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


The Round Up
27 August 2009
Issue No. 164
The Round Up is a comprehensive daily note produced by the RBS Warrants
team providing an overview of market movements along with quality ideas for
warrant traders and investors.

In today’s issue
Global Market Action Scoreboard, commentary
Aussie Market Action SPI Comment, Events & Dividends
STO (STOVZJ) Trading Buy – A play on LNG
WOWKZF/WESKZT MINI Pairs Trade – WOW enters hardware
TLS (TLSSZX) MINI Trading Buy – Future Fund Selldown
Round Up Corner Stocks reporting – CWN,LGL,TOL,TTS,WOW


Move Last % Move Range Volume
ASX 200 +48.7 4454.5 +1.1% + to +63 $5.8 bn(H)
SPI - yesterday +36.0 4431.0 +0.8% +3 to +62 27,531(A)
Dow Jones +4.2 9543.5 +0.0% -54 to +44 Low
S&P 500 +0.1 1028.1 +0.0% -6 to +4 Avg
Nasdaq +0.2 2024.4 +0.0% -11 to +10 Low
FTSE -26.2 4890.6 -0.5% -44 to +10 Low


Move Last % Today % Past Month
Oil-WTI spot -0.62 71.43 -0.9% +5.0%
Gold Spot +0.80 945.55 +0.1% -0.6%
Nickel (LME) -12.20 866.60 -1.4% +14.5%
Aluminium (LME) -1.54 83.05 -1.8% +2.3%
Copper (LME) -1.02 284.68 -0.4% +13.7%
Zinc (LME) -0.20 82.42 -0.2% +8.9%
Silver +0.06 14.34 +0.4% +3.1%
Sugar +0.45 22.37 +2.1% +21.4%
Dual Listed Companies (DLC’s)

Move %Move Last AUD Terms Diff to Aus
NWS (US) +0.06 +0.5% 12.93 15.61 +10.8 c
RIO (UK) -99.0 p -4.0% £23.82 46.70 -1223.8 c
BLT (BHP UK) -23.0 p -1.4% £16.050 31.47 -667.5 c
BXB (UK) +9.0 p +2.5% £3.750 7.35 -5.6 c

American Depository Receipts (ADR’s)

Move %Move Last AUD Terms Diff to Aus
BHP (US) -0.20 -0.3% 62.65 37.81 -33.6 c
AWC (US) +0.10 +1.8% 5.63 1.70 -1.6 c
TLS (US) -0.08 -0.6% 14.00 3.38 -1.0 c
ANZ (US) -0.08 -0.5% 16.65 20.10 +12.9 c
WBC (US) -0.91 -0.9% 97.81 23.61 -3.6 c
NAB (US) -0.22 -1.0% 22.31 26.93 -14.9 c
LGL (US) +1.04 +4.8% 22.64 2.73 -2.7 c
RMD (US) -0.30 -0.7% 45.68 5.51 -5.6 c
JHX (US) -0.63 -2.1% 28.72 6.93 -19.6 c
PDN (CAN) +0.08 +2.0% 4.14 4.55 -4.5 c

Overnight Commentary
United States Commentary
US stocks struggled for direction as industrial names slipped after slightly disappointing goods orders, but better home sales boosted
the homebuilders and energy stocks held firm. The Dow closed up just 4.2pts, while the S&P 500 added just 0.1pt.

Eco - The focus seemed to be on a smaller-than-estimated Durable Goods ex Transport Orders at +0.8 vs expectations of +0.9%,
slowing slightly from +2.5% in June, despite the headline Durable Goods Orders solid +4.9% vs +3.0%, from -1.3% previous. New
Home Sales for July rose 9.6% vs 1.6% forecast, after rising 9.1% in June.

Homebuilders - DR Horton added 5.7%, Lennar rose 4.1% and Toll Brothers put on 3.7% as purchases of new homes in the US
jumped more than forecast reinforcing signs the economy is rebounding, and brokers begin to lift estimates.

Energy - Energy names such as Exxon and Chevron held firm, up 1% and 0.6% each, despite crude slippin slightly to $71/barrell, and
as Australia's approval of the Gorgon deal boosted sentiment.

Industrials - 3M, General Electric and Caterpillar slipped as orders for durable goods for items meant to last several years, excluding
cars, trucks and airplanes, climbed less than projected, and news of possible curbs on raw-material suppliers in China, saw the three
majors off between 1 and 2 percent each.

Steel - US Steel Corp dropped 2.5%, Nucor lost 2.4% and AK Steel off 2.2% after China's cabinet said it is studying curbs on
overcapacity in industries including steel and cement.

United Kingdom & Europe Commentary
The FTSE 100 was 0.5% or 26pts lower as falls in miners and energy stocks outweighed gains by defensive pharma stocks. The FTSE
Eurofirst 300 was off 0.5%, the DAX dropped 0.6% and the CAC fell 0.3%

UK Banks - RBS soared 5.3% after saying it would slash retirement benefits for staff saving £1mn per year and cut future liabilities by
£500mn. Elsewhere the sector was mixed with HSBC off 0.4%, Lloyds added 0.6%, Standard Chartered climbed 1.1% and Barclays
eked out a gain of 0.1%.

Euro Banks - Natixis soared 38.8% after its parent bank guaranteed billions of Euros of toxic assets. Commerzbank rose 3.2%,
SocGen added 1.1% but BNP was off 2.2% and Deutsche Bank fell 0.8%.

Beverages - Good results from Heineken, which jumped 7.2%, helped the sector. SABMiller rose 1.3%, AnheuserBusch InBev climbed
1% and Diageo added 2.6%.
Pharma - GlaxoSmithKline, up 0.2%, was one of the talking points of the FTSE as rumours again circled that it would make a takeover
play for its US partner in the development of lupus drugs, Human Genome Sciences. AstraZeneca climbed 0.5% but Shire fell 0.4%.

Resources Commentary
Miners - Antofagasta reported worse than expected which saw it fall 4.8%. BHP dropped 1.4%, Rio was off 4%, Anglo fell 2.3%,
Xstrata slumped 4.1% and Vedanta ended 2.4% lower.

Energy - Crude dell to $71 per barrel which saw the majors off. Tullow sank 3.9% after reporting 1H results inline but rill results from
Uganda proved inconclusive and its exploration programme in Ghana suffered delays because of rig shortages. BP fell 1%, Shell was
off 0.5% and BG Group dropped 2.25%. In Europe Total was off 0.9%, Statoil dropped 2% and Repsol

SPI Commentary
The SPI traded up 35pts or 0.8% to 4430. Open at 4403 with a low of 4398 and a high of 4457. Volume 27,388. Overnight the SPI
traded down 10pts to 4421.

SPI Intraday SPI Daily

*SPI report taken from the 9:50am open to the 4:30pm close on the previous trading day. Charts taken from IRESS

Upcoming Economic Events for the Week

Monday AUS New motor vehicle sales
Tuesday AUS
US S&P/CS composite 20
Wednesday AUS Real construction work done
US Consumer confidence, FHFA house price, durable goods orders
Thursday AUS Real capital expenditure, real equipment investment, expected nominal capex
US New home sales, real GDP
Friday AUS
US Personal income, personal consumption, core PCE deflator, Michigan consumer confidence
*Dates are indicative only and may change

Upcoming Dividends

ExDivDate Security Description Div (c) Yield Frk(%) PayDate
27-Aug-09 ASX ASX Limited 74.5 4.78% 100 24-Sep-09
27-Aug-09 BEN Bendigo & Adelaide Bank 15 4.93% 100 30-Sep-09
28-Aug-09 COH Cochlear 95 2.92% 100 24-Sep-09
31-Aug-09 BHP BHP Billiton 50.07 3.01% 100 25-Sep-09
3-Sep-09 NWS News Corp 6 0.9% 0 14-Oct-09
Trading Buy:

Santos Limited (STOVZJ) – A play on LNG
RBS Research have a buy recommendation on STO with a $16.50 target price. STO reported NPAT of $102mln which
beat consensus. The stock went ex dividend 22c yesterday and will not fully underwrite the DRP which suggests that the
company has a strong funding position. Oil and gas stocks have been strong following results with STO underperforming
WPL and OSH. STO remains RBS Research favourite pick. Buy STOVZJ for a bounce to $16.50

Source: IRESS

STO has been moving higher since July and recently broke resistance at $15. The stock now looks headed to its march
high of $16.50 which is also RBS Research target price.

STO has transformed into an LNG stock with two recent deals being added to the portfolio of potential LNG
developments, bringing the total number of possible LNG assets, at differnent stages of development, up to five. Given
this new strategic direction, STO appears to predominantly position itself increasingly as an LNG player. RBS Research
believe that this makes the company attractive as a target to international oil companies seeking to participate in the LNG
race from an early stage.


Security ExPrc Stop Loss CP ConvFac Delta Description
STOVZJ 24-Sep-09 $ 16.00 Call 4 0.10 Trading Call Warrant
STOVZK 29-Oct-09 $ 14.00 Call 4 0.20 Trading Call Warrant
STOVZY 24-Sep-09 $ 14.00 Put 4 -0.03 Trading Put Warrant
STOVZZ 29-Oct-09 $ 13.00 Put 4 -0.02 Trading Put Warrant

RBS Warrants over STO

Security ExDate ExPrice CP ConvFac Delta Description
STOKZD $ 8.8526 $ 9.93 Long 1 1 MINI Long
STOKZE $ 7.8670 $ 8.85 Long 1 1 MINI Long
STOKZT $22.5094 $ 20.47 Short 1 1 MINI Short
STOKZU $20.5563 $ 18.73 Short 1 1 MINI Short
MINI Pairs Trade:

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

Source: IRESS

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


Security ExPrc Stop Loss CP ConvFac Delta Description
WOWKZD $20.1875 $ 21.01 Long 1 1 MINI Long
WOWKZE $18.5064 $ 19.27 Long 1 1 MINI Long
WOWKZF $23.6341 $ 24.59 Long 1 1 MINI Long
WOWKZR $37.1202 $ 35.13 Short 1 1 MINI Short
WOWKZT $34.2012 $ 32.52 Short 1 1 MINI Short


Security ExPrc Stop Loss CP ConvFac Delta Description
WESKZG $12.7721 $ 14.63 Long 1 1 MINI Long
WESKZH $10.5496 $ 12.20 Long 1 1 MINI Long
WESKZT $29.6274 $ 27.24 Short 1 1 MINI Short
MINI Trading Buy:

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

Source: IRESS

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


Security ExPrc Stop Loss CP ConvFac Delta Description
TLSKZC 260.58 274 Long 1 1 MINI Long
TLSKZD 289.16 306 Long 1 1 MINI Long
TLSKZP 449.9 405 Short 1 1 MINI Short

RBS Warrants over TLS

Security ExDate ExPrice CP ConvFac Delta Description
TLSJZB 29-Oct-09 250 Call 1 0.88 HOT Instalment
TLSIZA 28-Jan-10 250 Call 1 0.95 HOT Instalment
TLSIZQ 14-Jun-10 250 Call 1 1 Rolling Instalment
TLSIZR 14-Jun-10 225 Call 1 1 Rolling Instalment
TLSSZX 4-Feb-19 193.88 Call 1 1 Self Funding Instalment
TLSSZZ 30-Jun-17 255.18 Call 1 1 Self Funding Instalment
RBS Round Up Corner:

Stocks Reporting This Week
Date Code Company Y/E NPAT (Abs) Div EPS 2H Long Short
(pre abs) div Product Product
24 Aug WOR WorleyParsons Jun AUD 409.2 0.0 86.0c 172.1c 48.0c WORKZD
25 Aug ALL Aristocrat Leisure Dec AUD 40.9 -5.0 5.0c 30.4c 36.0c ALLKZI
25 Aug FGL Foster's Group Jun AUD 739.8 -349.0 27.0c 38.4c 15.0c FGLKZD
25 Aug OSH Oil Search Dec USD 15.2 0.0 4.0c 8.4c 8.0c OSHKZD OSHKZR
25 Aug SUN Suncorp-Metway Jun AUD 462.0 -414.0 40.0c 41.0c SUNKZM SUNKZP
26 Aug AOE Arrow Energy Jun AUD -24.2 0.0 0.0c -3.3c AOEKZA
26 Aug CMJ Consolidated Media Jun AUD 85.8 0.0 16.5c 12.4c 6.0c CMJKZC
26 Aug HSP Healthscope Jun AUD 83.7 -11.5 21.5c 33.2c 11.0c HSPSZX
26 Aug WDC Westfield Group Dec AUD 1047 0.0 47.5c 97.3c 95.0c WDCKZG WDCKZR
27 Aug CWN Crown Jun AUD 247.0 -610.7 34.6c 34.6c 20.8c CWNKZG CWNKZP
27 Aug LGL Lihir Gold Dec USD 152.3 -186.5 0.0c 12.4c 0.0c LGLKZI LGLKZP
27 Aug TOL Toll Holdings Jun AUD 296.7 -28.8 20.0c 43.7c 8.5c TOLKZH TOLKZP
27 Aug TTS Tatts Group Jun AUD 292.7 0.0 20.8c 23.1c 10.6c TTSSZX
27 Aug WOW Woolworths Jun AUD 1781 0.0 99.5c 145.3c 51.5c WOWKZF WOWKZS
28 Aug SHL Sonic Healthcare Jun AUD 302.2 0.0 54.0c 83.6c 32.0c SHLSZX
*Figures in table based on RBS Research forecasts

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

Aristocrat Leisure (ALL) - ALL reported 1H09 normalised NPAT of A$44m, down 38% on the pcp and in line with recently issued guidance. Reported
NPAT of -A$33m includes A$82.6m of abnormals largely associated with an impairment taken on ALL's investment in PokerTek and Elecktroncek,
which had been flagged

Fosters Group (FGL) NPAT A$725.5m, A$740.8m pre-SGARA (RBS: A$739.8m pre-SGARA). EBITS A$1165m (RBS A$1216.1m): despite A$25m
lower corporate costs.

Oil Search (OSH) - (USD) - NPAT of US$35.6m was ahead of consensus (US$28.7m) and RBS forecast (US$28.3m). OSH's interim result was solid,
but the real story was news that the group is in talks to sell a 3.5% stake in PLNG. Not only should this crystallise some value, but we believe it will give
the market renewed comfort in OSH's funding position.

Suncorp Metway (SUN) - With much of the confusion surrounding this result already taken out by the early release, there were few surprises in the
headline numbers. Looking closer at the Banking operations, the surprise would be that the non-core book is performing even worse than we'd thought,
with B&DD charges at c450bp in non-core v RBS expectation of c350bp.

Consolidated Media (CMJ) - FY09 NPAT of A$83.6m was slightly below RBS A$85.8m forecast. Premier EBITDA was in line, at A$145m (ex one-offs
from 1H09) and up 9% on pcp. The big news was on the 10% share buyback, which could take Packer's stake to 45.3%, if it doesn't first flush out a bid
from Seven

Healthscope (HSP) - FY09 normalised net profit of A$88.2m, up 17.8% on pcp. This was 5.3% above our forecast of $83.7m and compares with
Reuters consensus average of $81.8m (range: A$69.8m-A$86.1m). Normalised EPS was 35.0 cps, up 12.9% on pcp (vs. RBS at 33.2cps). FY09
dividend increased by 10% to 21.5cps (fully franked) vs RBS at 21.5 cps. Significant items included a A$15.9m write-off of HSP's share of break fee
receivable associated with the unsuccessful SYB acquisition.

Westfield Group (WDC) - Reported NPAT A$-(708) impacted by $2.9bn in revaluations offset by some large mark-to-market gains on financial
instruments. Operating NPAT A$1.040m (RBS A$1.047m). Dividend 47cps. FY10 guidance maintained at 94-97cps (RBS 97cps). Cut the DPU payout
from 100% to 70-75% from 1H10 distribution

Crown Limited (CWN) - Expect Australian casino revenues to remain relatively resilient in the six months to June (we forecast 5.6% growth in 2H09).

Lihir Gold (LGL) - (USD) Focus will be on Ivory Coast expansion and the Million Oz project.

Toll Holdings (TOL) - Expect 2H to be marginally down on the pcp, coming in slightly below original guidance.

Tattersalls (TTS) - should benefit from a strong run in jackpots from its lotteries business, and relatively defensive earnings from wagering and gaming.

Woolworths Limited (WOW) - Strong sales and margin, particularly in Australian F&L. All eyes will be on international acquisition commentary.
Sonic Healthcare (SHL) - Expect a solid result driven by ongoing volume increases in domestic pathology and margin uplift from acquisition synergies.

MINIs approaching stop loss

Approx. MINI Share:
Underlying MINI Code MINI Type Strike Stop Loss Share Price
Value Stop Loss

CWN CWNKZP Short $10.16 $8.14 $ 8.10 $ 2.06 0.5%
NAB NABKZT Short $31.08 $28.00 $ 27.14 $ 3.94 3.2%
XJO XJOKZX Short 4,894.63 4,655.00 4,454.50 $ 4.40 4.5%
COH COHKZQ Short $69.39 $62.55 $ 59.02 $ 10.37 6.0%
CPU CPUKZP Short $11.79 $10.72 $ 10.10 $ 1.69 6.1%

For further information please do not hesitate to contact us on the details below

Equities Structured Products & Warrants
Toll free 1800 450 005
Trading Products Team
Ben Smoker 02 8259 2085
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Robert Deutsch 02 8259 2065
Mark Tisdell 02 8259 6951

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© Copyright 2009. RBS Equities. A Participant of the ASX Group.

Explanation of Warrant Tables:
Security – refers to the code ascribed to the warrant, ExDate – refers to the date on which the warrant expires or is reset, ExPrc – refers to the
exercise price, or second instalment payment, CP – tells you whether the warrant is a call or a put, ConvFac – the conversion factor of the warrant
which tells you how many warrants you need to exercise in order to take possession of 1 share, Delta – tells you how much the warrant will move for a
1c move in the underlying security, Description – Tells you the type of warrant.
All charts taken from IRESS unless indicated otherwise