.0 10.0 8.0
10.0 6.1 8.1 0.0 10.0 8.0
8.9% 8.4% 5.1% 0.0% 5.6% 8.2%
0 0 0 0 0 0
32.4 17.1 7.8 23.4 11.8
16.0 16.5 6.6 35.2 11.5
1.3 -1.2 -58.5
2.85 1.51 0.68 1.82 1.04
1.53 1.58 0.63 3.09 1.10
15.4 11.2 4.6 0.0 25.2 11.8
9.5 9.2 3.9 -0.1 19.1 8.1
21.5 1.4 0.2 1.7 10.9
3.6% 10.5% 19.2% -18.1% 7.1% 39.6%
7.3 6.1 1.1 n.a. 9.6 5.1
268.8% 299.1% 56.4% -18.4% 169.9% 159.3%
William Allott William Allott Jason Mabee, CFA Roger Leaning William Allott William Allott
146

5 December 2011
Actual
Fcst 1
Fcst 2
Actual
Fcst 1
Fcst 2
Fcst 1
Fcst 2
Fcst 1
Fcst 1
Aluminium & Steel

GBG Gindalbie Metals 669 Jun 11 0.54 0.72 0.72 33% Buy -60% -51% -5.3 18.2 93.8 0.5 -0.6 1.5 7.6 -12.9% 416%
-
0.0
0.0
0.0
0.0%
100
36.8
7.1
3.23
0.68
32.3
26.8
1.0
3.0%
10.7
67.2% Todd Scott
Energy
AZT ERA GCL HZN IFN LNC MAD NCR NHC NXS SMR SXY WHC Aston Energy Resource Gloucester Coa Horizon Oil Infigen Energy Linc Energy Maverick Drilling NuCoal New Hope Corp Nexus Energy Stanmore Coal Senex Energy Whitehaven Coal 2,038 813 1,704 254 187 785 84 169 4,981 405 109 558 2,823 Jun 11 Dec 10 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jul 11 Jun 11 Jun 11 Jun 11 Jun 11 9.49 1.57 8.40 0.22 0.25 1.56 0.22 0.26 6.00 0.31 0.83 0.61 5.71 11.85 1.81 9.47 0.33 0.80 2.60 0.36 0.65 5.87 0.12 2.03 0.63 7.00 11.85 1.81 9.47 0.33 0.80 2.60 0.89 0.65 5.87 0.60 2.03 0.63 6.23 25% 15% 13% 51% 220% 67% 64% 148% -2% -61% 145% 3% 23% Buy Sell Buy Buy Buy Buy Buy Buy Buy Hold Buy Buy Buy 18% -79% -31% -24% -54% -41% 0% -57% 24% -30% -40% 49% -15% 27% -70% -22% -15% -45% -32% 9% -48% 33% -21% -31% 58% -6% -11.1 52.8 54.6 16.4 -26.0 -204.0 1.7 -3.4 133.4 26.1 -2.0 -2.4 73.3 -11.7 39.5 55.1 24.2 -42.7 -25.3 14.7 -6.0 209.4 -18.7 -4.3 22.6 173.3 -5.8 92.5 82.0 40.6 -24.4 29.3 25.8 -7.1 194.7 -2.8 -5.6 48.7 243.9 12.3 0.5 0.9 1.6 0.6 0.7 0.1 0.9 0.4 0.4 1.0 3.7 0.7 -5.1 27.7 26.9 1.4 -3.4 -41.1 0.6 -0.5 16.1 2.0 -1.5 -0.3 14.8 -5.4 7.6 26.8 2.0 -5.6 -5.0 3.9 -0.9 25.2 -1.4 -3.3 2.5 34.4 -2.7 17.9 39.9 3.4 -3.2 5.8 6.9 -1.1 23.4 -0.2 -4.3 5.3 48.4 -85.5% -54.0% -35.5% -12.5% -103.6% -5.7% 8.0% -9.6% -5% -72% 0% 41% -39% 717% 551% -44% 57% -172% -54% 132% 102% 134% 49% 68% 75% 75% -15% -7% 575% -22% 115% 41%
90% -83% 45% 79% -36% 12% -19% 54%
0.0 8.0 0.0 0.0 1.0 0.0 0.0 0.0 25.3 0.0 0.0 0.0 7.4
0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.0 0.0 0.0 0.0 18.0
0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 11.0 0.0 0.0 0.0 24.0
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2.0% 0.0% 0.0% 0.0% 3.2%
0 100 0 0 0 100 0 0 100 0 0 0 100
20.6 31.3 11.1 5.8 23.8 24.6 16.6
8.8 21.0 6.2 26.8 3.1 25.6 11.4 11.8
-0.2 0.7 0.1 2.0 0.3
1.60 2.75 0.98 0.51 2.09 2.16 1.46
0.77 2.01 0.59 2.56 0.29 2.45 1.09 1.13
-179.5 1.3 15.5 10.3 27.5 -25.8 4.5 -27.3 17.0 -81.1 -11.8 22.0 10.9
-179.5 9.5 7.0 6.6 -49.5 4.0 -27.3 14.0 9.2 -11.8 20.4 9.0
3.2 0.7 1.6 1.5 0.7 1.3 2.6 5.2 2.2 0.7 1.9 3.1 2.6
-1.8% 3.3% 5.3% 14.9% -6.9% -3.5% 49.8% -16.8% 9.0% -3.0% -9.7% 13.4% 15.8%
n.a. 6.4 0.0 1.1 5.4 n.a. 0.2 n.a. 6.6 1.8 n.a. 2.4 0.2
-35.6% -49.8% -0.2% 26.9% 144.6% -25.9% 12.4% -17.4% -67.4% 15.6% -48.0% -33.1% -5.6%
Tom Sartor Lyndon Fagan Tom Sartor Chris Brown William Allott Jason Mabee, CFA Roger Leaning Tom Sartor Tom Sartor Chris Brown Tom Sartor Roger Leaning Tom Sartor
Diversified Metals & Mining

ALK AQA AGO GRR GRY IRD IGO IMD MDL OMH Alkane Resources Aquila Atlas Iron Grange Resources Gryphon Minerals Iron Road Independence Gp Imdex Mineral Deposits OM Holdings 299 2,557 2,556 548 504 103 942 417 483 189 Dec 10 Jun 11 Jun 11 Dec 10 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Dec 10 1.11 6.83 3.09 0.47 1.37 0.73 4.77 2.09 5.79 0.38 1.92 5.12 4.06 0.62 2.22 0.70 5.92 2.83 8.00 0.48 1.92 5.12 4.06 0.62 2.22 0.70 5.92 2.83 9.40 0.48 73% -25% 31% 33% 62% -4% 24% 35% 38% 26% Buy Sell Buy Buy Buy Hold Buy Buy Buy Sell 11% -31% 5% -37% -24% -1% -40% 17% 7% -73% 20% -22% 14% -28% -15% 8% -31% 26% 16% -64% 7.8 -63.5 168.6 33.9 -10.6 -17.5 30.3 31.0 39.0 47.2 -5.4 -29.2 233.2 86.1 -2.8 -17.2 28.9 47.0 20.3 4.1 -9.9 -160.2 215.2 102.7 13.5 -17.1 38.6 54.1 21.4 17.3 1.0 1.4 1.1 1.8 2.4 0.9 1.0 0.8 0.4 0.4 2.9 -17.0 20.4 3.0 -3.1 -13.6 18.7 15.6 46.7 9.4 -2.0 -7.8 28.2 7.5 -0.7 -12.2 14.3 23.1 24.3 0.8 -3.7 -42.8 26.0 8.9 3.5 -12.1 19.0 26.5 25.6 3.4 -367.0% -11.2% 3.7% -32.2% 11.0% 38.2% -65.1% -169% 118% 38% 153% 337% 11% -24% 48% -48% -91% -45% -82% -8% 19% 1% 33% 15% 5% 321%
21% 33% 41% 23% 7% -18%
0.0 0.0 3.0 0.0 0.0 0.0 7.0 4.5 0.0 2.8
0.0 0.0 6.0 3.7 0.0 0.0 5.0 5.5 0.0 1.0
0.0 0.0 6.0 2.2 0.0 0.0 0.0 6.5 0.0 0.9
0.0% 0.0% 1.9% 7.8% 0.0% 0.0% 1.0% 2.6% 0.0% 2.7%
0 0 0 0 0 0 0 100 0 0
11.0 6.4 33.5 9.0 24.0 46.1
11.9 5.3 38.9 25.1 7.9 21.2 11.0
0.5 0.2 0.8 0.4 3.3 -2.6
0.96 0.50 2.94 0.85 2.11 3.59
1.13 0.47 3.72 2.40 0.79 2.03 0.96
-33.7 947.9 6.5 2.2 372.1 -7.1 25.8 6.4 10.9 26.3
-33.7 306.3 5.8 1.8 345.2 -7.1 14.4 5.7 9.6 12.2
5.1 -10.3% 7.8 -8.4% 1.3 12.4% 0.7 12.7% 2.9 -1.8% 22.1 ####### 1.7 4.2% 4.0 31.1% 1.3 5.4% 0.8 1.5%
n.a. 5.7 1.4 1.3 20.1 n.a. 0.5 0.3 4.1 4.4
-32.7% 14.8% -24.5% -29.4% -15.3% 218.3% -5.4% 13.9% -37.0% 44.4%
Sam Berridge Sam Berridge Lyndon Fagan Todd Scott James Wilson Todd Scott Sam Berridge Matthew Nicholas Chris Brown Todd Scott
Gold & Precious Metals

AMX EVN IAU IGR KCN KGL MML OGC PRU RRL SAR Ampella Mining Evolution Mining Intrepid Mines Integra Mining Kingsgate Kentor Gold Medusa Mining OceanaGold Perseus Mining Regis Resources Saracen Minera 395 1,248 663 527 953 138 1,114 723 1,337 1,580 548 Jun 11 Jun 11 Dec 10 Jun 11 Jun 11 Dec 10 Jun 11 Dec 10 Jun 11 Jun 11 Jun 11 1.82 1.78 1.27 0.63 7.04 0.13 5.91 2.62 3.14 3.64 0.89 2.84 2.02 1.62 0.77 7.37 0.22 7.46 2.89 3.37 2.89 1.07 2.84 2.02 2.70 0.77 7.37 0.24 7.46 2.89 2.93 2.51 1.07 56% 14% 27% 22% 5% 69% 26% 10% 7% -21% 20% Buy Buy Buy Buy Buy Buy Buy Buy Hold Hold Buy -45% -8% -37% -11% -35% -28% -9% -28% -7% 52% 6% -36% 1% -28% -2% -26% -19% 0% -19% 2% 61% 15% -24.0 2.9 5.3 41.1 32.0 0.1 112.5 32.5 -30.0 36.3 47.7 -13.6 177.8 -6.0 47.8 158.6 -2.0 126.6 46.4 132.9 52.9 66.2 -13.6 129.3 -10.3 38.1 192.9 16.2 111.1 73.5 114.7 193.5 73.8 0.8 0.2 0.1 0.4 0.4 1.0 0.8 0.5 0.6 0.9 0.7 -11.9 0.5 1.0 4.9 23.6 0.0 59.9 12.4 -7.1 8.4 9.2 -6.5 25.4 -1.1 5.7 117.2 -0.3 67.4 17.7 31.2 12.2 12.1 -5.7 18.4 -2.0 4.5 142.5 2.8 59.1 28.1 27.0 44.6 13.0 82% 4.8% 5069% - -211% 16.3% 16% 6.7% 396% -54.1% -4070% -0.2% 13% 59.5% 43% -0.9% -3.2% 46% 45.0% 32% 14% -27% -42% -20% 22% -12% 58% -14% 266% 8%
-11% -22% 75% 8% -7% 83% 80% 16%
0.0 0.0 0.0 0.0 15.0 0.0 10.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 27.0 0.0 10.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 56.0 0.0 10.0 0.0 0.0 20.0 0.0
0.0% 0.0% 0.0% 0.0% 3.8% 0.0% 1.7% 0.0% 0.0% 0.0% 0.0%
0 0 0 0 0 0 0 0 0 0 0
7.0 11.0 6.0 8.9 14.7 10.1 29.9 7.4
9.7 13.8 4.9 4.6 9.4 9.2 11.7 8.2 6.8
-0.5 0.1 1.1 -2.2 0.1 0.4 0.5
0.62 0.97 0.53 0.78 1.15 0.88 2.63 0.65
0.92 1.32 0.47 0.41 0.90 0.81 1.11 0.78 0.65
-17.0 4.2 -59.7 6.5 4.7 -62.2 8.2 9.0 7.7 28.7 5.0
-17.0 3.4 -96.5 5.1 3.8 -62.2 7.2 4.5 6.8 20.0 4.8
7.1 2.6 3.7 2.5 1.4 2.3 3.0 4.6 3.6 11.9 2.5
-31.5% 47.2% -3.2% 25.3% 24.9% -5.9% 39.2% 8.1% 45.2% 38.7% 41.7%
n.a. 0.9 n.a. 0.9 0.1 n.a. 0.6 0.2 0.6 0.2 0.9
-104.2% -46.0% -83.9% -36.7% -5.1% -31.7% -24.2% 5.3% -30.8% 14.4% -43.2%
James Wilson Chris Brown Chris Brown Chris Brown Sam Berridge Chris Brown Phillip Chippindale Phillip Chippindale Sam Berridge Sam Berridge James Wilson
Miscellaneous Metals & Mining

DML FND HSK MBN MGX PSH TXN Discovery Finders Resources Heemskirk Mirabela Nicke Mount Gibson Iron Penrice Soda Texon
Exchange rate (A$/US$)
599 101 23 789 1,426 11 146
Jun 11 Dec 10 Sep 10 Dec 10 Jun 11 Jun 11 Dec 10
1.37 0.36 0.14 1.61 1.33 0.12 0.60
1.43 0.67 0.16 2.03 1.77 0.13 1.28

Copper LME (US$/lb)
1.68 0.67 0.16 2.18 1.77 0.13 1.28
4% 87% 17% 26% 33% 12% 114%
Buy Buy Hold Buy Buy Sell Buy
-4% -8% -42% -29% -37% -68% -12%

Nickel LME (US$/lb) 8.79 9.89 10.87 10.92 10.41 11.00 11.95 12.98 8.50
5% 1% -33% -20% -28% -59% -3%
-2.5 -7.4 -5.4 -51.7 233.8 -26.1 2.1
-26.0 -7.9 -3.4 -66.2 410.9 0.5 9.6
65.9 59.3 5.0 33.8 384.0 1.8 17.4
3.9 1.0 2.6 7.1 0.8 0.3 1.8
-0.6 -2.6 -3.5 -10.5 21.7 -28.6 1.2
-5.9 -2.7 -2.2 -13.5 38.2 0.6 3.7
14.9 20.4 3.2 6.9 35.7 2.0 6.6
-5.8% -13.1% -7.7% -
-90% -3% 59% -22% 76% 212%
-7% 231% 82%
6% 12% 4% -53% 75%
0.0 0.0 0.0 0.0 4.0 0.0 0.0
0.0 0.0 0.0 0.0 4.0 0.0 0.0
0.0 0.0 1.0 0.0 4.0 0.0 0.0
0.0% 0.0% 0.0% 0.0% 3.0% 0.0% 0.0%
0 0 100 0 0 0 0
3.5 19.9 16.4
9.2 1.8 4.5 23.0 3.7 6.0 9.0
0.8 -0.4 0.2
0.31 1.75 1.28
0.88 0.15 0.40 2.02 0.35 0.57 0.79
-32.1 -17.0 34.9 -64.8 1.5 8.4 8.1
-32.1 -17.0 6.9 33.7 1.3 4.4 6.1
3.4 1.2 0.7 1.3 0.9 0.2 2.5
-13.6% -8.7% -11.9% -10.9% 30.0% 0.8% 20.2% -
n.a. n.a. 2.5 9.8 1.0 3.9 2.0
-35.2% -9.1% 39.1% 53.0% -38.3% 110.7% -59.1%
Chris Brown Chris Brown Chris Brown Tom Sartor Lyndon Fagan Alexandra Clarke Chris Brown
Gold Oil WTI (US$/oz) (US$/bbl) 1092 1223 1370 1637 1838 1750 1600 1525 1100 77.2 82.6 93.2 94.4 87.8 91.0 94.3 96.0 90.0
Zinc Aluminium LME LME (US$/lb) (US$/lb) 0.91 0.99 1.08 1.15 1.15 1.19 1.25 1.35 1.15 0.94 0.98 1.02 1.05 1.04 1.10 1.18 1.33 1.00
Coal coking steaming (US$/t) (US$/t) 146.0 190.5 247.3 287.5 301.3 305.0 290.0 270.0 180.0 76.3 90.0 108.3 120.0 118.8 116.3 112.5 107.5 100.0
Iron ore lump fines (US$/t) (US$/t) 86.4 138.5 176.0 138.5 177.0 138.5 159.3 138.5 95.4 73.7 118.1 154.1 162.9 161.8 153.2 145.4 137.9 84.8
FY10 CY10 FY11 CY11 FY12 CY12 FY13 CY13 LT (2015+)
0.88 0.92 0.99 1.03 1.01 1.04 1.09 1.09 0.80
3.03 3.42 3.93 4.25 4.33 4.50 4.65 4.86 3.00
Source: Company data, RBS forecasts, RBS Morgans forecasts. * Share prices as at close of trading on 5 December 2011. Target prices, forecasts and recommendations for some companies featured in 'The Bulletin' may have been updated overnight. ** BHP, LGL, PDN & RIO price and market cap reported in AUD. Financial forecasts in USD. * Earnings Quality: Net Operating Cash Flow/(Net Profit + Depreciation & Amortisation)
147
S&P/ASX 200 - Sector Aggregations (RBS)

Prices updated: 2 December 2011
PE (x) Sector 200 CONS DISCRET 200 ENERGY 200 HEALTHCARE 200 INFO TECHNOL 200 MATERIALS 200 INDUSTRIALS 200 PROPERTY 200 CONS STAP 200 TELECOMS 200 UTILITIES 200 FIN EX PROP S&P/ASX 200 2010 14.3 25.7 16.0 15.7 16.0 20.9 11.0 18.0 11.5 16.1 11.6 14.3 2011 13.6 23.8 16.0 15.4 11.0 22.2 12.6 16.4 12.6 14.9 10.9 12.7 2012 12.0 20.5 15.8 14.9 9.4 15.5 11.6 14.6 12.1 15.3 10.1 11.3 2013 11.1 18.6 14.3 12.6 8.6 13.0 10.9 13.1 11.6 14.8 9.4 10.4 2014 10.1 15.1 12.7 11.3 8.2 11.4 10.7 11.8 10.9 13.9 8.9 9.7 2010 7.8 3.1 11.9 13.0 45.1 36.2 -19.7 9.2 2.2 3.9 17.8 18.2 EPS growth (%)* 2011 4.8 8.5 -5.0 1.9 48.7 -6.1 -12.7 9.8 -9.1 8.0 6.6 14.0 2012 12.2 15.4 1.2 3.4 18.3 42.2 8.5 11.7 3.9 -1.6 8.1 12.6 PCF (x) 2013 3.6 3.0 3.5 4.6 3.0 5.1 6.4 6.0 7.1 6.8 7.7 5.3 2014 3.9 3.4 3.9 5.1 3.2 5.8 7.0 6.5 7.2 7.1 8.0 5.7 2010 9.6 15.0 11.9 12.4 7.0 7.6 12.0 10.6 6.1 9.8 na 8.2 2011 9.4 16.7 12.1 14.8 4.8 8.6 13.8 11.0 6.4 8.9 na 7.1 2012 8.7 12.6 13.1 12.8 4.5 8.0 13.1 9.5 6.3 8.9 na 6.6 ROE (%) 2013 1.3 1.6 2.3 3.7 1.6 1.5 0.9 2.0 2.2 1.4 1.4 1.6 2014 1.2 1.6 2.1 3.3 1.4 1.4 0.8 1.9 2.1 1.3 1.3 1.4 2010 11.8 8.2 16.4 35.3 21.7 9.4 8.6 12.4 21.9 9.4 14.5 15.5 2011 11.4 8.2 16.1 31.1 25.1 7.5 8.9 13.2 19.1 9.7 14.7 16.3 2012 12.2 8.8 16.1 28.7 24.0 10.6 9.1 14.3 19.7 9.3 15.0 16.7 ROA (%) 2014 9.0 23.1 6.1 26.8 3.8 31.6 31.4 21.5 25.3 51.3 na 16.0 2010 6.8 4.7 10.6 32.1 12.8 4.9 5.5 7.8 11.3 5.7 3.9 8.9 2011 6.9 4.9 10.7 32.8 15.1 4.2 5.1 8.0 10.3 5.9 4.6 9.6 2012 7.3 5.2 10.6 32.6 14.9 5.3 5.6 8.3 10.5 5.7 4.4 10.0 2013 7.5 5.0 10.9 32.2 14.0 6.0 5.8 8.9 10.6 5.8 4.7 9.9 2014 7.8 6.2 11.4 31.7 12.7 6.6 5.9 9.4 11.0 6.1 5.2 9.8 2013 12.5 9.2 16.7 30.6 21.5 12.0 8.9 15.4 19.9 9.4 15.2 16.5 2014 13.3 11.3 17.5 30.5 17.9 14.2 8.1 16.4 20.1 10.4 15.2 16.0 2013 8.3 10.5 11.7 11.1 4.2 6.4 12.0 9.3 6.2 8.6 na 6.1 2014 7.1 8.2 10.5 10.1 4.4 5.7 11.4 8.4 6.0 7.6 na 5.9 2013 8.0 10.3 10.8 18.4 8.8 18.8 6.0 12.1 4.8 3.7 7.0 8.5 2014 9.8 23.0 12.6 11.8 4.8 14.1 1.9 10.6 6.5 6.9 5.4 7.2
Dividend yield (%) Sector 200 CONS DISCRET 200 ENERGY 200 HEALTHCARE 200 INFO TECHNOL 200 MATERIALS 200 INDUSTRIALS 200 PROPERTY 200 CONS STAP 200 TELECOMS 200 UTILITIES 200 FIN EX PROP S&P/ASX 200 2010 3.0 2.4 3.0 3.7 2.1 3.6 7.3 4.4 6.6 6.8 6.1 4.2 2011 3.2 2.4 2.9 3.9 2.3 3.4 5.8 4.9 6.7 6.5 6.7 4.5 2012 3.6 2.7 3.2 4.1 2.7 4.4 6.1 5.4 6.8 6.6 7.2 4.9 PB (x) Sector 200 CONS DISCRET 200 ENERGY 200 HEALTHCARE 200 INFO TECHNOL 200 MATERIALS 200 INDUSTRIALS 200 PROPERTY 200 CONS STAP 200 TELECOMS 200 UTILITIES 200 FIN EX PROP S&P/ASX 200 2010 1.6 2.0 2.6 5.2 2.9 1.6 1.1 2.2 2.4 1.4 1.6 2.1 2011 1.5 1.8 2.6 4.5 2.4 1.7 1.1 2.1 2.4 1.4 1.5 1.9 2012 1.4 1.8 2.5 4.1 2.0 1.6 1.0 2.0 2.4 1.4 1.5 1.7
Gearing - net debt/(net debt+equity) (%) Sector 200 CONS DISCRET 200 ENERGY 200 HEALTHCARE 200 INFO TECHNOL 200 MATERIALS 200 INDUSTRIALS 200 PROPERTY 200 CONS STAP 200 TELECOMS 200 UTILITIES 200 FIN EX PROP S&P/ASX 200 2010 20.5 10.5 18.1 29.1 9.2 30.1 37.5 22.7 37.0 51.4 na 21.7 2011 19.9 14.6 18.1 25.2 12.4 31.2 38.2 22.4 35.4 49.6 na 22.3 2012 22.6 19.0 17.0 41.8 15.0 33.3 35.8 23.4 32.3 50.9 na 23.3 EV/EBIT (x) Sector 200 CONS DISCRET 200 ENERGY 200 HEALTHCARE 200 INFO TECHNOL 200 MATERIALS 200 INDUSTRIALS 200 PROPERTY 200 CONS STAP 200 TELECOMS 200 UTILITIES 200 FIN EX PROP S&P/ASX 200 2010 9.9 20.4 13.2 12.5 10.0 14.9 13.4 12.1 9.3 12.8 9.1 11.1 2011 9.6 16.5 13.3 10.8 7.7 16.2 17.9 11.2 9.9 12.8 7.8 9.7 2012 8.7 14.1 13.0 9.2 6.4 12.1 15.3 10.3 9.4 11.9 8.1 8.4 2013 8.0 13.2 11.6 8.1 5.6 10.4 14.1 9.3 8.9 11.5 7.4 7.5 2014 6.3 9.7 10.3 7.2 5.5 8.8 12.7 8.4 8.3 10.7 6.3 7.0 2010 7.4 13.9 11.0 11.9 8.0 8.3 13.3 9.5 6.0 10.1 8.6 8.3 2013 16.8 22.5 11.9 34.8 9.1 33.2 34.2 22.9 29.0 51.7 na 19.9
EV/EBITDA (x) 2011 7.2 12.1 11.0 10.3 6.4 8.6 17.8 8.9 6.1 9.9 7.4 7.5 2012 6.6 10.4 10.6 8.8 5.5 7.1 15.2 8.2 5.9 9.3 7.4 6.6 2013 6.0 9.6 9.6 7.8 4.8 6.3 14.1 7.4 5.6 9.0 6.8 5.9 2014 4.9 7.1 8.5 6.9 4.6 5.5 12.7 6.7 5.4 8.5 5.8 5.5
Source: Company data, RBS forecasts * When comparing to consensus (IBES), RBS forecasts include BHP and RIO, but only a limited number of property stocks
149
S&P/ASX 200 - Sector Aggregations (IBES)

PE (x) Sector 200 CONS DISCRET 200 ENERGY 200 HEALTHCARE 200 INFO TECHNOL 200 MATERIALS 200 INDUSTRIALS 200 PROPERTY 200 CONS STAP 200 TELECOMS 200 UTILITIES 200 FIN EX PROP S&P/ASX 200 2010 11.9 27.9 18.8 15.9 17.7 22.2 12.4 17.8 10.5 17.7 11.6 14.6 2011 11.4 25.5 17.6 15.7 11.9 21.6 13.7 15.4 12.4 12.1 10.6 12.8 2012 11.8 21.1 17.6 18.4 10.5 15.2 13.6 14.8 11.5 16.0 9.8 11.7 EV/EBIT (x) Sector 200 CONS DISCRET 200 ENERGY 200 HEALTHCARE 200 INFO TECHNOL 200 MATERIALS 200 INDUSTRIALS 200 PROPERTY 200 CONS STAP 200 TELECOMS 200 UTILITIES 200 FIN EX PROP S&P/ASX 200 2010 6.4 19.7 13.6 12.0 6.1 15.0 15.5 11.5 5.2 12.8 na 8.5 2011 6.7 17.3 13.1 12.7 6.1 16.8 13.0 10.9 5.4 13.2 na 8.2 2012 7.9 13.3 13.1 12.1 6.3 11.4 12.8 10.2 8.7 11.8 na 8.2 2013 7.1 11.3 11.5 9.9 5.5 9.7 12.4 9.5 8.4 11.2 na 7.3 2014 6.3 9.7 10.1 8.4 5.1 8.5 12.2 8.9 8.0 10.6 na 6.7 2010 5.2 13.2 11.3 10.9 4.9 8.4 15.3 9.0 3.3 10.1 na 6.4 2013 11.2 17.6 15.5 15.2 8.9 12.7 13.0 13.7 11.1 15.1 9.1 10.5 2014 10.3 15.5 13.6 13.1 8.2 11.2 12.3 12.8 10.7 14.1 8.4 9.7 2010 5.4 -24.2 6.2 10.8 37.1 19.1 -21.2 -0.2 -5.5 -5.0 17.9 10.5 EPS growth (%) 2011 -1.3 9.1 6.7 1.1 48.6 -15.4 -9.4 8.6 -15.1 46.7 9.9 13.2 2012 1.6 14.9 0.1 -1.9 14.6 43.8 0.4 10.7 7.7 -24.6 7.3 9.8 2013 6.1 20.2 13.6 20.5 17.0 19.3 4.8 8.0 4.2 6.1 7.9 11.2 2014 8.6 13.8 14.0 16.0 8.8 13.3 5.3 6.9 3.3 7.3 8.3 8.8
EV/EBITDA (x) 2011 5.3 12.0 11.0 10.9 5.1 9.0 12.9 8.6 3.3 10.7 na 6.4 2012 6.4 9.4 10.8 10.7 5.4 6.9 12.8 8.1 5.4 9.2 na 6.5 2013 5.8 8.2 9.6 8.9 4.6 6.1 12.4 7.5 5.3 8.7 na 5.8 2014 5.2 7.1 8.4 7.7 4.2 5.4 12.1 7.1 5.1 8.3 na 5.3
Dividend yield (%) Sector 200 CONS DISCRET 200 ENERGY 200 HEALTHCARE 200 INFO TECHNOL 200 MATERIALS 200 INDUSTRIALS 200 PROPERTY 200 CONS STAP 200 TELECOMS 200 UTILITIES 200 FIN EX PROP S&P/ASX 200 2010 4.8 2.3 3.1 3.8 2.3 3.3 6.2 3.0 8.5 6.0 6.6 4.6 2011 4.8 2.4 2.8 4.1 2.7 4.2 6.4 5.3 8.3 6.2 7.1 5.1 2012 4.9 2.7 3.1 4.6 3.1 4.9 6.7 5.7 8.4 6.4 7.5 5.5 ROA (%) Sector 200 CONS DISCRET 200 ENERGY 200 HEALTHCARE 200 INFO TECHNOL 200 MATERIALS 200 INDUSTRIALS 200 PROPERTY 200 CONS STAP 200 TELECOMS 200 UTILITIES 200 FIN EX PROP S&P/ASX 200
Source: IBES
Price to Book Value (x) 2013 5.3 3.0 3.5 5.2 3.5 5.6 7.0 6.1 8.7 6.7 8.1 5.9 2014 5.9 3.4 4.1 5.5 3.6 5.9 7.4 6.6 8.8 7.1 8.5 6.2 2010 0.92 2.20 2.86 4.52 1.66 1.72 1.12 2.26 3.12 1.82 1.66 1.69 2011 0.79 1.86 2.91 4.78 1.48 1.70 1.02 1.94 3.25 1.66 1.87 1.62 2012 0.93 1.67 2.80 4.22 1.20 1.56 0.87 1.84 1.34 1.18 1.70 1.42 ROE (%) 2013 12.1 8.7 19.9 29.8 20.1 10.9 5.8 12.3 15.0 7.2 3.4 10.7 2014 13.0 10.1 21.7 31.5 19.0 11.3 6.0 12.8 17.0 7.6 3.7 10.9 2010 10.5 7.5 17.2 30.4 20.1 7.5 8.4 13.6 55.8 10.2 14.6 14.8 2011 10.4 7.5 18.4 29.7 25.1 7.5 8.4 13.7 50.5 10.2 14.6 16.0 2012 11.1 8.5 15.9 28.5 22.7 10.9 7.7 13.8 20.9 9.1 14.5 15.4 2013 12.5 9.5 16.9 30.0 21.4 12.0 7.4 14.3 21.4 8.3 14.6 15.4 2014 12.7 10.3 17.7 30.4 19.2 12.8 7.4 14.7 21.5 8.9 14.7 15.2 2013 0.86 1.53 2.60 3.71 1.01 1.48 0.84 1.77 1.28 1.14 1.58 1.29 2014 0.80 1.40 2.39 3.23 0.86 1.39 0.80 1.69 1.23 1.06 1.47 1.18
2010 8.0 3.4 10.5 20.1 11.1 5.2 3.8 7.6 9.3 3.0 2.8 6.2
2011 8.0 4.7 15.4 20.3 16.5 5.3 5.1 8.3 8.2 3.8 2.9 7.9
2012 11.7 7.4 17.4 27.1 20.1 9.8 5.6 11.8 14.7 7.0 3.2 10.3
150
Sector Aggregations (RBS)

PE (x) Sector Energy Energy Aluminium & Steel Chemicals Div Metals & Mining Gold, Precious Metals Packaging & Paper Materials Construction Other Capital Goods Services & Supplies Transportation Industrials Consumer Producers Consumer Services Media Consumer Discretionary Food Bev & Tobacco Retail Consumer Staples Healthcare Healthcare Banks Diversified Financials Insurance Financials ex Property Mgmnt & Development Property Property & Development IT Information Technology Telecommunications Telecommunications Utilities Utilities INDUSTRIAL ex Banks INDUSTRIAL SECTOR RESOURCE SECTOR S&P/ASX 100 SMALL ORDINARIES SMALL INDUSTRIALS SMALL RESOURCES MARKET AVERAGE
PE rel 2013 18.6 18.6 8.5 10.6 7.8 14.0 12.3 8.7 10.1 9.9 11.2 17.7 12.9 8.9 13.6 10.8 11.1 12.4 12.4 13.1 14.4 14.4 9.5 9.9 9.2 9.4 9.8 5.9 10.9 12.0 12.0 11.5 11.5 15.0 15.0 11.4 10.7 10.0 10.3 11.7 10.8 19.7 10.5 2014 15.1 15.1 6.7 9.8 7.9 11.7 10.7 8.2 8.8 8.9 10.2 14.5 11.3 8.5 12.2 9.9 10.1 11.8 11.2 11.8 12.1 12.1 9.1 9.0 8.7 8.9 9.3 5.1 10.7 10.8 10.8 10.7 10.7 13.6 13.6 10.2 9.8 9.6 9.7 10.1 9.8 11.9 9.7 2012 1.82 1.82 0.78 0.99 0.75 1.31 1.21 0.82 1.06 1.00 1.17 1.91 1.35 0.87 1.04 1.10 1.06 1.16 1.24 1.29 1.47 1.47 0.88 0.97 0.92 0.88 0.94 0.57 1.02 1.28 1.28 1.08 1.08 1.40 1.40 1.11 1.03 0.95 0.98 1.13 1.05 1.89 1.00 2013 1.78 1.78 0.81 1.02 0.75 1.34 1.17 0.83 0.96 0.95 1.07 1.69 1.23 0.85 1.30 1.03 1.06 1.18 1.19 1.25 1.38 1.38 0.91 0.94 0.88 0.90 0.94 0.56 1.04 1.15 1.15 1.10 1.10 1.44 1.44 1.09 1.02 0.95 0.98 1.12 1.04 1.88 1.00 2010 5.4 5.4 100.0 1.8 48.8 100.0 -18.2 45.5 19.2 16.8 -8.8 100.0 27.3 -0.5 -4.5 14.7 7.3 39.6 8.2 12.3 10.1 10.1 23.9 2.3 -4.6 17.8 -17.7 100.0 -19.7 13.4 13.4 2.8 2.8 -31.8 -31.8 5.4 11.5 40.0 19.6 2.4 -0.1 100.0 17.3 2011 6.9 6.9 91.9 6.1 55.7 -13.2 32.1 49.5 -30.8 -41.2 7.7 46.9 -6.1 -7.8 -2.6 13.7 5.4 11.0 7.4 9.8 -6.9 -6.9 8.9 -3.3 -6.1 6.6 -5.6 -32.0 -12.7 -0.1 -0.1 -10.3 -10.3 40.5 40.5 2.5 4.9 44.6 14.8 10.7 9.7 47.4 14.0
EPS growth (%) 2012 16.7 16.7 28.7 17.3 13.4 100.0 15.4 19.0 64.0 99.8 17.6 24.3 39.7 -4.2 6.8 19.2 12.1 3.8 10.4 11.9 4.2 4.2 6.2 1.7 30.4 8.2 4.9 1.8 8.5 3.0 3.0 5.5 5.5 0.1 0.1 14.5 11.3 18.5 12.2 18.7 9.2 100.0 13.0 2013 11.0 11.0 5.7 6.0 8.1 6.8 12.4 8.3 19.4 15.1 18.6 22.8 18.7 10.4 -12.5 15.8 8.3 5.8 13.1 12.2 16.5 16.5 5.3 11.5 13.6 7.0 8.2 10.8 6.0 21.7 21.7 6.1 6.1 6.7 6.7 11.1 8.9 8.6 8.3 10.6 10.7 9.4 8.7 2014 23.0 23.0 26.0 8.3 -0.7 19.8 14.9 5.0 14.5 10.9 9.9 22.0 14.2 5.0 11.4 9.7 9.8 4.9 11.0 10.6 18.8 18.8 4.5 10.0 5.9 5.3 5.7 16.2 1.9 11.4 11.4 7.3 7.3 10.7 10.7 11.3 8.8 4.4 6.4 16.0 10.8 65.8 7.5 2010 2.5 2.5 1.7 2.9 2.0 0.6 4.0 2.0 4.2 5.2 3.3 3.0 3.6 8.1 4.9 1.6 3.0 4.7 4.5 4.3 3.0 3.0 6.1 5.8 6.2 6.1 6.9 4.8 7.3 3.9 3.9 6.5 6.5 6.8 6.8 4.5 5.0 2.0 4.2 3.9 4.5 0.3 4.2
Dividend yield (%) 2011 2.5 2.5 2.6 3.3 2.3 0.5 4.7 2.3 3.5 3.8 3.3 3.3 3.4 7.6 5.5 1.7 3.2 5.2 5.0 4.9 2.9 2.9 6.8 6.2 6.6 6.8 5.8 9.5 5.8 4.1 4.1 6.7 6.7 6.6 6.6 4.7 5.4 2.1 4.5 4.2 5.0 0.3 4.5 2012 2.6 2.6 2.1 3.7 2.7 1.1 4.9 2.7 4.7 5.1 4.3 3.9 4.3 7.7 6.2 2.2 3.7 5.2 5.6 5.4 3.2 3.2 7.3 6.1 7.3 7.2 6.2 9.9 6.1 4.4 4.4 6.7 6.7 6.5 6.5 5.1 5.8 2.5 5.0 4.5 5.2 0.4 4.9 2013 2.9 2.9 2.9 4.0 2.9 1.5 5.4 3.0 5.3 5.7 5.0 4.7 5.1 8.3 5.0 2.5 3.7 5.5 6.1 5.9 3.5 3.5 7.7 6.7 8.0 7.7 6.6 11.0 6.4 5.0 5.0 7.0 7.0 6.8 6.8 5.5 6.2 2.8 5.3 5.0 5.8 0.9 5.3 2014 3.3 3.3 3.3 4.2 3.1 1.6 5.9 3.1 5.8 6.3 5.7 5.5 5.8 8.7 5.3 2.7 4.0 5.9 6.8 6.5 3.9 3.9 8.0 7.2 8.3 8.0 7.2 12.8 7.0 5.5 5.5 8.6 8.6 7.0 7.0 6.2 6.8 3.0 5.7 5.4 6.2 0.9 5.8
2010 25.9 25.9 21.1 14.0 15.0 28.4 21.1 16.1 13.9 12.4 17.1 39.3 20.1 8.6 12.6 17.4 14.5 15.1 16.7 18.0 16.8 16.8 11.6 10.9 12.9 11.6 10.6 4.5 11.0 15.1 15.1 11.5 11.5 22.4 22.4 14.8 13.6 17.6 14.2 16.6 14.3 103.1 14.5
2011 24.3 24.3 11.2 13.2 9.6 32.4 15.9 11.1 19.9 21.7 15.8 27.0 21.4 9.5 12.8 15.2 13.6 13.8 15.5 16.4 17.3 17.3 10.6 11.2 13.6 10.9 11.2 6.7 12.6 15.1 15.1 12.9 12.9 15.8 15.8 14.5 13.0 12.7 12.5 15.3 13.0 162.2 12.8
2012 20.7 20.7 8.9 11.3 8.5 14.9 13.8 9.4 12.1 11.4 13.3 21.7 15.3 9.9 11.9 12.6 12.0 13.2 14.1 14.7 16.7 16.7 10.0 11.0 10.5 10.1 10.6 6.5 11.6 14.6 14.6 12.2 12.2 16.0 16.0 12.6 11.7 10.8 11.2 12.9 12.0 21.5 11.4
151
Sector Aggregations (RBS)

EV/EBIT (x) Sector Energy Energy Aluminium & Steel Chemicals Div Metals & Mining Forestry products Gold, Precious Metals Packaging & Paper Materials Construction Other Capital Goods Services & Supplies Transportation Industrials Consumer Producers Consumer Services Media Consumer Discretionary Food Bev & Tobacco Retail Consumer Staples Healthcare Healthcare Banks Diversified Financials Insurance Financials ex Property Mgmnt & Development Property Property & Development IT Information Technology Telecommunications Telecommunications Utilities Utilities INDUSTRIAL ex Banks INDUSTRIAL SECTOR RESOURCE SECTOR S&P/ASX 100 SMALL ORDINARIES SMALL INDUSTRIALS SMALL RESOURCES MARKET AVERAGE
EV/EBITDA (x) 2013 13.2 13.2 6.4 8.0 5.1 8.7 9.6 9.8 5.6 7.7 6.8 8.7 14.2 10.2 7.4 10.4 7.6 7.9 8.9 8.8 9.3 11.6 11.6 na 5.7 12.9 7.3 12.0 5.6 14.1 7.7 7.7 9.0 9.0 11.5 11.5 9.2 na 6.1 7.3 8.8 8.3 13.3 7.5 2014 9.7 9.7 5.7 7.1 5.2 0.0 8.3 8.7 5.5 6.7 6.1 7.9 11.6 8.6 6.6 6.8 6.6 6.3 8.3 8.0 8.4 9.9 9.9 na 5.7 12.0 6.2 10.7 4.9 12.7 6.8 6.8 8.4 8.4 10.6 10.6 8.2 na 5.9 6.9 7.3 7.5 5.3 6.9 2011 12.4 12.4 6.7 8.0 5.9 0.0 16.3 8.3 6.4 8.4 7.3 8.3 9.4 8.6 7.0 7.8 7.3 7.3 8.0 8.5 8.9 11.4 11.4 na 5.2 15.3 7.3 14.3 6.5 17.8 8.8 8.8 6.1 6.1 9.6 9.6 8.0 na 7.0 7.4 8.3 7.5 30.4 7.5 2012 10.4 10.4 5.9 7.2 5.1 0.0 8.5 7.6 5.5 6.0 5.0 7.0 8.8 7.1 6.6 7.4 6.5 6.6 7.3 7.9 8.2 10.8 10.8 na 5.2 14.4 7.2 12.8 6.2 15.2 7.7 7.7 5.9 5.9 9.1 9.1 7.3 na 5.9 6.5 7.1 6.8 9.6 6.6 2013 9.6 9.6 5.3 6.6 4.4 0.0 7.5 7.1 4.8 5.3 4.5 6.1 7.7 6.3 6.1 7.9 5.6 6.1 6.9 7.1 7.4 9.5 9.5 na 5.0 11.7 6.7 11.7 5.6 14.1 6.5 6.5 5.7 5.7 8.8 8.8 6.7 na 5.2 5.8 6.5 6.2 9.1 5.9 2014 7.1 7.1 4.2 5.9 4.4 0.0 6.8 6.4 4.6 4.7 4.1 5.6 6.6 5.5 5.5 5.8 4.9 4.9 6.4 6.5 6.7 8.2 8.2 na 5.0 10.9 5.8 10.4 4.8 12.7 5.9 5.9 5.4 5.4 8.4 8.4 6.1 na 4.9 5.5 5.5 5.6 3.9 5.5 2012 1.8 1.8 1.2 1.9 2.1 0.0 1.9 2.4 2.0 1.7 1.7 2.0 1.3 1.6 1.2 1.7 1.4 1.4 1.7 1.9 2.0 2.5 2.5 1.6 1.1 1.3 1.5 1.0 0.4 1.0 3.2 3.2 2.3 2.3 1.3 1.3 1.6 1.6 2.0 1.7 1.7 1.7 2.0 1.7
P/BV (x) 2013 1.6 1.6 1.0 1.7 1.7 0.0 1.7 2.2 1.6 1.6 1.6 1.9 1.2 1.5 1.2 1.6 1.3 1.3 1.6 1.8 1.9 2.3 2.3 1.5 1.0 1.2 1.4 0.9 0.4 0.9 2.9 2.9 2.2 2.2 1.3 1.3 1.5 1.5 1.7 1.6 1.6 1.5 1.8 1.6 2014 1.6 1.6 0.9 1.5 1.5 0.0 1.5 2.0 1.4 1.5 1.5 1.8 1.2 1.4 1.1 1.5 1.2 1.2 1.5 1.8 1.8 2.1 2.1 1.4 1.0 1.2 1.3 0.8 0.4 0.8 2.6 2.6 2.1 2.1 1.3 1.3 1.4 1.4 1.5 1.4 1.5 1.5 1.6 1.4 2012 8.8 8.8 14.1 16.5 28.0 2.8 13.9 17.5 24.0 14.8 15.8 16.7 5.8 10.7 12.6 14.6 11.4 12.3 13.6 13.9 13.9 14.9 14.9 16.3 9.9 12.2 15.0 9.6 6.0 9.1 22.4 22.4 19.0 19.0 8.5 8.5 12.9 13.9 22.4 17.0 13.7 14.3 9.7 16.6
ROE (%) 2013 9.3 9.3 13.0 16.7 24.3 3.3 12.9 18.6 21.5 16.2 16.7 18.1 7.0 12.1 13.5 12.2 12.4 12.6 13.4 15.0 14.9 16.3 16.3 16.2 10.6 13.5 15.2 9.7 6.5 8.9 25.2 25.2 19.4 19.4 9.0 9.0 13.6 14.4 20.2 16.6 14.1 14.8 9.6 16.4 2014 11.3 11.3 7.2 15.8 19.5 0.0 12.2 19.9 17.9 17.2 17.3 18.5 8.8 14.1 13.6 25.2 12.4 13.5 14.1 16.4 15.9 17.9 17.9 19.7 13.2 16.5 15.3 9.3 7.5 8.1 25.5 25.5 19.8 19.8 10.5 10.5 14.4 14.4 17.4 16.0 15.5 15.6 13.8 16.0 2012 5.3 5.3 10.5 10.4 17.0 0.0 11.2 7.7 14.9 7.5 8.1 8.9 3.2 5.4 7.5 8.7 6.8 7.4 7.9 8.1 8.1 9.7 9.7 0.0 6.4 7.7 4.4 5.2 4.7 5.6 12.9 12.9 10.3 10.3 5.2 5.2 7.4 7.4 13.8 10.2 8.1 8.1 7.4 9.9
ROA (%) 2013 5.1 5.1 9.8 10.6 15.6 0.0 10.4 8.3 14.0 8.5 8.9 9.7 3.7 6.1 8.0 7.5 7.4 7.6 8.1 8.8 8.6 10.5 10.5 0.0 6.0 7.9 4.7 5.4 5.0 5.8 14.6 14.6 10.5 10.5 5.4 5.4 7.8 7.8 12.8 10.1 8.3 8.5 6.8 9.8 2014 6.3 6.3 11.1 10.9 13.5 0.0 11.0 9.1 12.7 9.1 9.3 10.1 4.5 6.7 8.5 7.9 7.6 7.9 8.2 9.3 9.2 11.4 11.4 0.0 5.6 7.5 5.2 5.6 5.4 5.9 15.2 15.2 10.9 10.9 5.8 5.8 8.3 8.3 11.6 9.9 9.1 9.0 9.6 9.7
2011 17.1 17.1 8.3 9.7 6.9 0.0 23.5 12.7 7.7 15.5 14.1 12.3 19.2 15.8 8.5 9.9 10.4 9.7 10.2 10.6 11.2 14.0 14.0 na 5.7 16.7 7.8 14.6 6.6 17.9 10.6 10.6 9.9 9.9 13.0 13.0 11.4 na 8.4 9.5 11.9 10.6 83.1 9.8
2012 14.2 14.2 7.0 8.7 5.9 10.1 10.6 10.8 6.4 9.2 7.8 10.1 17.4 12.0 8.1 9.4 8.9 8.7 9.4 9.9 10.3 13.4 13.4 na 5.7 16.2 7.8 13.1 6.3 15.3 9.3 9.3 9.5 9.5 12.0 12.0 10.1 na 6.9 8.2 9.8 9.4 13.8 8.4
152
Absolute performance to 5 Dec 11

Stock/sector Price last 5/12/11 11,587.5 $3.10 $1.45 $7.50 $2.86 $3.09 $37.26 $0.40 $3.81 $4.85 $0.54 $0.17 $15.64 $3.20 $4.77 $6.98 $0.35 $7.04 $1.36 $16.01 $0.78 $1.33 $0.40 $35.39 $4.74 $0.38 $0.86 $26.31 $0.07 $0.12 $67.00 $13.53 $2.40 $0.39 $5.72 4Q 2011 +6.9 +17.4 -2.0 +8.2 -3.7 +8.4 +6.4 -45.2 +8.9 +9.7 +12.5 +13.3 +25.0 -2.1 +10.4 +21.4 -13.8 -1.9 +24.8 +0.6 +12.2 -1.1 +17.9 +3.8 +10.7 -37.0 -30.6 +12.1 0.0 -25.0 +8.4 +9.1 +17.1 -10.5 +32.4 % return over ... 3Q 2Q 2011 2011 -19.3 -14.6 -29.9 -3.8 -36.8 -23.6 -20.0 -39.4 -20.5 -30.4 -40.9 -44.4 -25.4 -15.3 -23.3 -1.9 -29.8 -10.3 -44.9 +45.4 +17.4 -23.2 -27.2 -56.2 -9.6 -4.7 -35.3 -33.0 -12.8 -54.4 -59.0 -25.5 -29.7 +4.9 +26.5 -26.8 -5.5 -4.0 -14.2 +2.0 -12.8 0.0 -5.9 -39.0 -12.0 -0.9 -26.4 -56.5 +26.2 -10.9 -14.6 -3.9 -7.3 -7.9 -12.0 -5.6 -2.6 -34.2 -7.5 -23.1 -5.3 -13.2 -34.3 -24.2 +2.2 -54.9 -33.9 -2.1 +0.8 -10.3 -26.9 -12.7 Stock/sector 1Q 2011 +0.9 -1.7 -0.8 +4.6 +0.7 +26.4 +2.9 -12.2 +3.5 -2.0 -18.3 -0.8 +45.5 +9.3 -17.1 -10.0 -24.1 -20.1 +9.2 -9.4 -19.5 -27.1 -6.1 -22.0 -1.5 +0.6 -0.4 -5.8 +5.9 -13.4 -7.1 -0.8 -18.8 +6.9 -19.1 +13.2 CY 2010 +10.2 +20.0 +34.8 +8.3 -27.2 +56.1 +4.9 -27.7 -16.6 +47.3 +31.1 -33.5 +155.3 +11.5 +65.4 -20.2 -22.9 +18.1 +274.5 +13.8 +32.2 +5.9 +28.5 -49.0 +14.5 -50.7 -27.9 -22.7 +0.5 -35.9 -37.8 +14.1 -2.8 +15.3 +271.0 +19.4 Consumer Disc APN News & Media Aristocrat Leisure Austar United Billabong Consolidated Media Crown David Jones Fairfax Media Flight Centre Fleetwood Corp GUD Holdings Harvey Norman InvoCare JB Hi-Fi News Corp Pacific Brands Seven Network STW Communications Tabcorp Holdings Tatts Group Ten Network Holdings Wotifcom Holdings Price last 5/12/11 1271.7 $0.75 $2.56 $1.19 $3.93 $2.54 $8.46 $2.88 $0.85 $19.48 $12.34 $7.49 $2.16 $7.39 $15.95 $17.88 $0.59 $7.48 $0.87 $2.80 $2.37 $0.93 $3.58 4Q 2011 +7.6 -11.3 +21.9 +2.6 +18.4 +5.8 +6.1 -4.6 +3.0 +14.6 +8.9 +5.0 0.0 +7.1 +4.9 +9.7 -11.9 -5.9 -3.3 +8.5 +6.3 +5.1 -9.8 % return over ... 3Q 2Q 2011 2011 -14.2 -36.1 -13.2 -13.8 -44.8 -8.0 -10.8 -25.6 -15.8 -21.4 0.0 -21.6 -13.3 -10.3 -11.0 -2.0 -3.6 -17.4 -12.2 -21.6 -7.1 -16.5 -15.4 -8.2 -15.4 -25.5 +2.3 -20.4 -7.4 +9.6 -14.5 -24.0 -3.0 -6.4 -5.0 -17.0 +8.6 -15.2 -6.8 -17.8 +7.1 -15.3 -24.6 +2.6 -18.8 -14.1 1Q 2011 -0.1 -19.6 +8.7 +37.7 -7.4 -9.6 -1.2 +6.5 -7.9 -10.1 -6.8 -4.0 +2.0 -2.7 +12.5 +11.3 -13.8 +2.2 +14.2 +5.3 -9.3 -7.8 +9.6 CY 2010 -8.3 -16.6 -25.6 -32.7 -25.6 +2.0 +2.6 -17.4 -19.5 +34.5 +62.6 +10.9 -30.3 +18.2 -20.8 -10.4 -13.3 +27.4 +41.3 +2.3 +10.8 -10.4 -28.3
Materials Adelaide Brighton Alumina Ltd Amcor Aquarius Platinum Atlas Iron Limited BHP Billiton BlueScope Steel Boral Fortescue Metals Gindalbie Metals Ltd Gunns Iluka Resources Incitec Pivot Independence Group James Hardie Indust Kagara Ltd Kingsgate Consolid. Lynas Corporation Macarthur Coal Minara Resources Mincor Resources Mount Gibson Iron Murchison Metals Newcrest Mining Nufarm OM Holdings Limited OneSteel Orica PaperlinX Platinum Australia Rio Tinto Sims Group St Barbara Limited Sundance Resources Western Areas NL
Cons Staples Coca-Cola Amatil Foster's Group Goodman Fielder Metcash Wesfarmers Woolworths
7,765.2 $11.71 $5.38 $0.53 $4.25 $32.60 $25.52
+2.7 -1.8 +1.9 +9.4 +3.4 +3.2 +2.7
-4.2 +4.5 +2.5 -51.3 -1.0 -0.8 -10.4
+2.1 -2.7 +23.4 -13.8 -0.2 +0.2 +3.2
+0.2 +8.1 +0.7 -8.6 +1.2 -0.7 -0.3
-1.2 -5.8 +3.3 -17.5 -8.1 +2.3 -3.7
Health Care Ansell Cochlear CSL Ltd Ramsay Health Care ResMed Inc Sigma Pharma Sonic Hlthcare
8,099.1 $14.62 $57.16 $32.25 $19.20 $2.53 $0.65 $11.87
+6.5 +11.9 +23.2 +8.7 +1.1 -13.9 0.0 +4.1
-11.1 -7.8 -35.6 -10.2 +4.5 +2.4 +22.6 -11.4
-3.8 +4.7 -13.2 -7.5 -4.8 -1.4 +56.6 +7.4
-0.5 +6.6 +3.2 -1.5 +7.2 -16.6 +22.5 +3.3
+2.1 +16.0 +16.4 +11.7 +63.5 +17.7 -59.6 -24.5
Inform Tech Computershare DWS Advanced GBST Iress Oakton SMS Mgmt & Tech Technology One
511.8 $8.22 $1.25 $0.92 $7.62 $1.42 $4.60 $1.04
+6.4 +10.0 +2.9 -5.2 +8.9 -19.6 -15.0 -2.8
-14.0 -15.8 -8.3 +21.3 -22.3 -15.8 -14.1 +4.9
-4.8 -4.2 -8.7 -20.0 -3.6 -9.1 -2.6 +6.3
-8.8 -14.1 +2.4 +7.5 +7.5 -3.4 -2.9 0.0
-4.2 -5.9 -7.8 -3.6 +1.6 -24.7 +18.7 +18.2
Source: RBS, IRESS
153
Absolute performance to 5 Dec 11

Stock/sector Price last 5/12/11 3,541.6 $1.35 $1.22 $2.79 $1.98 $3.33 $0.25 $7.70 $7.30 $4.62 $2.14 $3.20 $1.07 $2.50 $0.90 $1.14 $21.32 $0.58 $3.55 $21.24 $0.49 $1.65 $6.21 $2.42 $4.87 $2.46 $0.80 $5.71 $12.83 $0.36 $32.60 4Q 2011 +12.5 0.0 -10.3 +25.1 +9.1 +27.1 +11.1 +16.7 +12.8 +6.0 -8.2 +11.5 +8.7 +25.0 +857.4 +12.9 +14.1 -3.3 +9.9 +22.1 -25.8 +16.7 +16.7 +34.8 +10.4 +29.8 +28.2 +5.4 +12.2 +10.9 +3.2 % return over ... 3Q 2Q 2011 2011 -11.0 0.0 -49.1 -11.6 -21.8 -5.5 -34.3 -25.0 -17.1 -10.4 -15.3 +18.5 -19.7 -22.4 -13.3 -27.3 -32.9 -15.5 -10.4 +7.1 -3.3 -5.4 +6.5 -23.4 -17.4 -23.0 -9.1 -43.4 -23.9 +3.6 -17.6 +14.3 -0.8 -6.1 -25.4 -14.7 -5.7 -14.9 +0.3 -14.7 -22.1 +1.4 +2.0 -6.7 +1.1 -11.6 -2.4 -7.0 -16.9 -84.9 -21.9 -27.7 -0.9 +9.9 -14.0 -15.6 -15.6 -4.7 +20.1 -18.2 0.0 -27.2 -2.6 -11.5 -11.1 +0.2 Stock/sector 1Q 2011 +0.8 -25.2 +19.4 +9.1 +8.8 +1.9 +2.6 0.0 -12.9 -0.6 -5.5 +7.1 -34.9 -14.5 +17.4 +7.8 -3.1 -18.0 -4.2 +7.6 +1.7 +16.9 -21.0 -14.2 +2.0 -7.6 +3.5 -0.3 -17.6 +4.9 +8.7 -26.7 -0.7 CY 2010 -6.7 -41.7 -43.6 -12.4 -32.5 +5.6 +28.5 -7.2 +32.1 +5.0 -2.8 -2.3 -6.9 -50.9 +36.7 -3.8 -49.6 -8.6 -19.2 -14.6 +2.8 +27.8 +20.0 -15.1 -3.9 -28.8 -34.4 -18.8 +0.4 -7.1 +1.0 -27.1 +2.3 Finan ex Prop Aust Educ Trust AMP Ltd ANZ Banking Aust Secur Exch Bank of Qld Bendigo Bank Comm Bank Challenger Fin Cromwell Corp Equity Trustees FKP Property IAG IOOF Holdings Lend Lease Corp Macquarie Bank NAB Oaks Hotels Perpetual QBE Insurance Suncorp Sunland Group Treasury Group Trinity Group Trust Company Westfield Group Westpac WH Soul Patt WHK Group Energy Aust Wwide Expl Caltex Aquila Res Beach Carnarvon Eastnstar Extract Karoon Linc Enrgy Molopo Nexus Energy Resource Gloucester Coal Horizon Oil New Hope Corp Oil Search Origin Energy Paladin Roc Oil Santos Woodside WorleyParsons Price last 5/12/11 4,727.7 $0.93 $4.39 $21.05 $31.63 $7.93 $9.47 $49.96 $4.47 $0.66 $13.36 $0.50 $3.05 $5.90 $7.62 $24.60 $24.65 $21.25 $14.37 $8.67 $0.91 $3.70 $0.20 $5.30 $8.27 $21.69 $13.80 $0.84 14,091.1 $1.43 $13.80 $6.83 $1.44 $0.11 $8.12 $5.16 $1.56 $0.62 $0.31 $1.57 $8.40 $0.23 $6.00 $6.55 $14.89 $1.71 $0.28 $13.54 $34.19 $27.33 4Q 2011 +8.6 +7.5 +11.1 +7.8 +4.3 +10.3 +11.5 +9.7 +5.2 -1.5 +15.2 +11.1 +1.0 +8.5 +8.2 +7.6 +10.2 +2.0 +11.6 +8.6 +18.3 +15.6 0.0 0.0 +6.7 +6.6 +7.8 +2.4 +12.9 +37.7 +27.4 +37.1 +31.7 -27.6 +6.4 +81.1 -18.8 -12.7 +117.9 -46.2 +24.4 +21.6 +11.3 +15.7 +11.1 +40.7 -9.7 +19.1 +5.3 +3.9 % return over ... 3Q 2Q 2011 2011 -12.7 +8.1 -19.2 -11.3 -0.4 -12.0 -4.2 -12.9 -13.1 -2.9 -16.5 -35.7 -11.2 -17.6 -21.5 -26.8 -12.7 0.0 -16.4 -25.3 -2.0 +24.4 -19.2 +8.3 -3.6 -10.5 -8.6 -2.3 -10.9 -17.3 -18.8 -7.9 -30.5 +19.1 -17.1 +28.1 -3.5 -45.5 -33.1 -6.6 -57.6 -28.8 -20.5 -44.8 +3.3 -14.9 -15.1 -51.8 -3.1 -16.0 -20.8 -6.9 -5.1 -0.6 -9.9 -7.6 -11.5 -17.6 -7.0 -0.2 -0.8 -2.1 -11.5 -17.6 -5.3 -9.0 -1.1 -14.6 -0.9 +43.1 -14.3 -2.4 -4.0 -11.5 -13.9 +38.5 -10.9 -7.3 -8.5 +3.6 -4.2 -11.1 -26.5 -24.6 -23.2 -5.7 -48.5 -19.9 +0.1 -27.0 -1.7 -15.1 -28.2 -48.4 -21.7 -9.5 +4.8 -6.6 -2.7 -30.2 -19.0 -12.9 -12.4 -8.8 1Q 2011 +3.8 -6.2 +2.6 +2.0 -8.7 -4.5 -4.2 +3.2 +4.9 -7.2 -0.6 -0.6 -7.5 -7.1 +5.1 -1.1 +9.1 +18.0 -6.8 -2.6 -1.5 -7.3 -8.0 +23.8 -2.1 -2.5 +9.5 +0.4 -11.1 +5.3 -2.0 +8.6 -5.2 +12.1 -28.4 -6.2 -16.0 -2.6 +10.2 -15.6 +7.9 -28.6 -10.9 +25.4 +2.7 +1.1 +0.2 -26.8 -3.7 +18.3 +10.0 +15.9 CY 2010 -9.7 +81.4 -21.9 +2.1 +7.8 -9.7 +1.1 -7.4 +11.1 +4.1 -12.2 +8.2 -3.7 +28.5 -13.0 -23.5 -13.5 -25.6 -15.9 -29.1 -0.9 -9.1 -6.5 -22.2 -2.8 -2.2 -12.2 -6.3 +0.9 -0.0 -36.8 +54.5 -2.5 -6.0 -22.8 -2.4 +13.0 -30.7 +75.4 -19.0 +41.3 -53.4 +35.7 -19.2 +6.0 +14.8 -1.0 +17.9 -38.8 -6.7 -9.8 -8.0
Industrials AJ Lucas Group Alesco Corporation Asciano Group Ausenco Limited Aust Infrastructure Boart Longyear BOOM Logistics Bradken Brambles Cabcharge ConnectEast CSR Ltd Downer EDI Emeco Holdings GWA Intl Hastie Group Limited Hills Industries Leighton Macmahon Hldgs Macq Airports Monadelphous Grp PMP Qantas Airways SEEK Spotless Group Toll Holdings Transfield Svcs Transpacific Transurban United Group Virgin Blue Holdings Wesfarmers
Infra & Utilities AGL Energy APA Group DUET
Energy Wld
Envestra Hastings Diversified SP AusNet Spark Infra
4,571.3 $14.66 $4.64 $1.77 $0.66 $0.71 $1.80 $0.98 $1.32
+7.1 +2.5 +14.6 +9.3 +28.2 +6.8 +16.5 +4.3 +6.0
-2.7 -2.4 -0.5 -3.9 +3.0 -3.6 -2.2 -1.1 -3.5
+3.2 +2.4 -3.3 +1.5 +3.1 +15.0 -1.3 +7.4 +15.2
-3.7 -6.0 +4.0 -0.6 -14.9 +14.3 -5.3 +1.1 -1.3
+2.0 +8.3 +15.7 -6.4 +44.3 +2.9 +53.6 -4.9 -18.1
Telecoms Amcom Hutchison Telecom iiNet Singapore Tel. Telecom NZ Telstra Corporation TPG Telecom
1,099.8 $0.87 $0.06 $2.82 $2.38 $1.52 $3.22 $1.43
+3.4 +12.3 -5.2 +29.4 -4.8 -25.9 +3.9 +0.4
+7.1 -30.2 -14.7 -16.5 +11.2 +9.8 +7.3 -15.7
+3.1 +10.4 -26.9 -1.5 +3.5 +27.0 +2.5 +0.9
+0.4 +1.5 -6.1 -8.6 -1.7 -9.8 +1.1 +2.5
-18.4 +17.9 -17.5 +55.9 -4.9 -18.8 -18.7 -2.1
S&P / ASX 100 S&P / ASX 200 S&P / ASX 300

Source: RBS, IRESS
3,524.0 4,321.3 4,318.5
+7.7 +7.8 +7.8
-13.1 -13.0 -13.1
-4.5 -4.8 -5.0
+2.3 +2.0 +1.9
-3.4 -2.6 -2.2
154
Recommendation structure
Absolute performance, short term (trading) recommendation: A Trading Buy recommendation implies upside of 5% or more and a Trading Sell indicates downside of 5% or more. The trading recommendation time horizon is 0-60 days. For Australian coverage, a Trading Buy recommendation implies upside of 5% or more from the suggested entry price range, and a Trading Sell recommendation implies downside of 5% or more from the suggested entry price range. The trading recommendation time horizon is 0-60 days. Absolute performance, long term (fundamental) recommendation: The recommendation is based on implied upside/downside for the stock from the target price. A Buy/Sell implies upside/downside of 10% or more and a Hold less than 10%. For UK Small/Mid-Cap Analysis a Buy/Sell implies upside/downside of 10% or more, an Add/Reduce 5-10% and a Hold less than 5%. For UK-based Investment Funds research the recommendation structure is not based on upside/downside to the target price. Rather it is the subjective view of the analyst based on an assessment of the resources and track record of the fund management company. For listed property trusts (LPT) or real estate investment trusts (REIT) the recommendation is based upon the target price plus the dividend yield, ie total return. Performance parameters and horizon: Given the volatility of share prices and our pre-disposition not to change recommendations frequently, these performance parameters should be interpreted flexibly. Performance in this context only reflects capital appreciation and the horizon is 12 months. Sector relative to market: The sector view relative to the market is the responsibility of the strategy team. Overweight/Underweight implies upside/downside of 10% or more and Neutral implies less than 10% upside/downside. Target price: The target price is the level the stock should currently trade at if the market were to accept the analyst's view of the stock and if the necessary catalysts were in place to effect this change in perception within the performance horizon. In this way, therefore, the target price abstracts from the need to take a view on the market or sector. If it is felt that the catalysts are not fully in place to effect a re-rating of the stock to its warranted value, the target price will differ from 'fair' value.
Distribution of recommendations
The tables below show the distribution of recommendations (both long term and trading). The first column displays the distribution of recommendations globally and the second column shows the distribution for the region. Numbers in brackets show the percentage for each category where there is an investment banking relationship. These numbers include recommendations produced by third parties with which RBS has joint ventures or strategic alliances.
Long term recommendations (as at 05 Dec 2011)

Global total (IB%) Buy Hold Sell Total (IB%)
Source: RBS
Trading recommendations (as at 05 Dec 2011)

Global total (IB%) Trading Buy Trading Sell Total (IB%)
Source: RBS
Asia Pacific total (IB%) 537 (4) 265 (3) 51 (0) 853 (3)
Asia Pacific total (IB%) 1 (0) 0 (0) 1 (0)
839 (11) 466 (6) 95 (5) 1400 (9)
1 (0) 0 (0) 1 (0)
Regulatory disclosures
Subject companies: TOL.AX, BLD.AX, APN.AX, CLO.AX, RIC.AX, ERA.AX, UGL.AX RBS has been appointed as Lead Arranger for a debt financing transaction by Linc Energy Limited: LNC.AX This publication is intended for informational purposes only and the opinions set forth herein should not be viewed as an offer or solicitation to buy, sell or otherwise trade futures and/or options. Past performance is not necessarily indicative of future results. The risk of loss associated with futures and options trading can be substantial. Any recipient of this document wanting additional information or to effect any transaction in futures markets in the US should contact the registered futures commission merchant, RBS Securities Inc., located at 600 Washington Boulevard, Stamford, CT, USA. Telephone: +1 203 897 2700.: IAU.AX RBS Morgans Corporate Limited was the Lead Manager and Underwriter to the Intrepid Mines Limited share placement in November 2010 and received fees in this regard.: IAU.AX
Daily Bulletin | Disclosures Appendix | 6 December 2011
155
Global disclaimer
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Daily Bulletin | Disclosures Appendix | 6 December 2011
156
RBS Equities (Australia)

Randolf Clinton, Head of Equities +61 2 8259 5247
RESEARCH
Michael Morrison, Head of Research DATABASE & QUANT Thiva Nagaratnam, CFA Stuart Nielsen Eben van Wyk, CFA STRATEGY, ECONOMICS & ESG Dr Alva DeVoy Daniel Blake Jonathon Brycki Kieran Davies FINANCIALS, INSURANCE Andrew Lyons John Buonaccorsi Richard Coles Ashley Dalziell Michael Leonard MEDIA & TELCOS Fraser McLeish Ian Martin Alan Stuart Ashley Wallace GAMING, FOOD & BEVERAGE Michael Nolan Alexander Beer RETAILING Daniel Broeren Chris Cable HEALTHCARE Dr Derek Jellinek Elliott Crane +61 2 8259 5832 +61 2 8259 5373 +61 2 8259 5849 +61 2 8259 5492 +61 2 8259 5831 +61 2 8259 5016 +61 2 8259 6831 +61 2 8259 5171 +61 2 8259 6086 +61 2 8259 5660 +61 2 8259 5728 +61 2 8259 5039 +61 2 8259 5767 +61 2 8259 5543 +61 3 9612 1585 +61 2 8259 5834 +61 2 8259 6356 +61 3 9612 1316 +61 2 8259 6834 +61 2 8259 5381 +61 2 8259 6722 +61 2 8259 5848 +61 2 8259 6729 ENERGY, UTILITIES & INFRASTRUCTURE Jason Mabee, CFA William Allott Philipp Kin Michael Newbold, CFA TRANSPORT Mark Williams Michael Newbold, CFA RESOURCES, STEEL & COMMODITIES Lyndon Fagan Sam Berridge Todd Scott Tom Sartor Phillip Chippindale Warren Edney Nick Moore MID/SMALL CAPS Julian Guido Matthew Nicholas Brewin Kwong Michael McNair SMALL CAPS RBS MORGANS Roger Leaning Chris Brown Fiona Buchanan Nick Harris Josephine Little Belinda Moore Scott Power Tom Sartor James Wilson +61 2 8259 5380 +61 2 8259 5348 +61 2 8259 6080 +61 2 8259 5663
+61 2 8259 6921 +61 2 8259 5663
+61 2 8259 5870 +61 2 8259 5955 +61 2 8259 5865 +61 7 3334 4503 +61 2 8259 6859 +61 3 9612 1557 +44 207 678 0555
+61 2 8259 5838 +61 2 8259 6168 +61 2 8259 6891 +61 2 8259 2089
BASICS (Agriculture, Builders, Chemicals, Developers, Paper, Property) Andrew Hodge +61 2 8259 6608 Andrew Scott +61 2 8259 5847 Belinda Moore +61 7 3334 4532 Niraj Shah, CFA +61 2 8259 5836 Tony Sherlock +61 2 8259 5548
+61 7 3334 4554 +61 7 3334 4885 +61 7 3334 4879 +61 7 3334 4557 +61 7 3334 4505 +61 7 3334 4532 +61 7 3334 4884 +61 7 3334 4503 +61 8 6462 1974
DISTRIBUTION
Nick Caughey, Head of Sales SYDNEY Research Sales Nick Caughey Sandy Isherwood Scott Ramsay James Ledgerwood Specialist Sales Michael McNair (Small Caps) Richard Hitchens (Quant) Corporate Broking/Access Georgina Wells Sales Trading Justin Gallagher Tony James Tom Sullivan William Tietjens Program Trading Jason Milliss Facilitation Rod Killick Peter Pennisi Derivative Sales Richard Brasher Robert Gibson Alan Issers +61 2 8259 2028 Hedge Fund Sales Aaron Lagerlow Ankon Rahman Andrew Watson Electronic Execution Gilda Bresic MELBOURNE Research Sales James I Smith Andrew Chirnside Sales Trading Mark Hendel David Harris Marianna Saliba LONDON David Schiller Pamela Tironi NEW YORK Stuart Nutting Sanjay Magotra Tom Roberts ASIA Mark Skocic Daniel Baker Woon Millen (Regional) +61 2 8259 2082 +61 2 8259 2088 +61 2 8259 2076
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+61 2 8259 2013
+61 2 8259 2089 +61 2 8259 6030
+61 3 9612 1360 +61 3 9612 1353
+61 2 8259 6896 +61 3 9612 1356 +61 3 9612 1454 +61 3 9612 1362
+61 2 8259 2062 +61 2 8259 2030 +61 2 8259 5170 +61 2 8259 6820
+44 20 7678 5475 +44 20 7678 6573
+61 2 8259 5357 +1 203 897 4803 +1 203 897 1520 +1 203 897 1539
+61 2 8259 2026 +61 2 8259 2038
+61 2 8259 2005 +61 2 8259 2003 +61 2 8259 6829
+61 3 9612 1355 +852 3988 7814 +61 2 8259 5260
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Equity | Australia

Produced and issued by: RBS Equities (Australia) Limited

Rec& EPS& TP& TP& EPS&

Jan Dubsky (+44 20 7085 9119)

111 121 135

1H = interim, 2H = final; SP = special Source: IRESS

Important disclosures can be found in the Disclosures Appendix.

IN BRIEF STRATEGY & ECONOMICS

Kieran Davies (+612 8259 5171)

Boral (A$3.81) Hold TP& A$3.91

Andrew Scott (+61 2 8259 5847)

UGL Ltd (A$12.83) Hold & TP& A$14.07

Andrew Hodge (+61 2 8259 6608)

Australia Small/Mid Caps

Julian Guido (+61 2 8259 5838)

APN News & Media (A$0.750) Buy TP& A$1.20

Fraser McLeish (+61 2 8259 5543)

Clough (A$0.740) Hold & TP& A$0.80

Alexandra Clarke (+61 7 3334 4804)

Ridley Corporation (A$0.98) Buy TP& A$1.26

Belinda Moore (+61 7 3334 4532)

Precious Metals Review*

Nick Moore (+44 20 7678 0555)

Daily Bulletin | 6 December 2011

IN BRIEF (contd) GLOBAL

Global Weekly Preview

Jan Dubsky (+44 20 7085 9119)

Dylan Cheang (+65 6518 5936)

Ahead Of The Curve*

James McCafferty (+852 3988 7190)

Global Action Pack

* Extract. For further details please refer to our website (http://research.rbsm.com/Research)

Daily Bulletin | 6 December 2011

Produced by: RBS Equities (Australia) Limited

Source: ASIC, Data Explorer, RBS

Eben van Wyk, CFA

Important disclosures can be found in the Disclosures Appendix.

RBS short screen

Australia Strategy | Analysis | 5 December 2011

Increasing short interest

Chart 2 : ASX Limited

WES short interest (rhs)

ASX short interest (rhs)

Source: ASIC, IRESS, RBS

Source: ASIC, IRESS, RBS

Chart 3 : Lynas Corporation

LYC short interest (rhs)

CPU short interest (rhs)

Source: ASIC, IRESS, RBS

Source: ASIC, IRESS, RBS

Chart 6 : Linc Energy

OMH short interest (rhs)

LNC short interest (rhs)

Source: ASIC, IRESS, RBS

Source: ASIC, IRESS, RBS

Australia Strategy | Analysis | 5 December 2011

Increasing short interest

Chart 8 : Flight Centre

MQG short interest (rhs)

FLT short interest (rhs)

Source: ASIC, IRESS, RBS

Source: ASIC, IRESS, RBS