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

The Round Up
11 December 2009
Issue No. 237
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
NWS (NWSKZJ) MINI Trading Buy USD rebound, more value in TV
QAN (QANKZK) MINI Trading Buy – Strong load factors
ASX (ASXKZI) MINI Trading Buy – Strong November trading
Round Up Corner Banks Update – ANZ,CBA,NAB,WBC

Equities

Move Last % Move Range Volume

ASX 200 -31.2 4606.7 -0.7% -31 to -31.u.c $5.5 bn(A)

SPI - yesterday -16.0 4614.0 -0.3% -34 to +26 25,427(A)
Dow Jones +68.8 10405.8 +0.7% -1 to +108 Avg
S&P 500 +6.4 1102.4 +0.6% +3 to +10 Avg
Nasdaq +7.1 2190.9 +0.3% +3 to +19 Low
FTSE +40.5 5244.4 +0.8% -9 to +51 Avg

Commodities

Move Last % Today % Past Month

Oil-WTI spot -0.19 70.48 -0.3% -10.8%
Gold Spot +2.85 1131.45 +0.3% +2.4%
Nickel (LME) -13.34 734.51 -1.8% -3.4%
Aluminium (LME) -0.45 98.24 -0.5% +12.5%
Copper (LME) -6.11 307.12 -2.0% +4.1%
Zinc (LME) -1.89 101.45 -1.8% +4.7%
Silver +0.03 17.41 +0.2% +0.3%
Sugar +1.11 22.69 +5.1% +6.4%
Dual Listed Companies (DLC’s)

Move %Move Last AUD Terms Diff to Aus

NWS (US) +0.21 +1.4% 14.81 16.15 +38.4 c
RIO (UK) -45.0 p -1.4% £30.95 54.95 -1485.4 c
BLT (BHP UK) -0.5 p -0.0% £18.500 32.84 -711.7 c
BXB (UK) +8.8 p +2.5% £3.523 6.25 -2.7 c

American Depository Receipts (ADR’s)

Move %Move Last AUD Terms Diff to Aus

BHP (US) -0.39 -0.5% 73.17 39.91 -5.5 c
AWC (US) +0.07 +1.2% 5.76 1.57 +2.6 c
TLS (US) +0.27 +1.7% 15.90 3.47 -0.1 c
ANZ (US) +0.21 +1.1% 19.80 21.60 +9.7 c
WBC (US) +2.56 +2.4% 109.36 23.86 +8.7 c
NAB (US) +0.38 +1.5% 25.74 28.08 +7.6 c
LGL (US) -0.35 -1.2% 29.59 3.23 +3.8 c
RMD (US) +0.80 +1.5% 52.77 5.76 +3.6 c
JHX (US) +0.96 +2.6% 37.72 8.23 +5.9 c
PDN (CAN) -0.05 -1.3% 3.75 3.89 -8.8 c

Overnight Commentary
United States Commentary
Despite the weekly dose of employment data providing little to no comfort around the health of the US labour market,
cyclicals, retail and media all did well. With 30mins to trade, the Dow is off highs but up 57pts, the S&P up 0.4% and the
Nasdaq 0.2% higher.
Media - Publisher Gannet Co. up nearly 9% and the S&P500's best, after the groups CFO said they will likely beat the
street with 4Q numbers on slowing declines in advertising revenue. The rest of the space came along for the ride, Time
Warner up over 4%, Walt Disney up 2.4%(one of the Dow's best) and Newscorp trading 2% higher.
Resources - Putting aside a mixed night for the commodities, resource/energy stocks were a feature in the plus column.
Alcoa up over 3% and the Dow's best, NationalOilwell 5% higher and the S&P100's top performer, Halliburton up 3% and
Schlumberger 2.1% higher.
Eco - Trade Balance for October -$32.9bln vs -$36.8bln. Initial Jobless Claims 474K vs 455K expected and up on last
weeks 477K. Continuing Claims 5157K vs 5450K expected.
Consumer - Coca-Cola up 1.6%(biggest pt contributor on the Dow) and along the way hitting itts highest level since 2008
on news the group had settled on a pricing dispute with Costco.

United Kingdom & Europe Commentary

The FTSE rose for the first time in 4 days as banks rebounded post the UK pre-budget release. The FTSE Eurofirst 300
was up 1% whilst the DAX and CAC both added 1.1% with Greek bank concerns fading.

UK Banks - Lloyds, up 6.5%, was the best on the FTSE100 ahead of their rights issue tomorrow. Standard Chartered
added another 3.3% after their positive trading update the night before whilst Barclays rose 4.6%, RBS climbed 3.4% and
HSBC ended 2% higher.

Euro Banks - Comments from the EU suggesting Greek state bankruptcy was out of the question saw the sector bounce.
Greek banks were strong whilst amongst the majors Deutsche Bank climbed 1.5%, Commerzbank was up 1%, BNP rose
0.75% and SocGen ended 2.1% higher.

Eco - As expected the BoE kept rates unchanged at 0.5% and said that the target for asset purchase program remained
unchanged with a £200bn quantitative easing.
Consumer - Cadbury rose 0.8% after rumours that Hershey was close to making an offer. In the retail sector, Inditex
advanced 3.6% after the Spanish owner of the Zara chain reported strong earnings for the first nine months of the year
thanks to growing sales in Asia.

Commodites Commentary
Miners / Energy - Weaker commodity prices hit the miners and the oil majors. BHP was flat but Rio fell 1.4%, Anglo
dropped 0.3% and Xstrata was the worst on the FTSE100 off 2.1%. Amongst the energy stocks BP and Shell were both
off 0.5%.

SPI Commentary
The SPI traded down 18pts or 0.3% to 4614. Open at 4632 with a high of 4656 and a low of 4593. Volume 25,547. Overnight the SPI
traded up 24 to 4638.

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 Aus ANZ job ads

US
Tuesday AUS Aus NAB business confidence, Aus current account balance
US US consumer credit
Wednesday AUS Aus trade balance, Aus housing finance
US
Thursday AUS Aus unemployment rate
US US wholesale inventories
NZ NZ RBNZ cash rate decision
Friday AUS
US US trade balance, US retail sales
*Dates are indicative only and may change
MINI Trading Buy:

News Corp (NWSKZJ) – USD rebound, more value in TV

NWS share price has bounced a dollar this week from low $15 to last closing price of $16.14. NWS remains a key RBS
Research conviction buy and believe it could break this trading range on it’s 3rd attempt on market upgrades to earnings.
NWS has been weighted down on the falling USD index of late. The stock was well supported at this level and with a
stabilising/rising USD, NWS could break strongly from this level. RBS Research believes that the introduction of
retransmission fees will add a substantial uplift to the TV revenues and valuation. RBS Research has a $19.92 Target
Price on NWS which represents a healthy 31.4% upside. Get Long NWS with NWSKZJ.

Source: IRESS

Retransmission fees could be a share-price catalyst

News Corp has indicated that it intends to try to start charging the cable, satellite and IPTV operators for the right to
retransmit the Fox Network to their pay TV customers. We estimate potential additional revenue and operating profit for
News Corp of US$500m+ over a threeto four-year time-frame, which could help drive News Corp’s TV operating profit
back up to US$1bn by FY14F (from only US$174m in FY09). etransmission revenues will take time to ramp up as
agreements come up for renewal, but the announcement of an initial deal could be a catalyst for an overall re-assessment
of the valuation of News Corp’s TV assets.

Retransmission fees could add US$3.2bn+ to TV valuation

We currently value News Corp’s TV operations at US$3.8bn (8.5x FY11F EBITDA). We estimate that retransmission
revenues of cUS$500m per annum would add US$3.2bn to our TV DCF valuation (equivalent to US$1.25 or A$1.40 per
share), with further upside if News Corp is able to achieve a rate per subscriber above that of CBS.

Buy rating and A$19.92 price target retained

We believe guidance for FY10 operating profit growth of ‘high single to low double digit’ is conservative and see potential
for ongoing upgrades as the year progresses (we forecast growth of 16%). The stock looks cheap on both peer multiple
and a sum-of-the-parts basis, with possible catalysts around retransmission deals and eventual capital management.

RBS MINIs over UGL

Security ExPrc Stop Loss CP ConvFac Delta Description

NWSKZJ 1157.22 1272 Long 1 1 MINI Long
NWSKZI 783.16 861 Long 1 1 MINI Long
MINI Trading Buy:

Qantas (QANKZK) – Strong load factors

QAN's October operating statistics highlight strong load factors and a further moderation in yield declines. With
price increases appearing sticky for Domestic and less discounting on offer for International flights, we expect
further yield improvement (and hence earnings growth) over coming months. Buy maintained.

Buy new MINI QANKZK

Source: IRESS

Load factors show further strengthening…

October group load factor increased 3.4ppt to 83.3%, driven by stronger demand and ongoing capacity management.
Jetstar Domestic continues to perform well, recording both capacity and load factor growth in the period (+1.0% and
+1.9ppts respectively) while effective capacity management (ASKs -4.6%) drove a 2.7ppt increase in loads (to 85.0%) for
Qantas. International operations also saw solid load factor growth. Qantas’s load factor grew 5.4ppt on the back of a
sharp 11.5% decrease in capacity, while Jetstar continues to grow with ASKs up 45.5% and load factor up 2.0ppt (to
76.6%). With load factors at or near record levels for both sets of operations, and economic conditions recovering (while
capacity still remains constrained), we expect similarly strong figures over coming months.

Strong loads to lead earnings recovery; Buy maintained

Load factor improvement generally leads yield recovery. With loads now strong, we expect yield improvement to drive
earnings recovery and, hence, share price performance over the next 12 months. With QAN now trading at 1.1x P/NTA
(vs 1.3x historical average), RBS Research maintain a Buy recommendation in the belief that QAN presents solid value to
investors.

RBS MINIs over QAN

Security ExPrc Stop Loss CP ConvFac Delta Description

QANKZK 200 220 Long 1 1 MINI Long
MINI Trading Buy:

Aust Securities Exchange (ASXKZI) – Strong November trading

RBS Research have a Buy recommendation on ASX with a 12mth Target Price of $40. Yesterday ASX released
November trading activity showing a surprisingly strong rebound to trading volumes in cash and deriviative
products. Cash equity volumes were in line with RBS Research’s forecast at 541k/day (up 31% on the pcp), while
futures & options volumes were up a sizeable 47% on an average daily basis. Furthermore, both primary and
secondary issuances remained healthy.

Get long ASX with ASXKZI for a valuation uplift to Target Price of $40.

Source: IRESS

Cash equities – value traded up 19% on the pcp at A$5.1bn

Total average daily volume traded was 541k in November, up 31% on the pcp. The daily average value traded was up
19% on the pcp to A$5.1bn (although this is down on the A$5.4bn in October). Overall we view these as strong numbers
and remain confident that our forecast of A$6.0bn in average value traded for FY10 remains intact.

Futures & options – November volumes up 47% on the pcp

November was an exceptionally strong month for futures & options with average daily volumes up 47% on the pcp.
Management attributed this strength to strong trading in 3-year treasury bond futures, as the contract has become the
focal point of liquidity across the yield curve. The uncertainty around future cash rates contributed to the volumes, as did
the high level of Commonwealth Government bond issuance (A$4.8bn).

ASX last traded $33.33, BUY ASXKZI for 1-for-1 upside towards RBS Target Price of $40.00

RBS SFIs over ASX

Security ExPrc Stop Loss CP ConvFac Delta Description

ASXKZI 2101.11 2415 Call 1 1 MINI Long
RBS Round Up Corner:

Banks Sector Update – ANZ,CBA,NAB,WBC

Post the bank reporting season, CBA trading update and ANZ, NAB and WBC going ex dividend, the banks have
underperformed. RBS Research believe banks will wait until they understand how businesses are performing post
Christmas before poviding further upbeat commentary. This is likely to weigh on relative share price performance in the
short term, however the BDD cycle seems to be peaking and any pullbacks in the banks into the end of the year should
be used as a buying opportunity.

Sector performance
Banks' PE relative (to All Ords) is back down to 86%, having underperformed the market over the last month. While this is
above the long-run average, given short-term structural advantages, we believe the sector can trade at a premium. The
banks are now trading at an average PE of 13.5x FY10F on IBES consensus.

Investment view – RBS Research prefer ANZ and NAB to WBC and CBA
As a result of a normalising earnings cycle, we believe relative valuation will again play a significant role in the relative
performance of stocks in the sector. RBS believe ANZ and NAB still have the greater share price upside potential over
the next six to 12 months, given their 1-2 PE point discounts.
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
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

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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