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

The Round Up
13 November 2009
Issue No. 217
The Round Up is a comprehensive daily note produced by the RBS Warrants
team providing an overview of market movements along with quality ideas for
warrant traders and investors.

In today’s issue
Global Market Action Scoreboard, commentary
Aussie Market Action SPI Comment, Events & Dividends
DJS (DJSSZX) SFI Investment Buy – Sales remain strong
NWS (NWSKZI) MINI Investment Buy – Leverage to growth
QBE (QBESZX) SFI Investment Buy – Investor Update
Round Up Corner RBS Model Portfolio – Recovery Bias

Equities

Move Last % Move Range Volume

ASX 200 -9.1 4747.9 -0.2% -9 to -9.u.c $3.8 bn(L)
SPI - yesterday -6.0 4762.0 -0.1% -17 to +41 23,702(L)
Dow Jones -93.8 10197.5 -0.9% -120 to +30 Low
S&P 500 -11.3 1087.2 -1.0% -14 to +3 Low
Nasdaq -17.9 2149.0 -0.8% -21 to +12 Avg
FTSE +9.8 5276.5 +0.2% -13 to +38 Avg

Commodities

Move Last % Today % Past Month

Oil-WTI spot -2.6 76.7 -3.2% +4.7%
Gold Spot -13.5 1103.9 -1.2% +4.4%
Nickel (LME) -29.8 731.7 -3.9% -14.0%
Aluminium (LME) -0.7 86.9 -0.8% +0.2%
Copper (LME) -1.6 294.0 -0.5% +3.5%
Zinc (LME) -1.6 96.3 -1.6% +2.7%
Silver -0.4 17.2 -2.0% -2.6%
Sugar -0.0 22.1 -0.0% +4.9%
Dual Listed Companies (DLC’s)

Move %Move Last AUD Terms Diff to Aus

NWS (US) -0.27 -0.02 +14.5 c 15.69 -9.7 c
RIO (UK) -18.00 -0.01 +31.0 c 55.73 -1411.1 c
BLT (BHP UK) -17.00 -0.01 +18.0 c 32.35 -720.0 c
BXB (UK) 1.25 0.00 +3.9 c 7.05 +6.1 c

American Depository Receipts (ADR’s)

Move %Move Last AUD Terms Diff to Aus

BHP (US) -1.03 -0.01 +71.6 c 38.79 -76.2 c
AWC (US) -0.25 -0.04 +6.0 c 1.63 -3.6 c
TLS (US) -0.07 0.00 +15.0 c 3.26 -2.0 c
ANZ (US) -0.54 -0.03 +20.9 c 22.65 -28.9 c
WBC (US) -3.81 -0.03 +118.9 c 25.77 -27.2 c
NAB (US) -0.82 -0.03 +27.4 c 29.65 -42.8 c
LGL (US) -1.00 -0.03 +31.0 c 3.36 -8.5 c
RMD (US) 0.05 0.00 +48.9 c 5.30 +4.4 c
JHX (US) 1.00 0.03 +35.6 c 7.71 +2.6 c
PDN (CAN) -0.06 -0.01 +4.0 c 4.15 -8.3 c

Overnight Commentary
United States Commentary
A drop in the crude price after a larger than expected jump in inventories had the energy plays under pressure and together with a
breather from the financials, explained most of the days fall. Heading into the closing bell, the Dow off 102pts, the S&P 1.2% lower and
the Nasdaq down 0.9%.

Techs - Cisco down 2.4% and one of the Dow's worst performers on news that Hewlett Packard plans to acquire 3Com, trumping
Cisco's bid and in so doing, becoming the main supplier of networking and computer equipment.

Financials - After a reasonably solid showing for most of the week, financials and in particular the banks, gave back some ground
overnight. JP's down 2.4%,BofA down 2.1%, Capital One down 3.1%, Wells Fargo and Morgan Stanley both down 2%.

Oils - Following the crude price lower, Chevron and Exxon both giving back around 1.5% and among the larger pt takers. Elsewhere,
Baker Hughes down 4.6%(S&P100 worst), National Oilwell down 4%, Halliburton 3.5% lower and Devon Energy down 3%.

Eco - Initial Jobless Claims marginally better than expected, 502K vs consensus at 510K. Continuing laims 5631K vs 5700K expected
and down from 5749K last week. Monthly Budget for October -$176.4b vs -$165bln expected and a further detoriation on Septembers -
$155.5bln.
Industrials - One of few highlights, Dow Chemicals nearly 7% higher and a clear standout on the S&P100. Gains followed mgmt
flagging cost cutting and rising sales post the Rohh&Haas acquisition set to push earnings past consensus.

United Kingdom & Europe Commentary

The FTSE hit 3 week highs, up 0.2% or 10pts, as merger talk lifted sentiment but weakness in the US kept gains low. The FTSE
Eurofirst eked out a gain of 0.1% but the DAX fell 0.1% and the CAC was off 0.2%.

UK Banks - The sector was generally higher with investors dropping their risk aversion. HSBC was up 0.9%, Lloyds rose 0.8%,
Standard Chartered added 2%, Barclays climbed 0.3% but RBS was off 3%

Euro Banks - Legislation to create an Irish 'Bad Bank' was passed overnight. Allied Irish Banks was off 2.3% whilst Bank of Ireland fell
1.8%. Deutsche Bank was off 0.8%, Commerzbank fell 1.6%, BNP dropped 1.2% and SocGen ended down 1.6%.

Airlines - BA jumped 7.5% after it confirmed it was in talks with Iberia which soared 11.8%. Ryanair added 0.5%, Air France-KLM was
up 3.4% and Lufthansa ended 1.6% higher.
Telco - A better than expected 2Q result from BT lifted that stock 3.7%. The company raised its FY revenue and dividend outlook after
slashing costs in the period. Vodafone which reported strong 1H results on Tuesday was up 1.3% and Cable & Wireless climbed 1.4%.

Auto - Peugeot jumped 7% at one stage before closing up 0.4% after saying it would break even in 2H. Renault added 2.4%, BMW
climbed 0.5% but VW sank 5.1%.

Commodiites Commentary
Miners - A touch of strength in the US dollar saw metal prices drift down. BHP ended 1% lower, Rio dropped 0.6%, Vedanta fell 0.5%
and Eurasian Natural Resources was off 2% after releasing 3Q production numbers and saying the outlook was still uncertain.

Energy - The sector continued to follow the oil price lower with crude falling below $77 after a bigger than expected rise in US
inventories. BP fell 0.9%, Shell dropped 0.8%, BG Group was off 1% and Tullow ended down 1.8%. In Europe Total fell 0.5%, Statoil
was off 0.7% but Repsol broke ranks again adding 0.2%.

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

SPI Intraday SPI Daily

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

Upcoming Economic Events for the Week

Monday AUS RBA Gov Lowe speaks, ANZ job ads, investor home loans, owner occ housing finance
US
Tuesday AUS RBA’s Broadbent speaks, NAB business confidence, NAB business conditions
US
Wednesday AUS WMI consumer confidence
US Veterans’ Day holiday
Thursday AUS Employment and unemployment
US
Friday AUS
US Trade balance, import prices, Michigan cons confidence
*Dates are indicative only and may change
SFI Investment Buy:

David Jones (DJSSZX) – Sales remain strong

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

Source: IRESS

Buy before the upgrade

DJS reported positive like for like sales contrasted with existing FY10 sales guidance of -3% to -5% underlying lfl sales
growth. RBS forecast 2.0% lfl sales growth for FY10, believing the balance of risks suggests management will upgrade
guidance to 5-10% underlying NPAT growth with the 2Q10 sales announcement in February. RBS target price remains at
$6.40 post the sales update

1Q10A sales +4.5% total, +1.9% lfl (excluding one-offs)

DJS reported headline sales for 1Q10A of A$452.1m, +4.5% pcp (+2.2% including one-offs; 1Q09A: -6.3%). More
importantly, lfl sales for the quarter grew 1.9% (excluding the impact of the Bourke Street redevelopment), ahead of
guidance for the full year of -3% to -5% growth

Buy DJSSZX

RBS SFIs over DJS

Security ExDate ExPrc CP ConvFac Delta Description

DJSSZX 4-Feb-19 169 Call 1 0 Rbs Feb19 169 I W
MINI Investment Buy:

News Corporation (NWSKZJ) – Strong leverage to growth

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

Source: IRESS

RBS forecast 16% operating profit growth in FY10

1Q10 operating profit was up 9% on the pcp and EPS of US$0.22 was ahead of Bloomberg consensus of US$0.18. The
company raised its FY10 operating profit growth guidance from ‘high single digit’ to ‘high single to low double digit’. RBS
Research still see the guidance as conservative and raise FY10F operating income growth to +16% (previously +11%)
and EPS by 5% to US$0.85.

Cable continues to outperform, TV imporving

The cable division was again the standout in the period, with operating profit up 41%. We now forecast cable operating
profit will grow 23% to US$2.05bn in FY10. Cable makes up half of operating income and underpins overall group
earnings growth in FY10 and FY11.

TV is showing encouraging signs, with NWS saying October pacings are flat on last year and November up ‘mid teens’.
Newspapers were weak in the quarter, but the company said Australian newspaper trends are improving and newspaper
operating profit should be down only marginally for the full year. Sky Italia and FIM were both weak, but should not detract
significantly in the full year.

Stock remains cheap

News Corp trades on an EV/EBITDA of 6.0x CY2010F, below both US peers (Disney on 7.8x, Viacom 7.6x on Reuters
estimates) and Australian domestic media stocks (TEN on 9.5x). RBSprice target of $19.92

RBS MINIs over NWS

Security ExPrc Stop Loss CP ConvFac Delta Description

NWSKZI 778.45 Long 1 1 MINI Long
NWSKZJ 1150.28 Long 1 1 MINI Long
NWSKZR 1981.63 Short 1 1 MINI Short
SFI Investment Buy:

QBE Insurance Group (QBESZX) – Investor Update

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

Source: IRESS

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

RBS SFIs over QBE

Security ExDate ExPrc CP ConvFac Delta Description

QBESZX 4-Feb-19 1140.01 Call 1 1 Self Funding Instalment

RBS MINIs over QBE

Security ExPrc Stop Loss CP ConvFac Delta Description

QBEKZF 1219 Long 1 1 MINI Long
QBEKZK 1124.7 Long 1 1 MINI Long
QBEKZL 1792.43 Long 1 1 MINI Long
QBEKZR 3147.08 Short 1 1 MINI Short
QBEKZS 3376.24 Short 1 1 MINI Short
RBS Round Up Corner:

RBS Model Portfolio – Recovery bias

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

Portfolio positioning
Full market valuations mean that any bad news will see a significant market reaction, as was evidenced towards the end
of October. A 12-month forward PE of 16.6x for the market is pushing towards a standard deviation of 1.5 above its long-
run mean. Other valuation metrics also look full, which means we need earnings growth to sustain the market rally. Given
modest expectations for 2010, the market may increasingly look to 2011 for guidance.

Key portfolio positions

• RBS Research key portfolio Overweight positions are Consumer Discretionary and Mining & Services, which
reflect our recovery bias. We trim our overweight Banks call in the short term, but will be looking to re-establish that
over the medium term.
• Key Underweight positions are in defensive sectors such as Consumer Staples, Financials and Property.

MINIs approaching stop loss

Approx. MINI Share:

Underlying MINI Code MINI Type Strike Stop Loss Share Price
Value Stop Loss

CBA CBAKZQ Short $62.85 $56.60 $ 54.72 $ 8.13 3.4%

WES WESKZU Short $32.22 $29.01 $ 27.98 $ 4.24 3.7%
DJS DJSKZP Short $6.78 $6.10 $ 5.86 $ 0.92 4.1%
RIO RIOKZS Short $79.48 $71.57 $ 68.73 $ 10.75 4.1%
LGL LGLKZP Short $3.96 $3.56 $ 3.41 $ 0.55 4.4%
For further information please do not hesitate to contact us on the details below

Contact
Equities Structured Products & Warrants
Toll free 1800 450 005 www.rbs.com.au/warrants
Trading Products Team
Ben Smoker 02 8259 2085 ben.smoker@rbs.com
Robbie Taylor 02 8259 2018 robbie.taylor@rbs.com
Ryan Corrigan 02 8259 2425 ryan.corrigan@rbs.com
Investment Products Team
Elizabeth Tian 02 8259 2017 elizabeth.tian@rbs.com
Tania Smyth 02 8259 2023 tania.smyth@rbs.com
Robert Deutsch 02 8259 2065 robert.deutsch@rbs.com
Mark Tisdell 02 8259 6951 mark.tisdell@rbs.com

Disclaimer:
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240530) (“RBS Equities”) and has been taken from sources believed to be reliable. RBS Equities does not make representations that the information is
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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