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. This material has not been reviewed by Egoli.
| Global Market Action |
Scoreboard, Commentary |
| Aussie Market Action |
SPI Comment, Events & Dividends |
| SUN (SUNKZL) |
MINI Investment Buy - The outlook is bright |
| TLS (TLSKZD) |
MINI Trading Buy - RBS trading buy |
| NAB (NABKZS) |
MINI Trading Update - More tax liability? |
United States Commentary
A decent start to the quarter in the US with a flurry of economic data the focus. While still not outstanding, the focus was on the direction of the data, with both Manufacturing and Pending Home Sales heading in the right direction. Stocks advanced, Dow +57 pts or +0.7% and S&P 500 +0.4%, while Treasuries retreated on hopes the worst of the recession is behind us.
Eco - A plethora of eco data last night, the main focus on the ISM Manufacturing, at 44.8 from 42.8 prev, as the US shrank at slowest pace since August 2008, and as Pending Sales of existing homes advanced for a fourth month, up 0.1% vs 0% forecast, with investors taking those as further signals of a stabilising economy. Other data, Weekly Mortgage Appl'ns -18.9% from +6.6%, ADF Employment - 473k from -485k, Construction Spend -0.9% from +0.6%.
Consumer Discr - Kraft topped Dow gainers, up 5%, after advising it may expand its factories in Russia, where sales have been climbing on higher demand, seeing continuous double-digit growth. Yum! Brands, the owner of KFC and Taco Bell, gained 5% after a broker upgrade on expectations of improving business in China and the US will accelerate growth in the 2H.
Beverages - Constellation Brands posted the best gains on the S&P 500, adding 7.3%, after the world's largest wine company said first-quarter profit was slightly above analysts forecasts for the period. Coca-Cola also strong, up 2.5%, after it announced construction of a new bottling plant in the north China/Mongolian region.
Financials - AIG fell 22%, falling for the second day after saying that valuation declines on credit-default swaps sold to European banks could have a "material adverse effect" on earnings. Its shareholders have approved a 1-for-20 reverse stock split to prop up the share price of the insurer as it continues to shed assets and spin off subsidiaries in an effort to repay gov't funds.
United Kingdom & Europe Commentary
The FTSE closed 2.2% or 92pts as oil rebounded helping commodity stocks bounce and giving investors hope that the recession may be nearing the end. The FTSE Eurofirst 300 added 1.8%, the DAX was up 2% and the CAC climbed 2.4%.
UK Banks - Banks were broadly higher as investor confidence grew. Barclays, HSBC, Standard Chartered and RBS rose 1.4% - 3.5%. Man Group however fell 5.6% after going ex-div.
Euro Banks - Commerzbank soared 18.6% after the ECB said it no objections to a German 'bad bank'. The sector was generally stronger with BNP up 2.5%, Swedbank added 3.6% and UniCredit was 1.8% higher.
Retail - Marks & Spencer added 3.8% as analysts nudged up their full-year profit forecasts for the high street retailer after it posted a smaller than expected decline in first-quarter underlying sales. Peer Next was also firmer, climbing 3.9%.
Retail - German retail sales posted their third consecutive monthly increase, up 0.4% in May from April. Metro the country’s largest retailer, rose 6.2% and Carrefour, the French retail group, climbed 5.7% after some positive revenue numbers.
Builders - Housebuilder Taylor Wimpey, up 7.5%, was among the best performers in a strong London market on Wednesday after a highly regarded building analyst upgraded his rating on the company and larger rival Persimmon, up 1.5%, to “buy”.
Resources Commentary
Miners - Vedanta was the biggest blue-chip riser, up 9.9%, after news they boosted the size of its share buy-back programme by 40% to $350 mn. Other miners also bounced with stronger metal prices and another positive Chinese PMI number. BHP climbed 4.5%, Rio was up 2.5%, Anglo added 3.9% and Xstrata jumped 5.5%.
Energy - Oil majors added the most points to the FTSE 100 index, holding on to gains despite crude prices reversing earlier gains and falling below $70 a barrel after U.S. government data showed increases in U.S. fuel inventories. BP, Shell, BG Group, Tullow Oil and Cairn Energy rose between 0.4% and 4.2%.
SPI Commentary
The SPI traded down 40pts or 1.03% to 3861. Open at 3870 with a low of 3828 and a high of 3871. Volume 32,218. Overnight the SPI trading up 16pts or 0.41% to 3877.
Upcoming Economic Events
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Monday
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Tuesday
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AUS - HIA new home sales, RBA private sector credit
US - S&P/CS composite 20, Chicago PMI
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Wednesday
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AUS - AIG/PWC manufacturing PMI, nominal retail sales, building approvals
US - TCB consumer confidence, Milwaukee NAPM, ADP employment report
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Thursday
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AUS - Trade balance
US - Construction spending, vehicle sales, non-farm payrolls, average hourly earnings, unemployment rate
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Friday
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AUS - AIG/CBA services PSI
US - Factory orders, Independence day holiday
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*Dates are indicative only and may change
Upcoming Dividends
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ExDivDate
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Security
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Description
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Div (c)
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Yield
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Frk(%)
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PayDate
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MINI Investment Buy:
Suncorp Metway (SUNKZL) – The outlook is bright
RBS have re-initiated coverage on SUN with a buy recommendation and a $7.35 target price. The stock is also showing a strong technical set up for a breakout of $6.75 which would be the entry signal. The SUN investment case continues to be dominated by the market’s focus on its banking operations. RBS Research believe the best outcome for SUN shareholders would be a full divestment of its banking operations. The stock is trending up and looks like good value at current levels. Buy SUNKZL
From a low in March 2009, SUN has formed an uptrend and is testing resistance around $6.75 where it gapped down in
February and has found resistance ever since. A breakout to the upside of $6.75 would be a bullish sign and would be a
good entry signal
- RBS has re-initiated SUN with a buy recommendation and $7.35 target price
- SUN has announced it has accepted offers to repurchase A$405m of subordinated debt across various issues for cA$310m. This has resulted in a non-recurring after-tax profit of cA$67m in FY09F. SUN's banking and insurance capital ratios remain ahead of internal and minimum regulatory requirements.
- SUN has appointed a new CEO, Patrick Snowball. Snowball has a strong insurance background from 19 years at Aviva UK. This removes some uncertainty for SUN
Buy SUNKZL
| Security |
ExPrc |
Stop Loss |
CP |
ConvFac |
Delta |
Description |
| SUNKZL |
392.77 |
433 |
Long |
1 |
1 |
MINI Long |
| SUNKZM |
455.38 |
501 |
Long |
1 |
1 |
MINI Long |
| SUNKZP |
1097.43 |
987 |
Short |
1 |
1 |
MINI Short |
| SUNKZQ |
895.83
|
846 |
Short |
1 |
1 |
MINI Short |
MINI Trading Buy:
Telstra Corporation (TLSKZD) – RBS Short term trading buy
RBS currently have a short term trading buy on Telstra for the period through to Telstra's FY09 result due on 13 August. We consider the high-water mark of regulatory risk has been reached, and the trading case now rests on the relative reliability of FY09F earnings and dividend of 14cps, which offers a 9% yield. The recent pullback provides a good entry opportunity with the stock having made a higher low in May/June. Indicative close range is $3.55-3.62. Buy TLSKZD
Relative reliability of FY09 earnings and dividend
RBS Research expect Telstra’s 2H09 to show good wireless broadband growth and erosion to ULL to have slowed in 2H09, although the recessionary impact on revenue has probably increased in 2H09 on 1H09. Some incremental positive surprise may be in Next IP data product revenue, which appears to have held up well in the business and enterprise segment. We estimate 2H09 revenue growth is running below 3%, which would bring in annual growth at the low end of the 3-4% guidance range. Expect costs to remain relatively high in 2H09 due partly to transformation issues, but sufficiently under control to allow the company to deliver the low end of its target EBIT growth of 3- 5%. The cost issues are already expected by the market and so delivery of EBIT within guidance would be a net positive.
RBS Minis over TLS
| Security |
ExPrc |
Stop Loss |
CP |
ConvFac |
Delta |
Description |
| TLSKZC |
257.31 |
|
Long |
1 |
1 |
MINI Long |
| TLSKZD |
285.54 |
|
Long |
1 |
1 |
MINI Long |
| TLSKZP |
428.75 |
|
Short |
1 |
1 |
MINI Short |
| TLSKZQ |
398.37
|
|
Short |
1 |
1 |
MINI Short |
RBS Warrants over TLS
| Security |
ExDate |
ExPrc |
CP |
ConvFac |
Delta |
Description |
| TLSIZM |
03-Dec-09 |
250 |
Call |
1 |
0 |
Rolling Instalment |
| TLSIZQ |
14-Jun-10 |
250 |
Call |
1 |
0 |
Rolling Instalment |
| TLSIZR |
14-Jun-10 |
225 |
Call |
1 |
0 |
Rolling Instalment |
| TLSIZW |
03-Dec-09 |
250 |
Call |
1 |
0 |
Rolling Instalment |
| TLSIZY |
03-Dec-09 |
345 |
Call |
1 |
0 |
Rolling Instalment |
| TLSIZZ |
03-Dec-09 |
300 |
Call |
1 |
0 |
Rolling Instalment |
| TLSJZA |
30-Jul-09 |
350 |
Call |
1 |
0 |
HOT Instalment |
| TLSJZB |
29-Oct-09 |
250 |
Call |
1 |
0 |
HOT Instalment |
| TLSSZX |
04-Feb-19 |
191.7 |
Call |
1 |
1 |
Self Funding Instalment |
MINI Trading Update:
Natinal Australia Bank (NABKZS) – Additional tax liability?
NAB may have an additional tax liability of A$367-615m depending of the determination by the ATO. The liability represents a 10-15bp drag on tier-1 capital. NAB also has earnings risks from the UK operations and its CDO exposures which are the main reason for RBS Research Sell recommendation. RBS research have a target price of $14.98 on NAB which is 33% below the current share price. Play downside thorugh NABKZS
- NAB has an ongoing dispute with the ATO over the tax deductability of various elements of its exchangeable capital units
- The current assessment is A$570m (post tax) or A$615m (pre tax). NAB has current objections against these assessments.
- An unfavourable tax ruling for SGB in May has led NAB to review its current assessment. NAB believes that under general deductability (similar to the SGB tax ruling), its liability would be A$367m (A$347m post tax). However, under section 4A of the tax code its liability would be as disclosed A$615m (A$570m post tax).
- NAB expects an ATO determination within FY09.
- The outcome is unlikely to have an impact on cash earnings but will have a capital impact due to the writedown of the tax asset (A$309m) as well as a reported profit impact for any amount not covered by the tax asset
- This is likely to 10-15bp impact on tier-1 capital, in the view of RBS Research
RBS warrants over NAB
| Security |
ExDate |
ExPrc |
CP |
ConvFac |
Delta |
Description |
| NABIZQ |
14-Jun-10 |
1300 |
Call |
1 |
0.000 |
Rolling Instalment |
| NABIZR |
3-Dec-09 |
1700 |
Call |
1 |
0.000 |
Rolling Instalment |
| NABIZW |
3-Dec-09 |
1400 |
Call |
1 |
0.000 |
Rolling Instalment |
| NABIZZ |
3-Dec-09 |
1850 |
Call |
1 |
0.000 |
Rolling Instalment |
| NABJZA |
30-Jul-09 |
2250 |
Call |
1 |
0.000 |
Hot Instalment |
| NABJZB |
30-Jul-09 |
2500 |
Call |
1 |
0.000 |
Hot Instalment |
| NABJZD |
29-Oct-09 |
1000 |
Call |
1 |
0.000 |
Hot Instalment |
| NABJZE |
29-Oct-09 |
1500 |
Call |
1 |
0.000 |
Hot Instalment |
| NABJZF |
29-Oct-09 |
1800 |
Call |
1 |
0.000 |
Hot Instalment |
| NABJZG |
28-Jan-10 |
1000 |
Call |
1 |
0.000 |
Hot Instalment |
| NABJZH |
28-Jan-10 |
1600 |
Call |
1 |
0.000 |
Hot Instalment |
| NABJZI |
28-Jan-10 |
2000 |
Call |
1 |
0.000 |
Hot Instalment |
| NABSZX |
4-Feb-19 |
958.27 |
Call |
1 |
0.000 |
Self Funding Instalment |
| NABWZA |
29-Oct-09 |
2600 |
Call |
4 |
0.063 |
Trading Call Warrant |
| NABWZB |
29-Oct-09 |
2500 |
Call |
4 |
0.081 |
Trading Call Warrant |
| NABVZL |
30-Jul-09 |
2200 |
Call |
4 |
0.153 |
Trading Call Warrant |
| NABVZM |
30-Jul-09 |
1900 |
Call |
4 |
0.246 |
Trading Call Warrant |
| NABVZN |
27-Aug-09 |
2100 |
Call |
4 |
0.186 |
Trading Call Warrant |
| NABVZO |
24-Sep-09 |
2300 |
Call |
4 |
0.119 |
Trading Call Warrant |
| NABVZV |
30-Jul-09 |
2100 |
Put |
4 |
-0.048 |
Trading Put Warrant |
| NABVZW |
27-Aug-09 |
1800 |
Put |
4 |
-0.006 |
Trading Put Warrant |
| NABVZX |
24-Sep-09 |
2000 |
Put |
4 |
-0.047 |
Trading Put Warrant |
| NABVZY |
24-Sep-09 |
2200 |
Put |
4 |
-0.102 |
Trading Put Warrant |
| NABVZZ |
29-Oct-09 |
1900 |
Put |
4 |
-0.039 |
Trading Put Warrant |
| NABWZP |
29-Oct-09 |
2400 |
Put |
4 |
-0.147 |
Trading Put Warrant |
RBS MINI’s over NAB
| Security |
ExPrc |
Stop Loss |
CP |
ConvFac |
Delta |
Description |
| NABKZL |
1350.56 |
|
Long |
1 |
1 |
MINI Long |
| NABKZM |
1189.93 |
|
Long |
1 |
1 |
MINI Long |
| NABKZP |
4012.39 |
|
Short |
1 |
1 |
MINI Short |
| NABKZQ |
3242.39 |
|
Short |
1 |
1 |
MINI Short |
| NABKZS |
2739.43 |
|
Short |
1 |
1 |
MINI Short |
For Further Information on RBS Warrants and Structured Products
please do not hesitate to contact us! |
| Robbie Taylor |
Ben Smoker |
|
(02) 8259 2018
|
(02) 8259 2085 |
|
robbie.taylor@rbs.com
|
ben.smoker@rbs.com |
|
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| RBS Equities Australia Limited ABN 84 002 768 701 | AFS Licence 240530 | Participant of ASX Group |
|
The information contained in this report has been taken from sources believed to be reliable. RBS Equities Australia Limited (ABN 84 002 768 701, AFS Licence No. 240530) ('RBS Equities') does not represent that the information is accurate or complete and it should not be relied on as such. Any opinions expressed reflect RBS Equities' judgment at this date and are subject to change. RBS Equities and/or its affiliated companies may make markets in the securities discussed. Further RBS Equities and/or its affiliated companies and/or their employees from time to time may hold shares, options, rights and/or warrants on any issue included 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 the 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 whatsoever. RBS, 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's assistance, consider whether any advice contained in the 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 spoken to your adviser for a personal securities recommendation. For clients in the USA, RBS Incorporated does not accept responsibility for the contents of this report. This report is distributed in the U.S. solely to 'major institutional investors' as defined in Rule 15a-6 (US Securities Exchange Act 1934). Each US recipient by its acceptance hereof warrants that it: is a 'major institutional investor', as defined; understands the risks involved in dealing in the Securities or any related investments or instruments; and shall not distribute nor provide this report, or any part thereof, to any other person. Any US recipient wishing to effect a transaction in any security mentioned herein, or any related investment or instrument, should do so by contacting RBS Incorporated and not RBS Equities Australia Limited. For clients in the UK, RBS Equities (UK) Limited accepts responsibility for the contents of this research material. The warrants mentioned in this report are issued by RBS Australia Limited (ABN 78 000 862 797, AFS Licence No.247013).
The Product Disclosure Statement ("PDS") relating to these warrants is available upon request from RBS (1800 450 005) or on our website www.abnamro.com.au/warrants/circulars.asp. 2004 RBS Equities Australia Limited (ABN 84 002 768 701) A Participant of the ASX Group.
