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


The Round Up
23 November 2009
Issue No. 223
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 Aussie Market Action UGL (UGLKZC) BXB (BXBKZG) QBE (QBESZX) Round Up Corner Scoreboard, commentary SPI Comment, Events & Dividends MINI Trading Buy – Top sector pick MINI Trading Buy – Recovery Story SFI Investment Buy – Investor Update RBS Model Portfolio – Recovery Bias

Move ASX 200 SPI - yesterday Dow Jones S&P 500 Nasdaq FTSE -63.4 -57.0 -14.3 -3.5 -10.8 -16.3 Last 4685.8 4701.0 10318.2 1091.4 2146.0 5251.4 % Move -1.3% -1.2% -0.1% -0.3% -0.5% -0.3% Range
-76 to -15.u.c -76 to -34.u.c -61 to +10 -8 to -0 -20 to -7 -44 to +42

$4.0 bn(L) 17,659(L) Avg Avg Avg Avg

Move Oil-WTI spot Gold Spot Nickel (LME) Aluminium (LME) Copper (LME) Zinc (LME) Silver Sugar -0.6 +6.0 -17.0 +1.3 +2.4 +1.8 -0.0 -0.3 Last 77.5 1150.6 750.4 91.9 309.3 101.0 18.5 21.9 % Today -0.7% +0.5% -2.2% +1.5% +0.8% +1.8% -0.2% -1.4% % Past Month -2.0% +9.0% -11.9% +7.9% +6.6% +5.8% +5.8% -4.9%

Dual Listed Companies (DLC’s)
Move NWS (US) RIO (UK) BLT (BHP UK) BXB (UK) -0.59 -36.00 -19.00 0.00 %Move -0.04 -0.01 -0.01 0.00 Last
+14.1 c +31.5 c +18.1 c +3.5 c

AUD Terms 15.45 56.80 32.61 6.40

Diff to Aus
-29.2 c -1442.1 c -741.7 c -12.4 c

American Depository Receipts (ADR’s)
Move BHP (US) AWC (US) TLS (US) ANZ (US) WBC (US) NAB (US) LGL (US) RMD (US) JHX (US) PDN (CAN) -0.80 -0.11 -0.08 -0.43 -1.12 -0.15 0.18 -0.42 0.27 0.01 %Move -0.01 -0.02 -0.01 -0.02 -0.01 -0.01 0.01 -0.01 0.01 0.00 Last
+73.4 c +6.0 c +15.0 c +19.8 c +110.9 c +26.0 c +33.1 c +50.3 c +33.8 c +4.2 c

AUD Terms 40.10 1.63 3.28 21.61 24.25 28.44 3.61 5.49 7.40 4.24

Diff to Aus
+7.1 c -1.6 c -1.8 c -13.6 c +4.6 c -25.4 c +3.3 c -3.6 c -0.2 c +1.7 c

Overnight Commentary
United States Commentary
Like most of the week, Friday's session was characterised by more indifference, signs of investor fatigue and a host of market/economic barometers struggling under their own weight. In a clear shift toward defensives and away from cyclicals, the Dow finished 14pts lower, the S&P down 0.3% thanks in no small part to a very tough day for the builders and the Nasdaq 0.5% lower. Techs - More bad news this time care of Dell, down 10%(S&P100's worst) after falling shy of consensus with Q3 earnings. For the period net income came in at 17cps, down 54% pcp and well below the average estimate of 27cps. Homebuilders - Dr Horton down 15%(S&P500's worst) after the 2nd largest homebuilder in the US reported a larger than expected 4Q loss. For the 3months to Sept30, mgmt posted a 73cps loss vs consensus expecting a 24cps deficit. Although orders rose 26% from a low base, the company did not project a return to profit for 2010. Homebuilders - Care of the Dr Horton reality check US homebuilders were hit hard. Pulte gave back nearly 4%, Lennar down 3.5%,KB 3.4% and the sector finishing almost 8% lower. With the last couple of years seeing the US job market suffer its biggest contraction since the Great Depression and most recently, unemployments push up through 10%, the macro backdrop for the homebuilders still has some work to do. Energy - Although the move from crude(-0.7%) wasn't overly dramatic, the energy plays continued to give back good ground. Devon Energy one of the S&P100's worst down 2.4%, so too NatOilwell, Schlumberger and Hallilburton both nearly 2% lower. Defensive - A clear move into more defensives names on Friday, filling the top5 performers on the Dow, Merck up 3.2%, Pfizer 1.4% higher, Coca-Cola added 1.1%, McDonalds and Kraft posting small gains.

United Kingdom & Europe Commentary
The FTSE lower for a 4th consecutive day, ongoing weakness in cyclicals and banks and like the US, a clear shift toward the more defensive names. A similar story across broader Europe, albeit the selling a little more heavy handed, the DAX down 0.7% and the CAC finished 0.8% lower. Travel - Thomas Cook down more than 4% and Tui Travel not far behind, the FTSE's two worst performers after both were downgraded on concerns the economic recovery will be a little slower in coming than previously forecast. Homebuilders/REITS - A prediction by a Bloomberg based survey that UK House Prices will probably fall next year and may take until 2014 to return to levels seen at the peak in 2007, ensured all the corresponding stocks finished in the red. Hammerson down 3.1%, British Land down 2.8%, Land Securities 2.4% and Wolseley finished 1.6% lower.

Commodiites Commentary
Commodities - A bounce from the dollar and further shying away from cyclicals meant it was a mixed day for commodities and the corresponding stocks. Crude down 0.7%, Nickel the worst of the metals down 2.2%, and silver 0.2% lower. On the flipside, Gold put on 0.5% Aluminium+1.5%, Copper +0.8% and Zinc finished 1.8% higher. Miners/Energy - Rio and Billiton down 1.1% and 1% respectively, Anglo eked out the smallest of gains, Xstrata unchanged and the UK Mining sector 0.5% lower.

SPI Commentary
The SPI traded down 57pts or 1.2% to 4701. Open at 4724 with a high of 4724 and a low of 4682. Volume 20,346. Overnight the SPI traded down 7pts to 4694

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 US Tuesday AUS US Wednesday AUS US Thursday AUS US Friday AUS US *Dates are indicative only and may change Existing home sales RBA Dep Governor speaks GDP, S&P/CS Composite 20, Consumer confidence, FHFA house price index Real capital expenditure, real equipment investment, expected capex Personal income, personal consumption, durable goods orders, core PCE deflator, Michigan Cons Conf, new home sales, FOMC minutes New motor vehicle sales

MINI Trading Buy:
United Group (UGLKZC) – Top sector pick
UGL remains RBS Research’s top sector pick. We forecast that growth in the Resources division will lead to rolling EPS upgrades in FY10 and beyond. IPL's confirmation of the A$683m Moranabah project delivery timetable is seen as a positive lead indicator for upgrades. RBS Research target price $16.00, Buy UGLKZC

Source: IRESS

Maintenance of the Moranbah schedule supportive of resources growth With guidance for a flat underlying FY10 NPAT, we still expect a return to double-digit growth in FY11 led by resourcerelated spend that has complimentary benefits for the Rail division. IPL’s confirmation that the Mornabah project schedule (UGL share A$683m) remains unchanged could act as a catalyst for potential consensus forecasts upgrades in FY11. Lower risks plus attractive returns and upside from cyclical recovery We continue to see risk mitigation and risk management in contract pricing as a core UGL competency. With only 8% of the order book effectively exposed to lump sum fixed-price projects, there is lower sector risk than for major peers. A portfolio of engineering and asset services offer attractive EPS growth prospects beyond FY10F and FY09 wins should fuel future earnings growth, supported by the robust order book of A$9.3bn.

Security UGLKZC ExDate 780.04 ExPrc CP Long ConvFac 1 Delta 1 Description MINI Long

MINI Trading Buy:
Brambles (BXBKZG) – Recovery Story
BXB’s AGM trading update last week conmtained few surprises and highlighted that conditions remain soft in BXB's key markets. While conditions may remain tough in the short term, RBS Research maintain a long-term Buy on the back of BXB's leverage to economic recovery. Last week’s pullback to the previous key resitance level at $6.50 is a buying opportunity. Buy BXBKZG

Source: IRESS

BXB’s AGM trading update showed underlying group revenue down 3% on the pcp, with CHEP and Recall both recording 3% declines. Given the weak economic conditions through the period to October we think this was not a bad outcome. Outlook commentary suggests conditions remain weak with BXB yet to see a pickup in activity in its key US and European markets. CHEP With a 5% decline in revenue, the CHEP Americas business was slightly weaker than expected. A soft US market was the primary driver, with management now estimating pallet issues in the US will be 3% below FY09. CHEP EMEA declined 1% (+1% ex-autos), while CHEP Asia Pacific increased 2% (+4% exautos) reflecting the better economic environment in the region. Buy at the bottom for longer-term upside RBS retain long-term Buy rating. We think the BXB business will prove itself over time and see sentiment returning as a pickup in the economic environment feeds through to earnings growth. Executing on the US will be key. Target price $7.51. RBS MINIs over BXB
Security BXBKZG BXBKZP BXBKZR ExPrc 382.1 981.09 911.27 Stop Loss CP Long Short Short ConvFac 1 1 1 Delta 1 1 1 Description MINI Long MINI Short 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

Security QBESZX ExDate 4-Feb-19 ExPrc 1140.01 CP Call ConvFac 1 Delta 1 Description Self Funding Instalment

Security QBEKZF QBEKZK QBEKZL QBEKZR QBEKZS ExPrc 1219 1124.7 1792.43 3147.08 3376.24 Stop Loss CP Long Long Long Short Short ConvFac 1 1 1 1 1 Delta 1 1 1 1 1 Description MINI Long MINI Long MINI Long MINI Short MINI Short

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

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

MINIs approaching stop loss
Underlying WDC NCM BHP WPL RIO MINI Code WDCKZT NCMKZT BHPKZY WPLKZP RIOKZT MINI Type Short Short Short Short Short Strike $14.59 $41.76 $47.58 $58.89 $85.62 Stop Loss $13.14 $37.62 $42.88 $53.04 $77.13 Share Price $ $ $ $ $ 12.69 36.01 40.85 50.10 72.60 Approx. MINI Value $ $ $ $ $ 1.90 5.75 6.73 8.79 13.02 Share: Stop Loss 3.5% 4.5% 5.0% 5.9% 6.2%

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

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

The information contained in this report has been prepared by RBS Equities (Australia) Limited (“RBS”) (ABN 84 002 768 701) (AFS Licence No 240530) (“RBS Equities”) and has been taken from sources believed to be reliable. RBS Equities does not make representations that the information is accurate or complete and it should not be relied on as such. Any opinions, forecasts and estimates contained in this report are the views of RBS Equities at the date of issue and are subject to change without notice. RBS Equities and its affiliated companies may make markets in the securities discussed. RBS Equities, its affiliated companies and their employees from time to time may hold shares, options, rights and warrants on any issue contained in this report and may, as principal or agent, sell such securities. RBS Equities may have acted as manager or co-manager of a public offering of any such securities in the past three years. RBS Equities’ affiliates may provide, or have provided banking services or corporate finance to the companies referred to in this report. The knowledge of affiliates concerning such services may not be reflected in this report. This report does not constitute an offer or invitation to purchase any securities and should not be relied upon in connection with any contract or commitment. RBS Equities, in preparing this report, has not taken into account an individual client’s investment objectives, financial situation or particular needs. Before a client makes an investment decision, a client should, with or without RBS Equities’ assistance, consider whether any advice contained in this report is appropriate in light of their particular investment needs, objectives and financial circumstances. It is unreasonable to rely on any recommendation without first having consulted with your adviser for a personal securities recommendation. This information contained in this report is general advice only. RBS Equities, its officers, directors, employees and agents accept no liability for any loss or damage arising out of the use of all or any part of the information contained in this report. This Information is not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. If you are located outside Australia and use this Information, you are responsible for compliance with applicable local laws and regulation. This report may not be taken or distributed, directly or indirectly into the United States, or to any U.S. person (as defined in Regulation S under the U.S. Securities Act of 1993, as amended. The warrants contained in this report are issued by RBS Group (Australia) Pty Limited (ABN 78 000 862 797, AFS Licence No. 247013). The Product Disclosure Statements relating to these warrants are available upon request from RBS Equities or on our website www.rbs.com.au/warrants © Copyright 2009. RBS Equities. A Participant of the ASX Group.

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