Daily Bulletin: Australia

Equity | Australia
24 October 2011
Produced and issued by: RBS Equities (Australia) Limited
Daily Bulletin
IN BRIEF
A summary of todays research
2
AUSTRALIA
STRATEGY & ECONOMICS
Australia Strategy High-conviction calls Weekly topical thoughts Economics Weekly Debt comparisons Australia & NZ versus the world
Alva Devoy (+61 2 8259 5831) 3 11 Kieran Davies (+61 2 8259 5171) 23
INDUSTRIALS
Resmed (A$2.95) Hold TP A$2.98 Pressure set to increase Primary Healthcare (A$3.15) Hold TP% A$3.20 One overhang lifted Australia Small/Mid Caps Weekly Informer #38, 2011
Dr Derek Jellinek (+61 2 8259 5848) 37
Dr Derek Jellinek (+61 2 8259 5848)
45
TP%
Julian Guido (+61 2 8259 5838)
49
RESOURCES
Woodside Petroleum (A$33.60) Buy TP& A$39.00 Solid 3Q, but Shell overhang remains
Jason Mabee, CFA (+61 2 8259 5380) 65
TP&
GLOBAL
Global Views Quick thoughts on EFSF and the need for Collateral guarantees
Equity Research 69
AGMs
Company BEN ORG WTF
Source: IRESS
Where Bendigo Syd Bris
Time 2.00pm 1.30pm 2.30pm
Airlines September traffic (relevant to QAN and VBA)* Tiger Airways Thriving in times of recession (relevant to QAN and VBA)* Wynn Macau 3Q11 results in line with estimates (relevant to CWN) Global Action Pack
Andrew Orchard (+852 3988 7191)
71
John Rachmat (+65 6518 7996)
87
EX DIVs
Code HVN CLH 2H 2H DPS 6.0c 3.1c Frnkd 100% 100% Ex date 28 Oct 7 Nov
Philip Tulk (+852 3988 7189)
101
1H = interim, 2H = final; SP = special Source: IRESS
RBS Research
105
TRADING ALERTs
Code (ST rec) Open Open date price Indictv close Exp date AIO (Buy) 22 Aug 1.56 1.64-1.67 21 Oct Catalyst: Resolution of wage negotiations TEN (Sell) 27 Sep 0.87 0.81-0.83 27 Nov Catalyst: 20 October trading update
DATABASE
Company financial forecasts Sector valuation aggregates Price performance
Thiva Nagaratnam (+61 2 8259 5373) 115 123 127
* Extract. For further details please refer to our website (http://research.rbsm.com/Research).
RBS Equities (Australia) Limited

ABN 84 002 768 701, AFS Licence 240530
Level 29, RBS Tower, 88 Phillip Street Sydney NSW 2000, Australia http://research.rbsm.com
= ex-100 company
%&
= result = flashnote Rec = recommendation TP = target price = change in EPS or DPS of at least 5%, or any change in recommendation or target price.
Important disclosures can be found in the Disclosures Appendix.
IN BRIEF STRATEGY & ECONOMICS

Australia Strategy High-conviction calls
Alva Devoy (+61 2 8259 5831) 3
Since inception, our Mid-cap resources long recommendations have outperformed funding source recommendations by a cumulative 80%. Last week our analyst, Sam Berridge, recommended long Regis Resources funded out of Kingsgate Consolidated. To date this call has generated alpha of 4.4%.
Weekly topical thoughts
11
The RBA has held its nerve through powerful cross-currents in 2011, but has made room for a rate cut at its 1 November meeting. We think the impact on the domestic market will be limited unless a sustained rate-cutting cycle is entered, which itself is unlikely outside of a fully-fledged euro-zone crisis.
Economics Weekly
Kieran Davies (+61 2 8259 5171)
23
We have compared gearing in Australia and New Zealand with gearing in the major advanced economies plus China. For economy-wide gearing, Japan takes top honours by an enormous margin, followed by Europe and the US. Australia and New Zealand are at the bottom, while China has the lowest gearing ratio of the lot.
INDUSTRIALS
Resmed (A$2.95) Hold TP A$2.98
Dr Derek Jellinek (+61 2 8259 5848) 37 We believe the progression of Medicare competitive bidding looks to change OSA market dynamics, as DMEs focus on driving greater price concessions and using lower priced products/manufacturers, while the price differential with private insurers diminishes, intensifying margin headwinds for RMD. Hold.
Primary Healthcare (A$3.15) Hold TP% A$3.20
Dr Derek Jellinek (+61 2 8259 5848)
45
While PRY's debt refinance has done little to our estimates, it has alleviated much of the uncertainty around its capital structure in tight credit markets. However, with soft profitability metrics, aggressive accounting and trading at 14x FY12F earnings, the stock looks to us fully valued. Hold maintained.
Australia Small/Mid Caps
Julian Guido (+61 2 8259 5838)
49
The Small Ords (-2.5%) underperformed the All Ords (-2.3%) by 23bp for the week, with the Small Resources down 4.4%. The Small Ords is at a premium to the S&P/ASX 100 at a PE relative of 114.0%, above the 99.5% eight-year average.
RESOURCES
Woodside Petroleum (A$33.60) Buy TP& A$39.00
Jason Mabee, CFA (+61 2 8259 5380) 65 WPL delivered a solid 3Q production result. Market sentiment remains weighed down as the November escrow period draws closer and uncertainty over key growth projects is worrying investors. In our view, Shell is likely to extend the current escrow period and this should help to kick up the share price. Buy.
GLOBAL
Global Views
Equity Research 69 Some interesting spanners are being thrown in the plans for the EFSF to be made larger via the insurance model. According to a story from the credible source of the WSJ European correspondents, the Euro leaders are looking at providing collateral to back up bond issues of troubled countries. Aussie Alpha comment: Ahead of the 23 October meeting of European leaders, mixed messages are emerging in terms of a possible resolution to the European crisis. European lawyers have apparently been warned that using the bailout fund to provide direct guarantees violates the EU Treaty, ruling out the Allianz model on providing insurance on a first-loss basis for periphery risk. That's a negative for market sentiment. (Alva Devoy +61 2 8259 5831)
Airlines*
71
This note summarises the latest traffic data from the global industry. Passenger data in September held up well, but red flags abound. Cargo traffic remains soft, usually a precursor to softer travel ahead. RBS analysts globally currently prefer LCCs to network carriers in this volatile environment for premium travel. Aussie Alpha comment: This is our second monthly collaborative piece on global traffic trends. With trends apparently worsening, we continue to prefer airlines with lower exposure to premium travel . (Mark Williams +61 2 8259 6921)
Tiger Airways*
87
In times of recession consumers generally downgrade to cheaper products. At this time, Tiger Airways, one of the world's lowest-cost carriers, stands to benefit from a volume spurt and falling oil price to boot. Its Australian problem is, in our view, in the process of being resolved, and we reiterate our Buy rating. Aussie Alpha comment: QAN and VBA continue to benefit from Tiger's reduced flying schedule, though it is beginning to again ramp-up operations. The question is just how damaged the Tiger brand is in Australia and how sticky recent market share win by Jetstar and Virgin is. (Mark Williams +61 2 8259 6921)
Wynn Macau
Philip Tulk (+852 3988 7189)
101
Wynn's 3Q11 results were in line with our estimates. We have anticipated a qoq decline due to the strength of Galaxy Macau. Wynn noted that its property is at capacity and growth will likely be achieved through optimizing table utilization. We believe growth will remain a concern in the near term. Hold. Aussie Alpha comment: 3Q11 result note for Galaxy provides a read through for the upcoming Melco Crown result. Melco Crown is 33%-owned by Crown Ltd. (Michael Nolan +61 2 8259 1316)
Global Action Pack

Friday 21 October 2011
RBS Research
105
* Extract. For further details please refer to our website (http://research.rbsm.com/Research).
Daily Bulletin | 24 October 2011
Equity | Australia
21 October 2011
Produced by: RBS Equities (Australia) Limited
Australia Strategy
RBS high-conviction calls
Since inception, our Mid-cap resources long recommendations have outperformed funding source recommendations by a cumulative 80%. Last week our analyst, Sam Berridge, recommended long Regis Resources funded out of Kingsgate Consolidated. To date this call has generated alpha of 4.4%.
Chart 1 : Mid-cap resources sector high-conviction calls alpha
100% 80% 60% 40% 20% 0% -20% -40% -60% -80% -100% Nov-10
Dec-10
Jan-11
Feb-11
M ar-11
Apr-11
M ay-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct -11
Long
Funding source
M id-cap resources alpha
Source: IRESS, RBS
Mid-cap resources sector cumulative return of 80% The Mid-cap resources high conviction calls have returned a cumulative alpha of 80% since inception. Last week our analyst, Sam Berridge, replaced OM Holdings (OMH) with Kingsgate Consolidated (KCN) as the preferred funding source for Regis Resources (RRL). We expect KCN will present a tough quarterly report at the end of October on the back of heavy rains in Thailand, reported as the worst in 50 years. While the worst of the rain appears to have been confined to the tail end of the September quarter, we anticipate the extent of the flooding will have a negative read-through for the December quarter as well. In addition, KCN has not reported receiving its factory license for the Chatree expansion. At the time of the FY11 result, management guidance was that FY12 production guidance would hold as long as the factory license was received by mid-September, so therefore achieving FY12 production guidance will be difficult. Positive research alpha since 5 November inception of market-neutral approach The RBS research team adopted a market-neutral approach to recommending highconviction calls on 5 November 2010 and, since then, the average sector alpha has been a cumulative +16%. The average long recommendation has delivered -4%, outperforming the S&P/ASX 200 Index over the same period (which returned -13%). Meanwhile, fundingsource positions have returned an average of -20%, thus increasing the portfolio alpha. We believe these high-conviction calls are just as relevant for long-only managers, acting to highlight our sector preferences even in down-markets. Changes to RBS high-conviction calls This week there are no changes to the RBS high-conviction calls. Important disclosures can be found in the Disclosures Appendix.
Analyst
RBS Australia Research RBS Equities (Australia) Limited, ABN 84 002 768 701, AFS Licence 240530 Level 29, RBS Tower, 88 Phillip Street, Sydney NSW 2000, Australia http://research.rbsm.com
Table 1 : Banks
Long ANZ Bank (ANZ) Andrew Lyons
1. ANZ's Asian franchise is a key differentiator in a sluggish domestic growth environment, and we believe the group is relatively well positioned on funding in uncertain money markets. 2. ANZ's lower relative exposure to retail banking means it should be less affected by the volume, margin and fee headwinds we believe the sector faces in FY11-12, while the group has good exposure to the recovery in business credit growth that we have forecast. 3. ANZ's balance sheet is robust. Firstly, ANZ's asset quality is showing good improvement and the group is strongly provisioned. Secondly, we think ANZ is not only best in class on capital, but one of the best prepared for additional Basel III standards. Funding source Commonwealth Bank (CBA)
1. We believe CBA's domestic operations will be less exposed to the improvement in business credit growth that we forecast will come through in FY12. 2. We expect CBA to face cost headwinds in FY12 as the amortisation charge relating to its investment spend increases. 3. CBA's core franchise is performing strongly and we believe its business mix should sustainably deliver an ROE premium compared with its peers, but at an 8.5% premium to the sector we think the stock is fairly valued.
Source: RBS forecasts
Table 2 : Capital Goods

Long Downer EDI (DOW) Andrew Hodge
1. We believe DOW's management continues to make steady progress towards where it believes the business should operate. 2. In our view, the short-term key to DOWs share price performance is three upcoming potential catalysts: Reliance Rail funding, further delivery of Waratah trains and the successful ramp-up of the FMG Christmas Creek contract. Funding source Leighton Holdings (LEI)
Although we don't believe there are structural problems within the business, we continue to believe LEI is too expensive relative to its likely growth profile over the next three years.
Table 3 : Transportation
Long Asciano (AIO) Mark Williams
1. Looks cheap relative to peers given that AIO is trading on a rail multiple despite the fact that one-third of its earnings are exposed to ports. 2. We see momentum in the ports division following a contract win with Maersk. 3. Catalysts we see remain in the form of wage negotiations concluded and potential coal rail contract announcements. Funding source Brambles (BXB)
1. Consumer spending in key markets such as the USA and Europe looks set to remain under pressure, with economic conditions remaining volatile. 2. BXB is trading at an FY12F PER of over 15x, about a 40% premium to the ASX200. We do not consider this premium justified at this point given the fragility of BXB's key markets.
Table 4 : Energy
Long Oil Search (OSH) Jason Mabee, CFA
1. On our current NAV forecast, an investor is only paying for 30% of PLNGs third-train expansion. This includes very conservative capex forecasts on PLNG T 1& 2. 2. OSH is embarking upon a very active drilling programme in 4Q which we believe will be enough to underpin PLNG T3 with the potential for further expansion (T4) in the future. Funding source Santos (STO)
1. We see no near-term positive catalysts ahead. 2. Disproportionate market reaction to any bad news regarding CSG. 3. We have concerns about capital expenditure blowouts.
Australia Strategy | Analysis | 21 October 2011
Table 5 : Gaming
Long Crown (CWN) Michael Nolan
1. In essence, casinos are a property play, which means the key success factor is location, location, location. CWNs Australian casinos tick that box in spades. And so does its 33% interest in Melco Crown in Macau, the worlds fastest growing gaming market. A portfolio of AAA-rated properties with a domestic and international flavour, a strong board and executive management team is a potent mix, and makes CWN a potent franchise, in our view. Funding source Tabcorp (TAH)
1. The demerged entity is predominantly a wagering business, and wagering is in secular decline. We believe such businesses warrant portfolio inclusion in exceptional circumstances only. TAH does not qualify on that basis, in our view.
Table 6 : Food & Beverages

Long Coca-Cola Amatil (CCL) Michael Nolan
1. We believe CCL has a strong medium-term growth profile driven by high-return-generating capital projects over the next four years. 2. Strong brands and footprint position business relatively well in a difficult pricing environment, in our view. 3. Not cheap on PE multiples, in our view, but trading towards the bottom end of its historical range despite having a superior medium-term growth profile. 4. Indonesia should be a positive earnings driver as relative immaturity and rising incomes continue to drive strong growth. Funding source Goodman Fielder (GFF)
1. With key food CPI segments flat, we believe any further material margin improvement would require brand emphasis and new product development (NPD) programmes, which are medium-term propositions. 2. The medium-term outlook appears uncertain, in our view, with risks in a tough CPI environment, private label substitution and supermarkets bargaining power all likely to affect GFFs earnings growth profile. 3. While GFF trades on a low P/E, we do not see it as cheap given its low growth potential.
Table 7 : Health care

Long Sonic Healthcare (SHL) Dr Derek Jellinek
1. Lower cost base increases leverage as domestic volumes return and the new funding agreement takes effect. 2. Offers higher-margin services and products through specialist channels. 3. Growing offshore footprint diversifies revenue base, decreases reliance on domestic business and offers upside via increasing coverage and volume. Funding source CSL Limited (CSL)
1. Constant currency NPAT growth has waned over the last three years (FY09-11: 45%; 22%; 14%), with 10% guided in FY12. 2. The return of Octagam, slowing product mix shift and increasing competition has negative implications on last litre economics. 3. The R&D pipeline appears underfunded (7.8% of revs) and lacks strong growth drivers over the near/medium term. 4. Growth looks muted in Human Health (18% of total sales) with soft Gardasil sales, concerns surrounding the seasonal influenza vaccine and ongoing FDA discussions with compliance issues for the Parkville facility.
Table 8 : Infrastructure
Long MAp Airports (MAP) Will Allott
1. We see strong traffic growth and operating leverage driving short-term earnings growth, with upside potential from better-than-expected traffic growth and cost performance. 2. Completion of the proposed OTPP transaction should unlock material upside from the move to a single-asset vehicle, removal of dilution of the Australasian airport premium, streamlining the structure (reducing costs and potentially increasing foreign ownership limit) and the deployment of surplus cash. 3. MAP has indicated it will return about 80cps to shareholders by the end of CY11, underpinning the share price. Funding source Macquarie Atlas Roads Group (MQA)
1. Weak economic conditions in the UK and the US affecting CY11 traffic. 2. Weak 1H revenue figures indicate Dulles Greenway is unlikely to pass the distribution test in December 2011. 3. Likely to tread water until we get closer to the 3.6bn Eiffarie debt refinancing in late CY11/early CY12, in our view.
Table 9 : Insurance/Diversified Financials

Long Suncorp-Metway (SUN) Richard Coles
1. Looks significantly undervalued to us at current market levels. 2. We see evidence of growing stability in its non-core bank run-off. 3. GI back-office integration appears on track. 4. Likely future capital returns. Funding source Australian Securities Exchange (ASX)
1. Ongoing negative news flow as commencement of the Chi-X market draws near. 2. Potential for competition in clearing, in our view LCH Clearnet has reaffirmed interest in entering the Australian market. 3. Softening volumes in cash equities trading and listings.
Table 10 : Materials Resources (large-cap)

Long Fortescue Metals Group (FMG) Lyndon Fagan
1. FMG is highly leveraged to the buoyant iron ore market, which is leading to strong cash flow. This cash flow is underpinning significant production growth, in our view. 2. The stock is also trading at a deep discount to our NPV, and at low PEs relative to the sector. 3. We foresee a number of positive news flow events in the medium term, including potential resource expansions, increased port capacity and the ramp-up of production. Funding source Energy Resources Australia (ERA) Lyndon Fagan
1. We continue to see significant risks around the upcoming wet season, difficulty in gaining a mine lease extension, and potential upward revision of rehabilitation costs. 2. We believe in the current uncertain environment, the stock is likely to trade at a discount to valuation near term. 3. We recommend investors look elsewhere at quality miners such as FMG trading at a material discount to our fair value estimate, rather than ERA, which continues to carry significant risks, and does not look overly cheap to us.
Table 11 : Materials Resources (mid-cap)

Long Regis Resources (RRL) Sam Berridge
1. RRL FY11 earnings of A$36m was above Bloomberg consensus and supported by robust cash flow from operations of A$48m. While not particularly cheap on our numbers, RRL's pure gold exposure and well established record of over-delivery on expectations is appealing in a volatile market, in our view. 2. The near-term positive catalysts for RRL are reserve expansions at Garden Well through extensional drilling, and at Moolart Well through infill drilling and optimisation of oxide pits. We expect an ongoing incremental positive impact on valuation via mine life extensions at both operations over the next six to nine months. Funding source Kingsgate Consolidated (KCN) We expect KCN will present a tough quarterly report at the end of October on the back of heavy rains in Thailand, reported as the worst in 50 years. While the worst of the rain appears to have been confined to the tail end of the September quarter, we anticipate the extent of the flooding will have a negative read-through for the December quarter as well. In addition, KCN has not reported receiving its factory license for the Chatree expansion. At the time of the FY11 result, management guidance was that FY12 production guidance would hold as long as the factory license was received by mid-September. It's now mid October. So it looks as though achieving FY12 production guidance will be tough.
Table 12 : Materials Steel

Long Sims Metal (SGM) Todd Scott
1. Relatively less exposed to high AUD:USD compared with domestic steel manufacturers. 2. Trading at 11x FY12F PE, with forecast 40% EPS CAGR over FY11-14F. Funding source OneSteel (OST)
1. Sluggish domestic steel demand. 2. Weakening iron ore prices. 3. Costs and timing risks on iron ore expansion plans.
Table 13 : Basic Materials

Long Amcor (AMC) Andrew Scott
1. We see further potential upside from the integration of the Alcan acquisition. 2. Above-market earnings growth means the stock is attractively priced on FY12F and FY13F multiples. 3. A mix of growth and defensive characteristics should see the stock perform well in both rising and declining equity markets, in our view. Funding source Boral (BLD)
1. While longer-term value is evident, BLD appears more expensive than peers ABC and CSR on a PE basis. 2. We continue to see risks to consensus expectations for domestic construction activity, particularly Australian housing starts. We believe that this may lead to a risk of earnings downgrades. 3. We expect that the market will remain sceptical until it sees evidence that earnings can reach the levels required to deliver an adequate return on the LBGA acquisition.
Table 14 : Media
Long Fairfax Media (FXJ) Fraser McLeish
We believe that the online assets are significantly undervalued at the current share price. Key potential catalysts include the proposed sale of the radio business and IPO of a 30-35% stake in Trade Me. Costs are under control and, while the advertising market remains weak, we would expect a significant rerating if conditions improve. Funding source Ten Network Holdings (TEN)
1. Ten's 'post-Masterchef' ratings have been very weak, and are below ratings share in the pcp, when it was down a second multi-channel. 2. If the weak ratings continue then this raises downside risk to FY12 EBITDA and NPAT forecasts. We calculate that +/-1ppt in market share can result in +/-14% to FY12F EBITDA and +/-20% to NPAT. 3. On a PE multiple of 10x FY12F, Ten trades at a premium to 'traditional' media peers such as FXJ and APN on about 5-6x.
Table 15 : Retailing
Long JB Hi-Fi (JBH) Daniel Broeren
1. JBH has significant rollout potential remaining, in our view, although we believe a saturation point is now in sight. At the current guided store opening rate of 13-15 pa, we estimate JBH can grow its trading space by 7-10% pa for the next four years. 2. Tablet sales are set to boost JBH's computer category's earnings in FY12, more than the likely drop in CDs, DVDs and Gaming. JBH looks well leveraged to any uptick in consumer discretionary spend and technology advances. While JB Hi-Fi Now isn't likely to bring in material earnings, in our view, the company is clearly looking for new growth opportunities in areas using the online sphere. 3. JBH is now trading at a notable discount to the S&P/ASX 200 Industrials Index multiple for FY13, its lowest since early in the financial crisis. In our view, this is not reflective of the space growth potential and category growth opportunities available to the business. Funding source Metcash (MTS)
1. The recent poor trading performance of Franklins (an A$18m loss in FY11) has reduced the value of the business for MTS, in our view. We now expect it to contribute longer and deeper retail trading losses, and a lower sale price when stores are ultimately on-sold to retailers. 2. The ramp-up in promotional activity of the major retailers has seen them build market share in CY11 to date. We believe the independents have been affected as the chains led the promotional programmes. 3. We believe margins have further eroded in the back half of 2H11 and the operating leverage is likely to be nearer to 0.9x.
Table 16 : Telecommunications
Long Telstra Corporation (TLS) Fraser McLeish
1. Passage of NBN legislation reduces uncertainty and improves visibility of A$11bn in NBN compensation. Expect announcement of capital management plans prior to shareholder vote. 2. Telstra has confirmed a 28c fully franked dividend for FY11 and FY12. 3. Turnaround plan on track, with strong subscriber growth in the 6M to December. Funding source Telecom Corporation (TEL)
Competitive headwinds and uncertainty surrounding UFB will continue to weigh on the stock price.
Table 17 : Utilities
Long Duet (DUE) Jason Mabee, CFA
1. Simplified asset portfolio post ATCO transaction. DUE is a much-simplified beast post the divestments of WAGN and Duquesne. In addition, all corporate debt and intercompany loans having been removed. 2. Expansion of the DBP is DUEs next major growth project. Rising industrial and mining demand and the potential switch from coal- to gas-fired generation would drive further compression/looping of the DBP, in our view. 3. Mixture of yield and growth places DUE in a very attractive position. We believe DUE offers investors not only a defensive holding, but also a stock that offers leverage to growth opportunities not to mention a 10% yield with 3%+ growth. Funding source SP AusNet (SPN)
1. SPN has been a solid performer in the sector so far this year, with the stock up 15% on a TSR basis vs the ASX200, which is down 5.5%. With limited upside to our target price and uncertainty around bushfire litigation hanging over the stock, we see limited upside potential from here.
Table 18 : Small Caps defensive pair

Long SAI Global (SAI) Julian Guido
1. SAI is a high-quality business with both defensive and growth characteristics, and a unique play on the strong macro theme of regulation and compliance, in our view. 2. Valuation appears undemanding in light of the premium EPS growth profile (about 20% EPS growth pa over the next three years, on our estimates). 3. We believe SAI has the opportunity to be both predator and prey. Funding source Tassal Group (TGR) Matthew Nicholas
1. The company has rejected a change of control proposal at A$1.90 the data room has closed and due diligence has ceased. 2. The near-term outlook for margin recovery is clouded, in our view, by: 1) a weak wholesale channel; and 2) import competition for smoked. 3. We believe weakness in wholesale is exacerbating the business skew to lower-margin retail, where pricing power remains limited.
Table 19 : Small Caps cyclical pair

Long Bradken (BKN) Matthew Nicholas
1. In our view, one of the best-placed mining services companies for strong earnings growth (in a capacityconstrained environment) over the next three years. 2. BKN has overweight exposure to mining consumables revenue (directly leveraged to production) and we think it is therefore a lower-risk play than its industry peers that are more exposed to less-predictable mining capex and exploration. 3. Potential margin upside to our medium-term forecasts as the new Chinese manufacturing facility (30% lower cost) begins to service global GET markets. Funding source Programmed Group (PRG) Julian Guido
1. We remain cautious on painting, assuming only a marginal EBITA increase in FY12. 2. Our caution is in relation to potential cost savings needing to be shared or reinvested with customers. 3. Demand from key customer segments (retail and commercial) is currently weak and may deteriorate further.
Please see our latest published research on each of these stocks for further details.
Australia Strategy | Analysis | 21 October 2011 7
Table 20 : RBS earnings forecasts

ASX code Company name Market cap (A$m) Last year end Price (A$) Target FV (A$) price (A$) Up/ down Rec YTD -Abs. YTD -Rel. 12m
NPAT pre abnormals (A$m) Earnings Quality* EPS pre goodwill (c) EPS ANALYSIS EPS growth IBES 3m EPS (pre goodwill) revisions 12m fwd Fcst 1 Fcst 2 EPS CAGR DIVIDEND ANALYSIS DPS (c) Div yield Div frank (%) Fcst 1 PE (x) (pre goodwill) PEG VALUATION B/SHEET ANALYSIS PE rel EV/ EV / P/ NTA ROE ND/EBITDA (pre goodwill) EBIT (x) EBITDA (x)
Actual
Fcst 1
Fcst 2
Actual
Actual
Fcst 1
Fcst 2
3 yr
Actual
Fcst 1
Fcst 2
Fcst 1
Fcst 1
Fcst 2
Fcst 1
Fcst 1
Fcst 2
Fcst 1
Fcst 1
Fcst 1
Fcst 1
Fcst 1
Long
AIO ANZ DOW CCL FXJ MAP SGM FMG TLS SHL SUN DUE OSH JBH RRL AMC CWN Asciano Group ANZ Banking Group Downer EDI C-C Amatil Fairfax Media MAp Airports Sims Metal Mgt Fortescue Metal Telstra Sonic Health Suncorp Group DUET Oil Search JB Hi-Fi Regis Resources Amcor Crown 4,389 54,836 1,262 9,064 2,046 6,142 2,752 13,419 39,196 4,249 10,550 1,807 7,550 1,396 1,241 8,615 5,961 Jun 11 Sep 10 Jun 11 Dec 10 Jun 11 Dec 10 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Dec 10 Jun 11 Jun 11 Jun 11 Jun 11 1.49 21.24 2.89 12.00 0.87 3.28 13.30 4.23 3.14 10.85 8.24 1.65 5.89 14.28 2.90 7.15 7.87 1.91 23.60 5.01 13.43 1.45 3.68 19.10 8.01 3.50 13.12 9.87 2.00 7.50 17.25 2.96 7.54 9.00 2.06 26.22 5.01 13.43 1.60 3.68 19.10 8.01 3.50 13.13 9.87 2.00 7.50 17.25 2.57 7.54 9.00 28% 11% 73% 12% 68% 12% 44% 89% 11% 21% 20% 21% 27% 21% 2% 5% 14% Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Hold Buy Buy -7% -9% -35% 10% -38% 10% -38% -35% 13% -6% -4% -1% -16% -20% 21% 6% -5% 5% 4% -22% 23% -26% 22% -26% -23% 25% 6% 8% 11% -4% -8% 33% 19% 8% 189.9 5,122.0 155.9 506.6 273.8 127.2 182.0 1,649.2 3,231.0 294.5 637.6 124.9 156.6 134.4 37.2 570.3 335.9 268.3 5,612.0 190.1 543.5 284.8 120.0 279.6 2,038.1 3,551.0 308.0 1,073.9 90.7 178.4 137.7 75.2 659.2 386.9 353.4 6,074.9 221.3 600.0 328.6 131.9 364.1 1,699.6 3,666.1 338.1 1,231.6 89.0 144.4 155.6 215.4 741.1 422.4 1.3 n.a. 0.5 0.8 1.2 1.1 0.5 1.6 1.0 1.0 n.a. 1.0 2.1 0.7 1.0 0.7 0.8 6.5 198.4 42.6 67.3 11.6 7.1 88.9 53.0 25.9 75.5 49.7 14.1 11.9 120.2 8.6 46.5 44.3 9.2 211.7 44.3 71.7 12.1 6.4 136.1 65.5 28.5 78.6 83.5 9.2 13.5 138.4 17.5 53.7 52.6 12.1 223.3 51.5 78.8 14.0 7.1 177.3 54.6 29.4 86.3 95.7 8.1 10.8 155.1 50.0 60.4 58.0 2.3% -3.2% -5.9% -0.4% -9.3% -42.8% -5.6% -10.4% 4.3% -4.4% -1.7% -19.9% -6.2% -8.5% 32.8% -2.7% 5.3% 41% 7% 4% 7% 4% -9% 53% 24% 10% 4% 68% -35% 13% 15% 102% 15% 19% 32% 5% 16% 10% 15% 10% 30% -17% 3% 10% 15% -11% -20% 12% 186% 12% 10%
30% 5% 14% 9% 10% 6% 32% 16% 5% 8% 29% -17% -11% 12% 86% 14% 15%
2.0 126.0 0.0 48.5 3.0 33.5 47.0 6.9 28.0 59.0 35.0 20.0 4.0 77.0 0.0 35.0 37.0
3.0 139.0 21.0 55.0 3.6 21.0 68.0 8.0 28.0 61.0 50.1 16.0 4.0 85.0 0.0 36.0 37.0
3.5 146.0 27.0 58.5 7.0 21.0 88.6 8.0 28.0 67.0 57.4 16.5 4.0 96.0 0.0 40.0 37.0
2.0% 6.6% 7.1% 4.6% 4.2% 6.4% 5.1% 1.8% 8.9% 5.6% 6.1% 9.7% 0.7% 6.0% 0.0% 5.1% 4.7%
0 100 0 100 100 0 45 0 100 32 100 0 0 100 0 0 60
16.4 10.0 6.6 16.7 7.2 51.2 9.8 6.3 11.0 13.9 9.8 18.1 42.2 10.2 16.5 13.1 15.0
12.4 9.5 5.7 15.2 6.2 46.6 7.6 7.4 10.7 12.7 8.6 20.4 51.0 9.1 5.8 11.6 13.6
0.5 2.0 0.5 1.8 0.7 8.2 0.3 0.4 2.1 1.7 0.3 -1.1 -3.8 0.9 0.2 0.9 1.0
1.54 0.82 0.62 1.37 0.68 4.18 0.93 0.60 1.04 1.31 0.92 1.70 3.45 0.96 1.55 1.23 1.41
1.27 0.89 0.58 1.43 0.64 4.38 0.77 0.75 1.09 1.30 0.88 2.09 4.80 0.93 0.59 1.19 1.39
10.9 7.0 5 11.7 6.6 21.1 6.5 5.4 8.7 11.4 45.3 12.3 22.4 7.5 16.1 10.4 14.8
7.4 6.0 3.2 9.4 5.4 13.6 5.1 5.1 5.0 9.2 28.3 9.1 19.9 6.5 14.5 7.3 10.3
6.7 2.0 1.3 19.6 1.4 3.0 7.8 1.3 2.7 12.1 10.0 4.4 2.5
8.1% 16.2% 12.7% 28.8% 6.3% 2.5% 9.3% 61.1% 29.3% 12.1% 6.9% 6.5% 6.5% 79.4% 56.9% 17.5% 12.1%
2.7 n.a. 1.1 1.1 2.1 6.0 0.2 1.5 1.3 2.3 n.a. 6.8 2.0 0.7 0.2 1.9 2.0
Funding Source
CBA LEI BXB ERA GFF CSL KCN OST TEN TEL MQA STO ASX MTS SPN TAH BLD Commonwealth Bank 74,377 Leighton 6,905 Brambles 9,764 Energy Resource 1,056 Goodman Fielder 915 CSL Ltd 15,862 Kingsgate 1,018 OneSteel 1,666 Ten Network 857 Telecom Corp 4,923 Macquarie Atlas 613 Santos 11,481 Aust Securities Exchang 5,156 Metcash 3,183 SP AusNet 2,697 Tabcorp 2,019 Boral 2,480 Jun 11 Jun 11 Jun 11 Dec 10 Jun 11 Jun 11 Jun 11 Jun 11 Aug 10 Jun 11 Dec 10 Dec 10 Jun 11 Apr 11 Mar 11 Jun 11 Jun 11 47.51 20.53 6.60 2.05 0.53 29.98 7.30 1.24 0.82 1.97 1.36 12.09 30.05 4.15 0.98 2.83 3.44 49.69 20.67 7.01 1.91 0.60 29.31 9.06 2.10 0.95 2.01 1.88 15.00 31.77 4.25 1.00 3.00 4.04 58.46 20.67 7.01 1.91 0.80 29.31 9.06 2.10 1.06 2.01 1.88 15.00 31.77 4.25 1.15 3.00 4.04 5% 1% 6% -7% 13% -2% 24% 70% 17% 2% 39% 24% 6% 2% 3% 6% 17% Hold Hold Hold Sell Hold Hold Buy Buy Hold Hold Buy Buy Hold Hold Hold Hold Hold -6% -32% -7% -82% -58% -17% -33% -52% -42% 20% -11% -8% -20% 1% 12% -9% -29% 6% -19% 5% -69% -45% -5% -20% -40% -30% 33% 2% 5% -8% 14% 25% 4% -16% 6,793.0 -107.7 532.1 52.8 135.2 940.6 32.0 235.0 96.9 296.6 -281.7 356.1 356.6 248.3 252.9 486.3 173.5 7,386.1 609.7 600.4 31.2 128.9 954.9 206.7 275.4 78.1 363.8 -57.0 520.5 385.9 276.9 244.5 364.5 203.1 7,930.4 672.2 718.4 76.8 141.5 1,004.2 205.7 285.1 80.6 383.9 108.5 573.7 424.8 304.4 251.2 222.7 275.3 n.a. 1.7 1.0 0.6 1.0 1.0 0.4 1.0 1.0 1.0 0.0 1.4 0.9 1.2 0.9 0.9 0.9 420.7 -35.1 36.6 27.7 9.8 173.6 23.6 17.6 9.3 15.5 -62.3 50.3 204.0 32.3 9.0 74.1 24.0 450.3 181.2 40.2 6.0 7.1 180.9 152.7 20.6 7.5 18.9 -12.6 61.0 219.3 36.0 8.6 51.6 28.1 475.5 199.7 48.2 14.8 7.2 190.7 152.0 21.4 7.7 19.9 24.0 62.8 239.2 39.6 8.7 30.6 38.0 -3.0% -2.0% -45.7% -34.6% -2.3% 6.9% -15.6% -16.4% 1.6% -88.2% -4.7% -0.6% -0.3% -0.1% -7.2% -15.4% 7% 10% -78% -27% 4% 547% 17% -19% 22% 394% 21% 7% 12% -4% -30% 17% 6% 10% 20% 146% 2% 5% 0% 4% 3% 6% 3% 9% 10% 1% -41% 35%
6% 84% 16% -71% -9% 5% 81% 19% 4% 13% -57% 11% 7% 8% 0% -27% 29%
320.0 60.0 25.9 8.0 7.8 80.0 15.0 10.0 11.0 18.0 0.0 30.0 183.2 27.0 8.0 43.0 14.5
343.0 116.0 30.0 0.0 5.7 81.0 35.0 8.2 5.0 21.0 0.0 30.0 196.5 29.0 8.0 25.8 16.0
363.0 128.0 34.0 0.0 5.8 88.0 59.0 10.7 5.8 23.0 7.0 31.0 214.3 32.0 8.0 21.4 17.0
7.2% 5.7% 4.4% 0.0% 10.9% 2.7% 4.7% 6.6% 6.1% 8.2% 0.0% 2.5% 6.5% 7.0% 8.3% 9.3% 4.6%
100 100 20 100 40 0 0 50 100 100 0 100 100 100 0 100 100
10.6 11.3 15.8 33.9 7.4 16.6 4.9 6.0 11.0 10.8 19.8 13.7 11.5 11.2 5.4 12.3
10.0 10.3 12.8 13.8 7.3 15.8 4.9 5.8 10.6 10.1 5.6 19.2 12.6 10.5 11.1 9.1 9.1
1.8 0.1 1.0 -0.5 -0.8 3.1 0.1 0.3 2.9 0.8 1.8 1.9 1.4 -81.5 -0.2 0.4
1.00 1.07 1.48 2.77 0.69 1.56 0.46 0.57 0.90 1.02 1.62 1.29 1.08 1.05 0.51 1.15
1.03 1.05 1.31 1.29 0.74 1.61 0.51 0.60 1.00 1.03 0.53 1.81 1.29 1.07 1.14 0.93 0.93
7.2 7.2 12.6 5.9 6.1 12.6 3.7 6.5 9.1 9.1 -223.2 12.9 9.4 8.1 11.5 4.3 12.5
6.5 3.8 8.2 3.5 4.7 11.0 3.2 4.8 7.7 4.1 -247.9 7.6 9.0 7.2 7.9 3.5 6.6
2.7 2.8 15.8 0.9 28.3 5.0 1.3 0.8 4.1 1.4 7.2 217.9 10.3 0.8
19.2% 25.0% 25.0% 2.6% 8.9% 24.6% 30.1% 6.0% 8.7% 19.9% 20.5% 6.5% 12.7% 19.9% 41.1% 26.2% 6.1%
n.a. 0.1 2.0 7.0 2.1 0.2 0.4 2.7 2.4 1.3 n.a. 0.0 0.8 1.2 5.0 0.7 2.4
Small cap Long

SAI BKN PRG TGR SAI Global Bradken Programmed Group Tassal Group 937 1,198 236 233 Jun 11 Jun 11 Mar 11 Jun 11 4.70 7.40 2.00 1.60 5.20 9.85 2.14 1.30 5.20 9.85 2.14 1.30 11% 33% 7% -19% Buy Buy Hold Hold -4% -18% 16% -6% 9% -5% 28% 7% 57.8 90.1 28.6 21.6 66.4 120.3 29.1 25.0 77.9 143.9 33.7 27.4 0.8 0.2 0.1 1.2 29.8 63.5 24.2 14.8 33.3 72.3 24.7 17.1 39.0 84.0 28.5 18.6 -3.8% 0.9% 1.2% -2.1% 12% 14% 2% 16% 17% 16% 16% 9%
16% 17% 9% 11%
14.3 39.5 9.0 2.0
16.3 45.0 11.0 6.0
20.3 52.5 13.0 7.0
3.5% 6.1% 5.5% 3.8%
100 100 100 100
14.1 10.2 8.1 9.4
12.0 8.8 7.0 8.6
0.9 0.6 0.9 0.9
1.33 0.96 0.76 0.88
1.23 0.90 0.72 0.88
11.0 8.0 6.0 8.0
9.8 6.5 5.1 5.8
2.2 2.0 0.9
20.1% 16.6% 8.1% 8.8%
1.3 1.7 1.5 1.5
Funding Source
Priced at 3.52pm on 21 October 2011. * Earnings quality: Net operating cash flow/(Net profit + Depreciation & amortisation). Source: Company data, RBS forecasts
Equity | Australia
21 October 2011
Australia Strategy
Weekly topical thoughts
The RBA has held its nerve through powerful cross-currents in 2011, but has made room for a rate cut at its 1 November meeting. We think the impact on the domestic market will be limited unless a sustained rate-cutting cycle is entered, which itself is unlikely outside of a fully-fledged euro-zone crisis.
Chart 1 : RBA rate cutting cycles have historically spurred building activity
Uni ts (000s) Units (00 0s)
225
225
200
200
175
175
150
150
125
125
100
100
75 1992 1997 2002 RBA rate cutting p hase 2007

Bui lding approval s
75
Source: RBA, ABS, RBS
Upcoming RBA meeting a key domestic catalyst in midst of Europe & China risks The upcoming RBA meeting on 1 November promises to be again an important waypoint for the market, with interest rate futures fully pricing a 25bp cut, while economists are split on the outlook (6 for, 19 against, as of Bloombergs last count). The RBA has held rates at 4.75% for nigh on a year, with the last hike occurring at the Melbourne-cup meeting of 2010. Powerful cross-currents have buffeted the Australian economy over the ensuing period, including century-high levels of the terms of trade and record mining investment offsetting the impact of the cautious consumer and the AUDs surge on manufacturing and tourism. Through this, the Reserve Bank Board has chosen to respond with a calming wait-and-see strategy. So have conditions changed sufficiently for the RBA to change tack? Softening in RBA rhetoric reflective of global uncertainty The statement and minutes of the October Board referred to the less-inflationary outlook over 2012, on the basis of weaker global growth and a downward revision to CPI. This effectively made room to cut interest rates, should that be deemed necessary. Outside of systemic crisis scenario, no major change of income dynamics expected A one-off 25bp rate cut would, in our view, be intended to shore up confidence, and this could indeed help to put a floor under the residential construction market, where approvals have continued to slide. We think this may help names highly-leveraged to the cycle (eg, GWA and GUD) and would result in a near-term softening in the AUD (Greg Gibbs is forecasting 0.93 by year-end). But we note household income dynamics will not be materially affected unless the RBA embarks on a sustained cutting cycle, which remains unlikely (outside of a Euro-zone triggered systemic crisis). As such, we recommend against taking a wholesale domestic tilt (banks and consumer) and retain our overweight in resources.
Analysts
Alva DeVoy
+61 2 8259 5831 alva.devoy@rbs.com
Daniel Blake
+61 2 8259 5016
Jonathon Brycki
+61 2 8259 6831
Thiva Nagaratnam, CFA

+61 2 8259 5373
Muditha Weeratunga, CFA

+61 2 8259 6920
RBS Equities (Australia) Limited, ABN 84 002 768 701, AFS Licence 240530 Level 29, RBS Tower, 88 Phillip Street, Sydney NSW 2000, Australia http://research.rbsm.com
11
Weekly indicators
Risk appetite, as gauged by the RBS risk-appetite indicator, was down slightly this week, remaining depressed 1.7 standard deviations below 12-month trend. The indicator has been below -1 standard deviations for the past 12 weeks. The only previous period where the indicator has been this low for an extended period was between September 2008 and January 2009 (16 weeks). This week the biggest contributor to the decrease in risk-appetite was the sharp sell off of commodities. The CRB Index was down 3% at 307.7, 1.4 standard deviations below 12 month trend. The decline in the copper price was more severe, dropping 11% to US$3.05/lb. Copper has now fallen 31% since the end of July when it was trading at US$4.45/lb. Copper is currently over 3 standard deviations below the 12-month trend. The VIX Index also spiked by 23% over the week to be 34.8%, 1.5 standard deviations above the 12-month trend. On the flow side this week, we saw outflows from the Australian market for the 14th time in the past 15 weeks. Active equity fund outflows were -US$26.8m, with the four-week total declining to -US$228m. Chart 2 : Risk-appetite indicator at -1.7 std deviations
Std dev 2 Euphoria 1.50
Chart 3 : CBOE VIX and CHF/AUD

A$ % 90 80
1.40 70
1.30
60 50
-1
1.20 40
-2
1.10
30 20
-3 Capitulation -4 2004 2005 2006 2007 2008 2009 2010 2011
1.00 10 0.90 2000 2002 2004 2006 2008 2010 0
RBS risk appetite (lhs)
CHF/AUD (lhs)
CBOE VIX (rhs)
Source: Bloomberg, RBS
Chart 4 : EPFR active equity fund flows into Australia

US$m 400
Chart 5 : European periphery spreads

bp 1,400 1,200 1,000
200
0
800
-200
600
-400
400
-600
200 0
-800 Jun 05 Jun 07 Jun 09 Jun 11
Jan 09
Jul 09 Ger.
Jan 10 Spain
Jul 10 Italy
Jan 11 Ireland
Jul 11 Port.
Active equity fund flows into Australia - 4wk total
Source: EPFR Global
12
Equity markets performance and valuations

Table 1 : Market performance and valuation
Index Australia S&P/ASX 200 MSCI World US S&P 500 US NASDAQ MSCI Europe Germany DAX France CAC UK FTSE Japan Nikkei South Korea Taiwan Singapore MSCI AP ex-Japan Hong Kong China Shanghai Thailand India Indonesia Brazil
Source: Bloomberg estimates
% 1d -1.6 -0.7 0.5 -0.2 0.6 -2.5 -2.3 -1.2 -0.7 -2.7 -1.5 -1.0 1.2 -1.8 -1.9 -3.1 -0.9 -1.7 -1.7
Local currency US$ unhedged % 1w % mtd % qtd % ytd % mtd % qtd % ytd -2.3 -1.6 1.0 -0.8 0.2 -2.5 -3.2 -0.3 -1.7 -1.0 -2.5 -1.5 -0.2 -4.1 -4.4 -3.0 0.3 -1.4 -1.1 3.4 5.7 7.4 7.6 4.8 4.8 3.4 5.0 -2.0 2.0 0.3 0.7 5.3 2.2 -1.2 -0.8 2.9 2.1 3.2 3.4 5.7 7.4 7.6 4.8 4.8 3.4 5.0 -2.0 2.0 0.3 0.7 5.3 2.2 -1.2 -0.8 2.9 2.1 3.2 -12.7 -8.8 -3.4 -2.0 -13.9 -16.6 -18.9 -8.7 -17.0 -12.0 -19.3 -15.5 -17.4 -21.9 -17.0 -12.0 -17.4 -2.2 -22.1 9.5 5.7 7.4 7.6 7.8 7.8 6.4 6.4 -1.8 5.2 1.5 3.3 5.3 2.3 -1.2 0.1 1.2 3.2 8.9 9.5 5.7 7.4 7.6 7.8 7.8 6.4 6.4 -1.8 5.2 1.5 3.3 5.3 2.3 -1.2 0.1 1.2 3.2 8.9 -12.7 -8.8 -3.4 -2.0 -11.4 -14.2 -16.6 -7.7 -12.3 -13.7 -22.2 -15.0 -17.4 -22.0 -14.3 -14.5 -25.9 -1.3 -27.4
A$ unhedged % mtd % qtd % ytd 3.4 -0.2 1.5 1.6 1.8 1.9 0.5 0.5 -7.2 -0.6 -4.1 -2.5 -0.5 -3.4 -6.7 -5.4 -4.4 -1.5 2.8 3.4 -0.2 1.5 1.6 1.8 1.9 0.5 0.5 -7.2 -0.6 -4.1 -2.5 -0.5 -3.4 -6.7 -5.4 -4.4 -1.5 2.8 -12.7 -8.8 -3.3 -2.0 -11.4 -14.1 -16.6 -7.6 -12.3 -13.9 -22.2 -15.0 -17.4 -22.0 -14.3 -14.5 -25.9 -0.9 -27.4
Valuation (x) PE 12 P/B 11 DY CY11 10.1 10.4 11.0 13.0 9.1 8.3 8.1 8.8 11.5 8.2 11.5 11.6 9.9 8.8 9.1 9.5 12.5 12.1 8.4 1.48 1.39 1.73 2.23 1.21 1.06 0.93 1.38 0.83 1.05 1.40 1.22 1.35 1.15 1.45 1.56 2.17 2.53 1.07 5.23 3.03 2.17 1.39 4.44 4.31 5.19 4.16 2.53 1.64 4.42 3.57 3.07 4.13 2.74 4.42 1.63 2.34 3.92
4,145 1,167 1,215 2,599 82.1 5,766 3,084 5,385 746 1,805 7,244 2,694 468.5 17,983 2,331 909 16,937 3,623 54,010
Chart 6 : Market performance (local currency)

10% 5% 0% -5%
Chart 7 : Market performance (unhedged USD)

15% 10% 5% 0% -5%
-10% -15% -20% S&P/ASX MSCI US S&P MSCI 200 World 500 Europe Local currency returns qtd (%) UK Japan MSCI APxJ China
-10% -15% -20% S&P/ASX MSCI US S&P MSCI 200 World 500 Europe US$ returns qtd (%) UK Japan MSCI APxJ China
local currency returns ytd (%)
US$ returns ytd (%)
Chart 8 : RBS risk appetite vs AUD/USD

US$ 1.20 1.10 1.00 0.90 0 0.80 -1 0.70 0.60 0.50 0.40 2000 2002 2004 2006 2008 2010 -2 -3 -4 Std dev 3 2 1
Chart 9 : Risk appetite vs forward market returns

3 Std dev 30% Capitulation
20%
10%
0%
-1 Euphoria
-10%
-2
-20%
-3 2000 2002 2004 2006 2008 2010
-30%
AUD/USD (lhs)
RBS Risk Appetite (rhs)
RBS risk appetite (inverted, lhs)
S&P/ASX 200 fwd 3m % chg. (rhs)
13
Table 2 : Global sector performance (absolute)

MSCI World % mtd % qtd % ytd Total Index Energy Materials Industrial Cons Discretionary Cons Staples Healthcare Financials Utilities Telecoms IT Large caps Small caps Growth Value
Source: Bloomberg
US S&P 500 % mtd % qtd % ytd 7.4 13.6 11.0 9.4 9.6 3.8 2.3 8.4 2.0 1.3 7.7 7.4 8.1 7.4 7.6 7.4 13.6 11.0 9.4 9.6 3.8 2.3 8.4 2.0 1.3 7.7 7.4 8.1 7.4 7.6 -3.4 -0.7 -14.5 -8.2 2.2 4.9 3.1 -19.7 9.4 -4.0 0.7 -3.4 -11.1 -2.1 -6.8
MSCI Europe % mtd % qtd % ytd 4.8 10.9 6.9 6.1 7.0 2.6 -0.1 4.2 2.6 3.5 4.8 3.5 4.4 4.1 5.4 4.8 10.9 6.9 6.1 7.0 2.6 -0.1 4.2 2.6 3.5 4.8 3.5 4.4 4.1 5.4 -13.9 -4.5 -26.0 -20.3 -14.2 -3.0 -0.7 -24.3 -13.0 -6.7 -10.8 -14.5 -18.6 -13.3 -14.5
MSCI Asia ex-Japan % mtd % qtd % ytd 5.3 1.5 2.6 4.2 3.1 2.8 -1.4 3.0 1.5 -1.0 3.8 2.7 3.1 5.3 1.5 2.6 4.2 3.1 2.8 -1.4 3.0 1.5 -1.0 3.8 2.7 3.1 -17.4 -19.6 -24.5 -29.2 -7.0 -3.7 -20.1 -24.5 -8.7 1.7 -20.2 -18.8 -25.6 -
S&P/ASX 200 % mtd % qtd % ytd 3.4 5.7 1.8 3.7 2.9 0.0 2.8 5.3 2.0 1.4 -1.3 3.1 4.0 1.7 4.8 3.4 5.7 1.8 3.7 2.9 0.0 2.8 5.3 2.0 1.4 -1.3 3.1 4.0 1.7 4.8 -12.7 -18.1 -21.6 -12.7 -19.0 -2.0 -12.5 -8.6 -1.4 12.3 -26.3 -11.7 -19.7 -17.5 -8.0
5.7 11.6 5.3 6.2 6.5 2.9 1.4 4.2 0.9 2.6 7.4 5.7 5.8 5.9 5.4
5.7 11.6 5.3 6.2 6.5 2.9 1.4 4.2 0.9 2.6 7.4 5.7 5.8 5.9 5.4
-8.8 -4.8 -20.7 -13.9 -7.3 1.4 0.7 -19.9 -7.2 -4.5 -3.2 -8.6 -12.2 -8.1 -9.6
Table 3 : Global sector performance (relative)

MSCI World % mtd % qtd % ytd 5.9 -0.4 0.5 0.8 -2.8 -4.3 -1.5 -4.8 -3.1 1.7 0.0 0.1 0.2 -0.2 5.9 -0.4 0.5 0.8 -2.8 -4.3 -1.5 -4.8 -3.1 1.7 0.0 0.1 0.2 -0.2 4.1 -11.9 -5.0 1.5 10.2 9.5 -11.1 1.6 4.3 5.7 0.3 -3.4 0.7 -0.7 US S&P 500 % mtd % qtd % ytd 6.2 3.5 2.0 2.2 -3.6 -5.2 1.0 -5.4 -6.1 0.3 0.7 0.0 0.2 6.2 3.5 2.0 2.2 -3.6 -5.2 1.0 -5.4 -6.1 0.3 0.7 0.0 0.2 2.7 -11.2 -4.9 5.6 8.2 6.5 -16.3 12.7 -0.6 4.1 -7.8 1.3 -3.4 MSCI Europe % mtd % qtd % ytd 6.1 2.2 1.3 2.3 -2.2 -4.9 -0.6 -2.2 -1.3 -0.0 -1.3 -0.4 -0.6 0.7 6.1 2.2 1.3 2.3 -2.2 -4.9 -0.6 -2.2 -1.3 -0.0 -1.3 -0.4 -0.6 0.7 9.4 -12.0 -6.3 -0.3 10.9 13.2 -10.3 0.9 7.2 3.1 -0.5 -4.7 0.6 -0.6 MSCI Asia ex-Japan % mtd % qtd % ytd -3.9 -2.8 -1.2 -2.2 -2.5 -6.7 -2.3 -3.9 -6.3 -1.5 -2.6 -2.2 -3.9 -2.8 -1.2 -2.2 -2.5 -6.7 -2.3 -3.9 -6.3 -1.5 -2.6 -2.2 -2.2 -7.1 -11.7 10.4 13.7 -2.6 -7.0 8.8 19.2 -2.8 -1.4 -8.2 S&P/ASX 200 % mtd % qtd % ytd 2.3 -1.6 0.3 -0.5 -3.4 -0.6 1.9 -1.4 -2.0 -4.7 -0.3 0.6 -1.7 1.4 2.3 -1.6 0.3 -0.5 -3.4 -0.6 1.9 -1.4 -2.0 -4.7 -0.3 0.6 -1.7 1.4 -5.5 -8.9 -0.0 -6.4 10.6 0.2 4.0 11.3 25.0 -13.7 1.0 -7.0 -4.9 4.7
Relative returns Energy Materials Industrial Cons discretionary Cons staples Healthcare Financials Utilities Telecoms IT Large caps Small caps Growth Value
Source: Bloomberg
Table 4 : Global sector valuations

(x) MSCI World US S&P 500 MSCI Europe MSCI Asia Ex Japan S&P/ASX 200 Sector valuation PE 12 PB 11 DY 11 (%) PE 12 PB 11 DY 11 (%) PE 12 PB 11 DY 11 (%) PE 12 PB 11 DY 11 (%) PE 12 PB 11 DY 11 (%) Total Index Energy Materials Industrial Cons discretionary Cons staples Healthcare Financials Utilities Telecoms IT Large caps Small caps Growth Value 10.4 11.1 15.3 13.3 10.2 1.4 1.4 1.2 1.9 1.1 3.03 3.16 2.40 2.09 4.01 11.0 10.2 11.5 13.0 14.5 14.8 11.2 11.1 13.8 17.3 12.0 12.2 20.5 14.5 11.7 1.7 1.6 1.8 2.1 2.5 3.1 2.0 0.8 1.4 1.6 2.4 1.7 1.4 2.8 1.2 2.17 1.98 2.44 2.48 1.55 3.08 2.36 1.92 4.17 5.49 1.08 2.17 1.60 2.72 9.1 8.6 8.4 11.7 10.3 14.4 10.6 8.4 11.1 9.7 13.9 12.7 11.9 8.7 1.2 1.2 1.1 1.6 1.4 2.4 2.4 0.6 1.1 1.3 1.9 1.1 1.7 0.9 4.44 4.35 3.21 3.87 3.55 3.50 4.12 5.00 6.14 8.36 2.47 3.57 3.25 5.65 9.9 8.5 8.7 10.6 11.1 18.0 20.4 9.5 15.8 12.5 15.0 10.9 9.0 1.4 1.4 1.2 1.1 1.8 2.5 2.7 1.1 1.3 1.8 1.7 1.4 1.0 3.07 3.57 3.57 2.85 1.74 2.27 1.01 3.71 2.96 4.55 2.69 3.18 3.30 10.1 20.8 9.4 14.5 10.7 14.6 16.6 10.3 14.5 11.2 13.9 10.9 15.0 11.3 10.5 1.5 1.5 1.7 1.4 1.2 2.1 2.5 1.2 1.2 3.1 3.4 1.6 1.3 1.8 1.3 5.23 2.53 2.85 4.49 5.46 5.31 3.13 7.16 6.36 8.71 4.42 5.35 3.51 3.51 6.96
Source: Bloomberg estimates
14
Chart 10 : Relative industry returns quarter-to-date

8% 6% 4% 2% 0% -2% -4% -6% -8% Energy Materials Industrials Cons. Disc Cons. Staples Healthcare Financials Utilities Telecoms IT
MSCI World
US S&P 500
MSCI Europe
MSCI APxJ
S&P/ASX 200
Source: Bloomberg
Chart 11 : Relative industry returns year-to-date

30% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% Energy Materials Industrials Cons. Disc Cons. Staples Healthcare Financials Utilities Telecoms IT
MSCI World
US S&P 500
MSCI Europe
MSCI APxJ
S&P/ASX 200
Source: Bloomberg
Chart 12 : Relative PE, 2012

x 14 12 10 8 6 4 2 0 S&P/ASX MSCI 200 World US S&P MSCI 500 Europe UK Japan MSCI APxJ China
Chart 13 : Relative PB, 2011

x 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 S&P/ASX MSCI US S&P MSCI 200 World 500 Europe UK Japan MSCI APxJ China
Price-earnings ratio (2012 estimates)
Price-book ratio (2011 estimates)
Source: Bloomberg forecasts
15
Chart 14 : Relative size and style returns quarter-to-date
2%
1%
0%
-1%
-2%
-3% Large caps MSCI World Small caps US S&P 500 MSCI Europe Growth MSCI APxJ S&P/ASX 200 Value
Source: Bloomberg
Chart 15 : Relative size and style returns year-to-date

6% 4% 2% 0% -2% -4% -6% -8% -10% Large caps Small caps MSCI World US S&P 500 MSCI Europe Growth MSCI APxJ S&P/ASX 200 Value
Source: Bloomberg
Chart 16 : Size/style PE, 2012

x 25
Chart 17 : Size/style PB, 2011

x 3.0
20
2.5
2.0 15 1.5 10 1.0 5
0.5
0 Large caps MSCI World Small caps MSCI Europe Growth MSCI APxJ Value S&P/ASX 200
0.0 Large caps MSCI World Small caps MSCI Europe Growth MSCI APxJ Value S&P/ASX 200
US S&P 500
US S&P 500
16
Fixed income, currency and commodity markets

Table 5 : Fixed income markets
Rates (%) US 3m 2yr 10yr Long (30yr) Europe 3m 2yr 10yr Long (20yr) UK 3m 2yr 10yr Long (20yr) Japan 3m 2yr 10yr Long (20yr) Australia 3m 2yr 10yr
Source: Bloomberg, iTraxx, RBS
Yield 0.42 0.26 2.19 3.22 0.68 0.59 2.00 2.79 0.53 0.58 2.45 3.18 0.10 0.15 1.01 1.77 4.72 3.94 4.46
mtd 0.04 0.02 0.27 0.30 0.30 0.04 0.11 0.15 0.02 0.00 0.02 -0.12 0.00 0.00 -0.02 0.04 -0.20 0.27 0.24
qtd 0.04 0.02 0.27 0.30 0.30 0.04 0.11 0.15 -0.01 0.00 0.02 -0.12 0.00 0.00 -0.02 0.04 -0.20 0.27 0.24
ytd Spreads (bp) 0.11 3m FRA/OIS -0.33 5yr swap spread -1.10 Moodys AAA -1.12 Moodys BBB 0.29 3m FRA/OIS -0.28 5yr swap spread -0.97 AAA 5yr (BFV) -0.68 BBB 5yr (BFV) -0.03 3m FRA/OIS -0.52 5yr swap spread -0.94 AAA 5yr (BFV) -0.94 BBB 5yr (BFV) -0.02 3m FRA/OIS -0.03 5yr swap spread -0.12 AA 5yr (BFV) -0.09 BBB 5yr (BFV) -0.32 3m FRA/OIS -1.23 5yr swap spread -1.09
Current 44.0 34.6 291 433 70.0 84.7 175.0 281.6 53.0 50.4 192.4 267.3 13.3 10.5 24.9 77.2 90.3
qtd 1.3 4.8 -10.0 6.0 5.3 5.1 3.4 -19.7 -0.3 9.3 9.9 -16.1 -0.5 -0.7 -0.9 -27.0 -19.0 0.0
ytd 26.0 17.4 3.4 35.4 37.5 12.3 59.4 71.6 28.2 6.2 58.3 90.9 2.7 -6.2 2.1 -24.6 -19.0 35.0
Chart 18 : Yield curves current

6%
Chart 19 : Yield curves six months prior

6%
5%
5%
4%
4%
3%
3%
2%
2%
1%
1%
0% 3M 2Y 10Y >15Y
0% 3M 2Y 10Y >15Y
US
Europe
UK
Japan
Australia
US
Europe
UK
Japan
Australia
Chart 20 : US bonds vs equities

40% 30% 20% 10% 0 0% -50 -10% -20% -30% -40% 2005 2006 2007 2008 2009 2010 2011 -100 3m % change 3m bp change 150 100
Chart 21 : Aus government 10yr yield vs S&P/ASX 200

Index 7,000 7%
6,000 50 5,000 5% 4,000 4% 3,000 -150 -200 2,000 2000 2002 2004 2006 2008 2010 3% 6%
US S&P 500 returns (lhs)
US 30yr Treasury yield (rhs)
S&P/ASX 200 (lhs)
CGS 10 yr yield (rhs)
17
Table 6 : Australian CDS vs stock performance

Ticker Company CDS spread (bp) 116.5 142.2 193.3 125.1 143.7 123.2 192.0 140.9 113.7 104.2 127.0 143.5 175.3 317.5 175.2 175.2 175.2 186.8 190.9 287.0 298.3 431.6 331.6 170.2 288.8 1wk bp chg 6.6 -0.2 -3.3 -3.5 -4.9 -5.3 -5.4 -5.7 -5.9 -6.0 -6.1 -6.4 -11.7 -11.8 -12.0 -12.2 -12.2 -13.8 -15.7 -15.9 -18.4 -20.1 -22.4 -26.4 -27.1 1mth bp chg 11.1 7.5 15.0 14.2 1.8 7.0 -44.4 5.4 -18.0 6.1 15.7 -3.2 -15.3 37.7 -15.3 -15.3 -15.0 31.2 -5.8 22.0 21.6 68.7 53.0 -5.4 21.2 3mth bp chg 39.1 53.2 56.7 49.3 47.0 34.1 7.5 59.1 18.9 40.6 51.4 57.1 46.3 127.6 46.4 46.4 46.4 85.9 53.3 151.2 111.8 213.8 169.4 47.5 144.3 6mth bp chg 44.9 66.7 98.0 57.1 65.3 46.4 30.9 69.5 34.7 48.7 60.5 72.7 70.3 160.4 70.2 69.8 70.2 98.0 67.3 177.9 145.2 249.6 204.5 66.7 166.2 1yr bp chg 31.1 74.8 111.3 67.4 75.9 55.4 64.6 80.8 34.3 46.9 61.5 87.1 69.1 123.9 69.2 68.2 68.4 110.5 44.8 164.3 147.3 266.0 180.4 35.4 158.5 Share price (A$) 35.48 2.43 7.86 24.59 3.15 2.00 2.79 7.03 5.30 11.99 31.54 2.47 21.53 23.00 47.72 24.28 21.12 62.85 4.07 7.56 1.48 7.57 13.82 33.60 3.10 1wk % chg -5.7% -1.2% -1.1% -0.2% 2.3% 0.5% 2.2% 1.9% 0.4% 1.9% -0.8% -1.2% -1.0% -7.1% 0.3% -0.2% 0.1% -9.4% -3.1% -1.2% -5.4% -1.0% -2.6% -5.4% -1.0% 1mth % chg -4.4% 3.4% -3.7% -1.1% 2.3% -4.1% 4.1% 5.1% 8.4% 1.6% 2.9% 6.0% 11.5% 4.6% 8.6% 9.4% 8.9% -9.7% 2.5% -0.9% -3.3% 0.0% 11.2% -0.2% -2.2% 3mth % chg -18.6% 0.0% -12.9% -11.0% 2.9% -2.9% -13.9% -1.8% 3.7% 4.7% 2.3% -5.7% 1.8% -21.0% -4.1% -1.3% -0.7% -23.7% -13.4% -8.3% -21.3% -15.5% -18.9% -15.9% 3.0% 6mth % chg -25.0% 8.2% -6.7% -8.1% 10.5% 25.6% -17.7% -1.3% 13.6% -1.4% -7.2% -20.3% -15.5% -34.8% -10.2% -9.4% -12.4% -25.3% -27.5% -18.4% -31.5% -16.0% -27.8% -29.8% -1.6% 1yr % chg -13.9% 5.9% -7.0% -13.7% 19.3% 29.7% -12.9% 6.5% 8.0% -3.4% -6.6% -35.4% -3.5% -30.5% -4.4% -0.9% -9.2% -23.1% -24.9% -21.9% -47.5% 2.3% -18.6% -23.9% 6.9%
BHP SGT CWN WOW TLS TEL TAH AMC FGL CCL WES CSR WBC MQG CBA NAB ANZ RIO AMP WDC QAN LLC QBE WPL GPT
BHP Billiton SingTel Crown Woolworths Telstra Corp Telecom Corp Tabcorp Amcor Fosters Coca-Cola Amatil Wesfarmers CSR Westpac Macquarie Bank Commonwealth Bank National Australia Bank ANZ Rio Tinto AMP Group Holdings Westfield Group Qantas Airways Lend Lease QBE Insurance Woodside Petroleum GPT
Priced at close of business 21 July 2011. Source: Bloomberg, RBS
Chart 22 : Australian CDS vs stock performance, one week

bp / % 30 25 20 15 10 5 0 -5 -10 -15 AMC MQG AMP QAN CSR QBE BHP TLS CBA NAB TAH TEL FGL CCL LLC RIO WES CWN WDC WBC WOW WPL GPT SGT ANZ
1w CDS tightening (bp)
1w Stock performance (%)
18
Table 7 : Commodity price movements

Spot Crude oil (US$/bbl) Natural gas (US$/mcf) Aluminium (US$/lb) Copper (US$/lb) Lead (US$/lb) Nickel (US$/lb) Tin (US$/lb) Zinc (US$/lb) Iron ore fines (US$/t cfr Tianjin) Coal steaming (US$/t fob Newcastle) Uranium (US$/lb) Gold (US$/oz) Silver (US$/oz) Platinum (US$/oz) Palladium (US$/oz) CRB index Soy (US$/bu) Corn (US$/bu) Wheat (US$/bu) Sugar (USc/lb)
Source: Bloomberg, CRB, LME, The Steel Index
% 1d -0.9 1.2 -4.5 -6.6 -4.4 -4.2 -3.3 -5.4 -1.3 0.7 -2.1 -0.1 0.2 0.2 -1.0 0.0 1.7 1.8 -0.6
% 1w 1.3 2.8 -5.2 -7.8 -12.7 -2.4 -3.7 -9.7 -9.0 0.7 -3.3 -5.1 -3.6 -5.8 -1.1 -2.5 1.8 2.1 -0.4
% mtd 7.7 -1.0 -2.8 -4.0 -12.6 2.3 4.0 -6.4 -14.9 -1.7 -0.3 -0.5 2.1 -1.8 -3.8 3.2 3.9 9.6 3.5 1.7
% qtd 7.7 -1.0 -2.8 -4.0 -12.6 2.3 4.0 -6.4 -14.9 -1.7 -0.3 -0.5 2.1 -1.8 -3.8 3.2 3.9 9.6 3.5 1.7
% ytd -6.7 -17.6 -16.1 -30.3 -31.1 -27.3 -21.4 -29.6 -14.3 -4.7 -14.1 13.4 -1.1 -15.4 -26.6 -7.5 -12.1 3.3 -20.6 -16.6
85.3 3.63 0.94 3.05 0.80 8.15 9.60 0.78 145.8 120.2 52.9 1612 30.57 1499 588.5 307.7 12.25 6.50 6.31 26.80
Table 8 : Exchange rate movements

Currency US dollar New Zealand dollar Euro Sterling Yen Hong Kong dollar Canadian dollar Singapore dollar Real Ruble Rupee Renminbi Rand
Source: Bloomberg
AUD vs USD NZD EUR GBP JPY HKD CAD SGD BRL RUB INR RMB ZAR 1.0229 1.2894 0.7426 0.6478 78.60 7.9586 1.0391 1.3041 1.8230 32.08 50.9 6.531 8.351
% 1d 0.0 -0.1 0.0 0.0 0.0 -0.1 0.0 -0.1 -0.1 0.0 0.0 -0.1 -0.3
% mtd 5.9 1.7 2.9 4.5 -5.3 5.8 2.4 3.2 0.3 2.9 7.7 5.9 0.0
% qtd 5.9 1.7 2.9 4.5 -5.3 5.8 2.4 3.2 0.3 2.9 7.7 5.9 6.8
% ytd Currency 0.0 Australian dollar -2.8 Euro -1.1 Sterling 5.6 Yen 0.0 Hong Kong dollar 1.7 Canadian dollar -0.7 Singapore dollar 7.3 Real 2.6 Ruble 11.7 Rupee -3.1 Renminbi 23.1 Rand AUD EUR GBP JPY HKD CAD SGD BRL RUB INR RMB ZAR -1.7 New Zealand dollar NZD
vs USD 1.0229 0.7933 1.3776 1.5789 76.84 7.78 0.9844 0.7844 1.782 31.4 49.8 6.39 8.16
% 1d % mtd 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.1 -1.3 0.0 0.3 5.9 4.2 2.9 1.3 0.2 0.1 3.4 2.5 5.5 2.8 -1.7 0.0 -0.8
% qtd 5.9 4.2 2.9 1.3 0.2 0.1 3.4 2.5 5.5 2.8 -1.7 0.0 -0.8
% ytd 0.0 1.7 2.9 1.1 5.6 -0.1 -1.7 0.7 -6.8 -2.7 -10.2 3.2 -18.8
Chart 23 : Copper price vs AUD/USD

US$/lb 5 US$ 1.20 1.10 4 1.00 3 0.90 0.80
Chart 24 : Oil vs gold ratio

bbl/oz 30
25
20
15
0.70 0.60
10
1 0.50
5
0 2004 2006 2008 2010 A$/US$ (rhs)
0.40
0 1990 1995 2000 2005 2010
Copper price (lhs)
19
Commodities and currency forecasts

See Global Economic Forecasts: Debt overhang hits back, Jacques Cailloux (ed), 18 August 2011, for the full set of RBS forecasts and contributors. Table 9 : RBS Metals & Mining commodity price forecast summary
Unit Aluminium Copper Lead Zinc Nickel Tin Gold Silver Platinum Palladium Iron ore fines Coal steaming US$/lb US$/lb US$/lb US$/lb US$/lb US$/lb US$/oz US$/oz US$/oz US$/oz US$/t US$/t 1Q11 1.14 4.37 1.18 1.09 12.20 13.57 1388 31.97 1,792 790 148 225 110 2Q11 1.18 4.15 1.16 1.02 10.97 12.97 1508 38.50 1,784 760 171 330 130 3Q11 4Q11F 1Q12F 2Q12F 3Q12F 4Q12F 1Q13F 2Q13F 3Q13F 4Q13F 2011F 2012F 2013F 1.10 4.17 1.13 1.02 10.05 8.15 1750 40.00 1,825 770 167 310 120 1.20 4.40 1.12 1.07 10.55 8.40 1950 42.00 1,900 820 164 285 120 1.13 4.42 1.13 1.02 10.20 8.60 1900 40.00 1,850 825 160 305 120 1.18 4.45 1.16 1.07 10.90 8.60 1800 38.00 1,900 850 154 305 115 1.20 4.51 1.20 1.13 10.90 9.05 1700 36.00 1,950 925 149 305 115 1.25 4.63 1.22 1.18 12.00 9.05 1600 34.00 2,100 1000 149 305 115 1.27 4.72 1.30 1.22 12.45 9.55 1550 30.00 2,150 1100 144 275 115 1.27 4.72 1.30 1.20 12.45 9.55 1550 30.00 2,150 1100 139 275 105 1.43 4.99 1.50 1.45 13.50 10.00 1500 29.00 2,250 1150 139 265 105 1.43 4.99 1.50 1.45 13.50 10.00 1500 29.00 2,250 1150 129 265 105 1.15 4.27 1.15 1.05 10.94 10.77 1649 38.12 1,825 785 162 288 120 1.19 4.50 1.18 1.10 11.00 8.83 1750 37.00 1,950 900 153 305 116 1.35 4.86 1.40 1.33 12.98 9.78 1525 29.50 2,200 1125 138 270 108 LT 1.15 3.00 0.95 1.00 8.50 6.80 1100 18.00 1,850 700 85 180 100
Coal hard coking US$/t
Source: Bloomberg, RBS forecasts
Table 10 : RBS energy price forecasts

Unit Brent Crude Uranium oxide US$/bbl US$/lb 1Q11 106 64 2Q11 95 56 3Q11 4Q11F 1Q12F 2Q12F 3Q12F 4Q12F 1Q13F 2Q13F 3Q13F 4Q13F 2011F 2012F 2013F 90 50 87 48 86 46 89 44 95 45 94 45 93 45 95 45 99 50 97 50 94 55 91 45 96 48 LT 90 65
Source: Bloomberg, RBS forecasts
Table 11 : RBS FX forecast summary

Per USD JPY GBP1 CHF AUD1,2 CAD ZAR SGD KRW CNY MXN BRL Per EUR USD JPY GBP CHF SEK NOK PLN CZK HUF 1.35 126.5 0.89 1.42 9.74 8.03 3.86 25.40 265.6 1.23 108.6 0.82 1.32 9.52 7.96 4.13 25.70 284.7 1.36 113.7 0.87 1.34 9.19 8.01 3.97 24.58 276.7 1.34 108.5 0.86 1.25 8.99 7.79 3.96 25.02 278.7 1.42 117.5 0.88 1.30 8.95 7.84 4.03 24.53 266.0 1.45 116.9 0.90 1.22 9.17 7.83 3.98 24.39 265.9 1.36 104.0 0.87 1.22 9.20 7.75 4.40 24.50 287.0 1.33 103.7 0.86 1.20 9.30 7.60 4.35 24.50 295.0 1.31 99.6 0.85 1.20 9.25 7.55 4.20 24.30 285.0 1.36 99.3 0.84 1.20 9.15 7.55 4.10 24.00 285.0 1.38 103.5 0.84 1.20 9.00 7.65 4.00 24.00 280.0 1.41 102.9 0.83 1.20 9.00 7.75 4.00 23.70 280.0 1Q10 93.4 1.52 1.05 0.92 1.02 7.27 1.40 1131 6.83 12.33 1.78 2Q10 88.6 1.50 1.08 0.85 1.06 7.66 1.40 1222 6.78 12.87 1.80 3Q10 83.5 1.57 0.98 0.97 1.03 6.98 1.32 1140 6.69 12.60 1.69 4Q10 81.1 1.56 0.94 1.02 1.00 6.63 1.28 1126 6.61 12.34 1.66 1Q11 82.8 1.61 0.92 1.04 0.97 6.77 1.26 1097 6.55 11.90 1.63 2Q11 3Q11F 4Q11F 1Q12F 2Q12F 3Q12F 4Q12F 80.6 1.61 0.84 1.07 0.96 6.76 1.23 1068 6.46 11.71 1.56 76.5 1.56 0.90 1.06 0.99 7.87 1.28 1170 6.39 13.45 1.80 78.0 1.55 0.90 0.93 0.98 8.00 1.18 1050 6.35 11.80 1.65 76.0 1.54 0.92 0.95 0.98 7.80 1.17 1040 6.29 11.50 1.65 73.0 1.62 0.88 1.02 1.00 7.60 1.16 1030 6.22 11.50 1.70 75.0 1.65 0.87 1.10 0.98 7.45 1.15 1020 6.16 11.00 1.70 73.0 1.70 0.85 1.10 0.98 7.30 1.14 1010 6.10 10.50 1.70
1. USD per currency unit. 2. AUD forecasts provided by RBS GBM FX team and currency assumptions of the RBS Australian equity research team may differ. Source: Bloomberg, RBS forecasts
20
10
RBS GBM economic forecasts

Table 12 : Global economic forecast database
GDP 2009 US Euro area Germany France Italy Spain UK Japan Asia (ex Japan) China India Australia New Zealand Emerging Europe and South Africa Poland Russia Turkey Latin America Mexico Brazil Argentina World2 -6.1 -0.6 0.9 -1.0 5.4 7.5 9.1 5.0 4.0 4.0 6.6 3.9 3.9 4.0 3.1 4.0 5.0 4.9 6.3 1.8 4.2 5.0 10.4 3.2 3.4 6.5 13.9 4.2 3.9 5.4 18.0 3.5 4.50 8.75 2.37 4.50 10.75 2.70 4.50 12.50 3.30 4.75 12.00 3.70 -3.5 -4.3 -5.1 -2.6 -5.2 -3.7 -4.9 -6.3 6.4 9.1 6.8 1.3 -2.0 -5.0 1.6 -7.9 -4.7 2010 3.0 1.7 3.6 1.4 1.3 -0.1 1.4 4.0 9.6 10.3 10.1 2.7 1.7 4.7 3.8 4.0 8.9 2011F 1.7 1.6 2.8 1.6 0.8 0.7 1.1 -0.5 8.1 9.6 7.6 1.6 2.7 4.4 4.3 4.1 6.8 2012F 2.1 1.1 1.3 1.2 0.9 0.7 1.8 2.3 7.7 9.0 7.6 4.4 4.9 3.7 4.2 3.5 4.4 Inflation headline 2009 -0.3 0.3 0.2 0.1 0.8 -0.2 2.2 -1.3 2.5 -0.7 10.8 1.8 2.1 8.4 3.8 12.3 6.2 2010 1.6 1.6 1.2 1.7 1.6 2.0 3.3 -0.7 5.2 3.3 12.1 2.8 2.3 6.0 2.7 6.8 8.6 2011F 3.1 2.6 2.4 2.0 2.4 3.0 4.3 0.2 5.7 5.6 7.8 3.5 4.4 6.0 4.1 7.5 6.5 2012F 2.4 1.7 1.5 1.2 1.4 1.1 2.8 0.3 4.5 4.7 5.1 3.1 2.2 6.4 3.3 8.5 6.0 3.50 8.75 6.50 3.50 7.75 6.50 4.75 8.25 5.25 5.00 9.00 5.25 0.50 0.10 5.31 3.25 3.75 2.50 0.50 0.10 5.81 5.25 4.75 3.00 0.50 0.10 7.06 6.75 4.75 3.00 0.50 0.10 7.81 6.75 5.00 4.00 4.11 1.30 5.50 3.39 1.13 5.56 2.00 1.05 4.75 3.20 1.60 5.00 13.02 1.74 3.80 12.34 1.66 3.98 11.50 1.65 4.20 11.60 1.70 4.30 2.86 30.04 1.50 2.96 30.54 1.54 2.78 29.00 1.75 2.60 28.50 1.50 1.61 93.1 6.83 46.53 0.90 0.73 1.56 81.1 6.61 44.71 1.02 0.78 1.65 78.00 6.35 46.50 1.06 0.85 1.74 73.00 6.10 44.00 1.10 0.86 2009 0.12 1.00 Policy rate1 2010 0.12 1.00 2011F 0.12 1.50 2012F 0.12 2.00 2009 3.85 3.39 10yr yield1 2010 3.30 2.96 2011F 1.80 2.28 2012F 1.70 3.45 2009 1.43 FX vs USD1 2010 1.34 2011F 1.42 2012F 1.44
1. End period. 2. Weighted average based on PPP GDP weightings, World GDP is 85% of IMF world PPP weightings. Source: Bloomberg, RBS forecasts
21
Table 13 : Key economic forecast changes

Gross domestic product 2011F (2.9) (3.5) (1.2) 1.7 1.6 2.8 1.6 0.8 0.7 1.1 -0.5 8.1 9.6 7.6 1.6 (1.5) 2.7 4.4 4.3 4.1 6.8 4.0 4.0 6.6 3.9 (4.1) (2.3) (2.0) (1.2) (-0.9) (2.5) (2.0) (3.4) (2.3) (1.1) Inflation headline 2011F 3.1 2.6 2.4 2 2.4 3 4.3 0.2 5.7 5.6 7.8 3.5 4.4 6.0 4.1 7.5 6.5 3.4 6.5 13.9 4.2 (3.3) (4.2) (2.2) (2.6) (3.2) (4.5) (0.3) (3.0) (2.7) Policy rate 2012F 2.4 1.7 1.5 1.2 1.4 1.1 2.8 0.3 4.5 4.7 5.1 3.1 2.2 6.4 3.3 8.5 6.0 3.9 5.4 18.0 3.5 (3.5) (2.0) (1.6) (1.5) (1.7) (1.4) (3.0) 2011F 0.12 1.50 0.50 0.10 7.06 6.75 4.75 3.00 4.75 8.25 5.25 4.50 12.50 3.30 (3.40) (6.30) (5.30) (1.80) 2012F 0.12 2.00 0.50 0.10 7.81 6.75 5.50 4.00 5.00 9.00 5.25 4.75 12.00 3.70 (4.20) (7.30) (5.80) (6.00) (5.00) (1.50) (2.80) (1.00)
2010E US Euro area Germany France Italy Spain UK Japan Asia (ex-Japan) China India Australia New Zealand Emerging Europe and South Africa Poland Russia Turkey Latin America Mexico Brazil Argentina World2 5.4 7.5 9.1 5.0 3.0 1.7 3.6 1.4 1.3 -0.1 1.4 4.0 9.6 10.3 10.1 2.7 1.7 4.7 3.8 4.0 8.9
2012F 2.1 1.1 1.3 1.2 0.9 0.7 1.8 2.3 7.7 9.0 7.6 4.4 4.9 3.7 4.2 3.5 4.4 3.9 4.0 3.1 4 (4.3) (4.9) (3.2) (1.6) (2.0) (1.9) (1.5) (1.0) (1.9) (2.1)
2010E 1.6 1.6 1.2 1.7 1.6 2.0 3.3 -0.7 5.2 3.3 12.1 2.8 2.3 6.0 2.7 6.8 8.6 4.2 5.0 10.4 3.2
1. End-period. 2. Weighted average based on PPP GDP weightings, world GDP is 85% of IMF world PPP weightings. Numbers in bold show forecast changes, numbers in brackets are forecasts as they stood the previous month. Source: Datastream, RBS forecasts
22
Australia/NZ Economics Weekly
21 October 2011
Contents Overview Economic diary Economics analysis The week ahead Monthly calendar
Debt comparisons Australia & NZ versus the world

We have compared gearing in Australia and New Zealand with gearing in the major advanced economies plus China. For economy-wide gearing, Japan takes top honours by an enormous margin, followed by Europe and the US. Australia and New Zealand are at the bottom, while China has the lowest gearing ratio of the lot. For public-sector debt, the story is very much the same, although the US features higher up the ladder, while public-sector gearing is the least in Australia by an extremely large margin, followed closely by New Zealand and China. Corporate debt has more differences, though, in that Spain takes the top spot from Japan, and the US joins Australia and New Zealand at the bottom of the rankings (we do not have a complete sector split for China, but it has the lowest non-government gearing of any country in the group). Household debt shows much less dispersion, with English-speaking countries at the top of the list. Australian households share the top spot with British households, followed closely by the US. Only in this instance does continental Europe feature at the bottom of the list. All this shows that Australia and New Zealand (and China) are the bestplaced countries to respond on the fiscal front in a worst-case scenario where the European debt crisis dragged the world economy into recession, although households would be exposed given Australians and Kiwis are so heavily indebted.
Economic diary
AEST 11:30 11:30 08:45 08:45 10:00 01:00 11:00 11:00 11:30 11:30 11:30 11:30 23:30 01:00 07:00 08:45 23:30 05:00 01:00 01:00 23:30 23:30 00:55 Indicator Aus SoP PPI Aus SoP PPI NZ CPI NZ CPI Period Q3 Q3 Q3 Q3 Unit % qoq % yoy % qoq % yoy Previous +0.8 +3.4 +1.0 +5.3 RBS +0.7 +2.7 +0.6 +4.8 Market +0.8 +2.9 +0.7 +4.9 Monday, 24 October
Tuesday, 25 October
Aus RBA Deputy Governor Battellino speaks (Sydney) US consumer confidence NZ NBNZ activity outlook NZ NBNZ business confidence Aus CPI Aus CPI Aus RBA underlying inflation Aus RBA underlying inflation US durable goods orders US new home sales NZ RBNZ cash rate decision NZ trade balance US real GDP US Fed Beige Book US pending home sales US ECI US personal spending US core PCE deflator US Michigan cons confidence (final) Sep Q3 Sep Sep Oct % mom % qoq % mom % mom Index -1.2 +0.7 +0.2 +0.2 57.5 na na na na na Flat +0.6 +0.6 +0.6 58.0 Oct Oct Oct Q3 Q3 Q3 Q3 Sep Sep Oct Sep Q3 Index Index Index % qoq % yoy % qoq % yoy % mom 000 % NZD m % ar 14 35.4 30.3 +0.9 +3.6 +0.6 +2.6 -0.1 295 2.5 -641 +1.3 na na na +0.5 +3.4 +0.7 +2.7 na na 2.5 na na 15 na na +0.6 +3.5 +0.6 +2.6 -0.6 300 2.5 na +2.4
Wednesday, 26 October
Thursday, 27 October
Economics Kieran Davies +612 8259 5171 kieran.davies@rbs.com Felicity Emmett +612 8259 5835 felicity.emmett@rbs.com
Friday, 28 October
Saturday, 29 October
Source: ABS, Bloomberg, Dow Jones, RBS & Reuters
www.rbsm.com/strategy
Important disclosures can be found in the Disclosures Appendix
23
The Royal Bank of Scotland
Kieran Davies and Felicity Emmett Key points We have compared gearing in Australia and New Zealand with gearing in the major advanced economies plus China. For economy-wide gearing, Japan takes top honours by an enormous margin, followed by Europe and the US. Australia and New Zealand are at the bottom, while China has the lowest gearing ratio of the lot. For public-sector debt, the story is very much the same, although the US features higher up the ladder, while public-sector gearing is the least in Australia by an extremely large margin, followed closely by New Zealand and China. Corporate debt has more differences, though, in that Spain takes the top spot from Japan, and the US joins Australia and New Zealand at the bottom of the rankings (we do not have a complete sector split for China, but it has the lowest non-government gearing of any country in the group). Household debt shows much less dispersion, with English-speaking countries at the top of the list. Australian households share the top spot with British households, followed closely by the US. Only in this instance does continental Europe feature at the bottom of the list. All this shows that Australia and New Zealand (and China) are the bestplaced countries to respond on the fiscal front in a worst-case scenario where the European debt crisis dragged the world economy into recession, although households would be exposed given Australians and Kiwis are so heavily indebted. 1. We compared Australian and NZ debt with debt in the major advanced economies plus China We have used new data-sets on non-financial debt from the Bank for International Settlements, International Monetary Fund to analyse economywide and sectoral gearing in Australia and New Zealand versus the major advanced countries and China. The countries we chose account for about two-thirds of the world economy. 1. 2. 3. 4. 5. 6. 7. 8. 9. USA (23.1% of world GDP in 2010) China (9.4%) Japan (8.7%) Germany (5.2%) France (4.1%) UK (3.7%) Italy (3.3%) Canada (2.5%) Spain (2.2%)
10. Australia (1.9%) 11. New Zealand (0.2%) The gearing ratios are relatively simple in that they relate to gross debt and hence ignore contingent liabilities (such as financial debt guaranteed by Government) and financial assets.
24
Debt comparisons Australia & NZ versus the world
Our sample group of countries accounted for almost two-thirds of the world economy Australia/NZ Economics Weekly 3
16 14
20 Nominal GDP (USD trillion, 2010) Nominal GDP (% world GDP) 25
12 10 8 6 4
5 10
15
2 0 USA China Japan Germany France UK Italy Canada Spain Australia NZ

Source: IMF and RBS
2.
Australian, New Zealand and Chinese economy-wide gearing is low by world standards In the first instance, calculating economy-wide gross debt, Japan is the stand-out, both at the moment and for the past thirty years (current gearing is 463% of GDP). The Europeans are next, with Spain (349%) in second place, followed by a cluster in the roughly 300-320% range (UK at 318%, France at 306% and Italy at 300%). The North Americans are next at between 270 and 290% (Canada at 285% and the US at 271%). Germany is on the low side of the major economies (248%), followed by Australia (194%) and New Zealand (186%). China is at the bottom of the group (153%). In terms of the trend, every country has seen a rise in gearing over the past three decades, with the exception of Canada, and often building pace recently, which is no surprise given the extremely large Budget deficits of many countries. Chinas gearing ratio has risen sharply, but this is exaggerated by a significant structural break in 2009 that affects the comparison (public debt was revised significantly higher in 2010, but China is yet to provide revised historical estimates). The rise in the gearing ratios for Australia and New Zealand has been modest by word standards.
25
Australian, New Zealand and Chinese economy-wide gearing is low by world standards Australia/NZ Economics Weekly
France UK Italy Canada Spain Australia NZ 500 450 400 350 France 300 250 200 150 100 Germany UK Economy-wide debt (% of GDP) 50 0 500 450 400 350 300 250 200 150 100 50 0 USA China Japan Germany Economy-wide debt (% of GDP, end 2009 and 2010 data)
500 450 400 350 300 250 200 150 100 50 0
Economy-wide debt (% of GDP)
Japan
USA
* structural break in 2009
China*
80
85
90
95
00
05
10
80
85
90
95
00
05
10
500 450 400 350 300 250 200 150 100 50 0
500 Spain 450 400 350 300 250 200 150 100
Canada
Australia
Italy
50 0
NZ
80
85
90
95
00
05
10
80
85
90
95
00
05
10
Source: BIS, IMF and RBS
26
3.
Australian, New Zealand and Chinese public-sector gearing is extremely low by world standards For the public sector, the gearing ratios are for general government debt in order to ensure a fair comparison across countries (for example, in Australias case, this means that debt covers Commonwealth, State and local Government). On this basis, the ranking is a little different. Japan is still at the top (220% of GDP in 2010), and the Europeans are next, although North America is now blended in. That is, Italy is in second place (119%), followed by the US (94%), Germany and Canada (both 84%), France (82%), the UK (76%) and Spain (60%). China is towards the bottom (34%), with New Zealand (31%) and Australia (20%) having the lowest gearing ratios by a very large margin. In terms of the trend, the deterioration in Japan has been under way for many years as incomes have stagnated. The recent jump in US and UK debt has been very sharp given massive Budget deficits, while the rest of Europe and Canada have seen large increases too. The increase in Chinese gearing is overstated for the above-mentioned reason, while the rise in Australian and New Zealand debt has been modest by world standards. Australia/NZ Economics Weekly 5
Australian, New Zealand and Chinese public-sector gearing is extremely low by world standards
250 Public-sector debt (% of GDP, end 2009 and 2010 data)
200
150
100
50
0 USA China Japan Germany France UK Italy Canada Spain Australia NZ
27
250
Public-sector debt (% of GDP)
250
200
* structural break in 2009
Japan 200
150
150
100
USA
France 100 UK
50 China* 0 80 85 90 95 00 05 10
50 Germany 0 80 85 90 95 00 05 10
250
250
200
200
150 Italy Canada 100
150
100
Australia NZ
50 Spain 0 80 85 90 95 00 05 10
50
0 80 85 90 95 00 05 10
4.
Non-financial corporate gearing is lowest in the US, Australia, and New Zealand For the corporate sector, the gearing ratios are for non-financial company debt, which blurs the distinction between public and private companies. On this basis, Japan slips from first place to second (161% of GDP in 2009), easily beaten by Spain (199%). France is third (155%), followed by the UK (133%) and Italy (129%). Canada (107%) and Germany (100%) have lower gearing. Surprisingly, US companies (77%) join Australia (65%) and New Zealand (61%) at the bottom of the rankings. Over time, most countries have seen a trend increase in corporate gearing, with an extremely big increase in Spanish gearing. The exceptions are Canada and Australia, where the gearing ratios are relatively stable over time, and Japan, which has seen a dramatic reduction in gearing over the past two decades from a record level for Japan and for any other country of 217% of GDP at the end of the 1980s. Note that we do not have a corporate split of debt for China. We calculate Chinese non-government debt at the lowest gearing of any country in our 6
28
group (the median ratio for the major advanced economies is 212%, with Australia at 175% and New Zealand at 212% and China at 119%). Australian, New Zealand and US corporate gearing is very low by world standards
250 Corporate debt (% of GDP, end 2009 and 2010 data)
200
150
100
50 NA 0 USA China Japan Germany France UK Italy Canada Spain Australia NZ
250
Corporate debt (% of GDP)
250
Japan 200 200 France 150 150 UK 100 100 Germany 50 50
USA
0 80 85 90 95 00 05 10
0 80 85 90 95 00 05 10
250
250 Spain
200
200
Canada 150 Italy 150 Australia
100
100
NZ
50
50
0 80 85 90 95 00 05 10
0 80 85 90 95 00 05 10
29
5.
Household gearing is led by the English-speaking countries, with Australia and the UK at the top For the household sector, the gearing ratios span mortgage and consumer debt. On this basis, the rankings are much closer and are dominated by trhe English-speaking countries. That is, Australia shares the top slot with the UK (both 110% of GDP). The US is next (99%), followed by Canada and New Zealand (both 94%). Spain is next (90%), with Japan (82%) afterwards. The lowest gearing ratios are in countries with lower homeownership rates, with France (69%), Germany (64%) and Italy (52%) at the bottom. For household gearing, the trend has been up in most countries over recent decades. The exceptions are Japan and Germany. The Japanese ratio has drifted lower over the past decade, while Germany is the only country where the ratio has fluctuated around a relatively stable long-term average. In recent years, gearing ratios have tended to stabilise or fall modestly in most countries, consistent with increased household saving. (Note that we do not have a household split of debt for China for the reason outlined above.) Australia/NZ Economics Weekly 8
Household gearing is led by the English-speaking countries, with Australia and the UK at the top
120 Household debt (% of GDP, end 2009 and 2010 data)
100
80
60
40
20 NA 0 USA China Japan Germany France UK Italy Canada Spain Australia NZ
30
120
Household debt (% of GDP)
120
Household debt (% of GDP) UK
100
Japan
100 Germany
80
80
60 USA 40
60
40
20
20 France
0 80 85 90 95 00 05 10
0 80 85 90 95 00 05 10
120
Household debt (% of GDP)
120 Spain
Household debt (% of GDP) Australia
100 Canada 80
100
80
NZ
60
60
40
Italy
40
20
20
0 80 85 90 95 00 05 10
0 80 85 90 95 00 05 10
31
The week ahead

Australia/NZ Economics Weekly 10
Monday, 24 October Australia PPI, Q3

Released: Forecast: 11:30am +0.7% Previous: Market: +0.8% qoq +0.8%
Our simple partial model points to a 0.7% rise in the PPI, although it has tended to slightly underestimate inflation recently. Oil prices should fall, with the PPIs rise driven by domestic cost pressures. The PPI does not have any useful relationship with the CPI given its different composition and weights, although motor-vehicle and house prices, along with a handful of other smaller items, do map across to their CPI equivalents. FE Tuesday, 25 October NZ CPI, Q3
Released: Forecast: 11:30am +0.6% / +4.8% Previous: Market: +1.0% qoq / +5.3% yoy +0.7% / +4.9%
The CPI should grow at a slower rate of 0.6%, although annual headline inflation will still be very high because it includes tax increases from last year. Food prices should be up sharply, increasing by 1.8%, which would be the largest rate since last year. Petrol prices should fall sharply. Our forecast is marginally below the RBNZs forecast of 0.7%. For underlying inflation, the RBNZ uses a complicated sectoral factor model to estimate core inflation (this is an unusual choice as we cannot think of another central bank measuring using this approach as its main measure of core inflation). It is currently running at an annual rate of 2.3% and will be updated by the RBNZ within a few hours of the release of the CPI. FE Wednesday, 26 October Australia CPI, Q3
Released: Forecast: Released: Forecast: 11:30am +0.5% / +3.4% 11:30am +0.7% / +2.7% Previous: Market: Previous: Market: +0.9% qoq / +3.6% yoy +0.6% / +3.5% +0.6 qoq / +2.5% yoy +0.6% / +2.6%
Average underlying inflation, Q3
Ahead of the PPI and NZ CPI, we are expecting a rise of 0.5% in the unadjusted headline CPI for Q3, with annual inflation nudging down to 3.4%. For seasonally adjusted underlying inflation, using the average of the trimmed mean and weighted median CPI, we expect a rise of 0.7%, which would see annual inflation rise to 2.7%. The largest contribution to Q3 inflation should come from housing costs, with electricity and other utilities charges and rents making significant contributions. Domestic holiday travel should also add to inflation in the quarter, as well as the heavy-hitting restaurant and take-away categories. Keeping inflation in check though will be a large fall in fruit prices as the supply of bananas and other fruit recovers after the hit from the Queensland floods and Cyclone Yasi. Added to
32
this will be ongoing weakness in prices impacted by the higher exchange rate (especially computers and tvs). CPI
Q3 10 Headline inflation Headline CPI % qoq % yoy Underlying inflation Weighted median* Trimmed mean CPI* Average % qoq % yoy % qoq % yoy % qoq % yoy 0.5 2.6 0.5 2.6 0.5 2.6 0.7 2.4 0.4 2.1 0.5 2.3 0.8 2.4 0.9 2.2 0.8 2.3 0.5 2.6 0.7 2.5 0.6 2.6 0.7 2.8 0.6 2.6 0.7 2.7 0.7 2.8 0.4 2.7 1.6 3.3 0.9 3.6 0.5 3.4 Q4 10 Q1 11 Q2 11 Q3 11f
Contribution to CPI (ppc) Food Alcohol & tobacco Clothing & footwear Housing Household furnishings Health Transportation Communication Recreation Education Financial services CPI (% qoq)
Q3 10 -0.1 0.2 0.0 0.5 0.1 0.0 -0.1 0.0 0.1 0.0 0.0 0.7
Q4 10 0.4 0.1 -0.1 0.1 -0.1 -0.1 0.0 0.0 0.0 0.0 0.0 0.4
Q1 11 0.5 0.1 0.0 0.3 -0.1 0.2 0.3 0.0 -0.1 0.2 0.2 1.5
Q2 11 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.0 -0.1 0.0 0.1 0.9
Q3 11f -0.2 0.1 0.0 0.5 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.5
Note: numbers may not add because of rounding Source: ABS, RBA and RBS
Note that this CPI includes significant changes flowing from the five-yearly review of the CPI that increase the uncertainty around our inflation forecasts. (1) The weights will be updated and most of the controversial deposit and loans series will be dropped from the CPI. We think this will bias the CPI down slightly given it will increase the weight of computers, av equipment, etc, which are falling rapidly in price and since the deposit and loans series was growing at a faster rate than the CPI (eg, we calculate on these changes, the Q2 CPI would have been 0.7% rather than 0.9%). (2) The CPI will also include a substantial increase in the numbers of goods and services that are adjusted for seasonality, with the seasonality of each item reanalysed every quarter. This will allow the publication of a seasonally adjusted CPI, although inflation-indexed swaps and bonds will still be priced off the unadjusted CPI. The change in seasonal adjustment has made us less certain of our trimmed mean and median CPI forecasts, particularly with the concurrent seasonal adjustment, although we think we have accounted for this. In terms of other risks, falling fruit prices are a key issue. The bad weather in Queensland earlier this year has magnified the already large volatility in these prices and hence their impact on the CPI. Its also quite difficult to get a good handle on fruit and vegetable prices, as composition-driven price movements at the wholesale level generally arent reflected in retail prices. While there is potential for it to go either way, we think on balance that this risk is tilted towards a lower headline CPI. For what its worth, the monthly TDMI inflation gauge is pointing to a 0.2% rise in the CPI in Q3, although it has provided a poor guide to the actual CPI over
11
33
recent years and we are not sure whether its weights have been updated at this point. FE Australia/NZ Economics Weekly 12
Thursday, 27 October RBNZ cash rate decision

Released: Forecast: 07:00am 2.5% Previous: Market: 2.5% 2.5%
The RBNZ should keep the cash rate unchanged at a record low of 2.5%. The local economy continues to do well, with a big temporary boost from the Rugby World Cup, although the rebuilding effort in Christchurch is proceeding slowly given aftershocks. However, global uncertainty should keep the RBNZ on hold, particularly when policy-makers struggle to present a united response to the European debt crisis. FE
34
The Royal Bank of Scotland Australia/NZ Markets Navigator | Weekly
Calendar
Monday
24 October Aus SoP PPI, Q3 US Chicago Fed national activity index, Sep Aus RBA Deputy Governor Battellino speaks (Sydney, 10am) NZ CPI, Q3 US S&P/CS house price, Aug US TCB consumer confidence, Oct US Richmond Fed PMI, Oct US FHFA house price, Aug
Tuesday
25
Wednesday
26 Aus CPI, Q3 NZ NBNZ business survey, Oct US durable goods orders, Sep US new home sales, Sep
Thursday
27 NZ RBNZ cash rate decision NZ trade balance, Sep US GDP, Q3 US pending home sales, Sep
Friday
28 US ECI, Q3 US personal income and spending, Sep US core PCE deflator, Sep US Michigan consumer confidence (final), Oct
31 October Aus RBA private-sector credit, Sep Aus RP data-Rismark house price, Sep NZ building permits, Sep NZ M3, Sep US Chicago PMI, Oct US Milwaukee NAPM, Oct US Dallas Fed PMI, Oct
1 November Aus RBA cash rate decision (2:30pm) Aus AIG/PWC manufacturing PMI, Oct Aus ABS house price, Q3 NZ private wages, Q3 NZ ANZ commodity prices, Oct US construction spending, Sep US ISM, Oct US vehicle sales, Oct US FOMC funds rate decision, Nov
2 Aus AIG/CBA services PSI, Oct Aus nominal retail trade, Sep Aus real retail trade, Q3 NZ employment & unemployment, Q3 US non-farm productivity, Q3 US non-manufacturing ISM, Oct US factory ordersm Sep
3 US non-farm payrolls, Oct US unemployment rate, Oct US average hourly earnings, Oct
Aus HIA new home sales, Sep Aus building approvals, Sep US Challenger lay-offs, Oct US ADP employment report, Oct
7 November Aus AIG/HIA construction PCI, Oct Aus TDMI inflation gauge, Oct Aus ANZ job ads, Oct NZ card spending, Oct NZ QV house prices, Oct US consumer credit, Sep Aus trade balance, Sep Aus NAB business survey, Oct US JOLTS, Sep US NFIB survey, Oct
8 Aus WMI consumer sentiment, Nov Aus housing finance, Sep US consumer credit, Sep
10 Aus RBA Assistant Governor (Economic) Lowe speaks (9:30am, Melbourne) Aus employment & unemployment, Oct Aus WMI consumer inflation expectations, Oct NZ Business NZ PMI, Oct NZ ANZ consumer confidence, Nov US import price, Oct US trade balance, Sep US Treasury statement, Oct NZ food prices, Oct US Michigan consumer confidence (preliminary), Nov
11
13
35
Equity | Australia | Health Care Equip & Serv
21 October 2011
ResMed Inc
Hold
Target price
Pressure set to increase

We believe the progression of Medicare competitive bidding looks to change OSA market dynamics, as DMEs focus on driving greater price concessions and using lower priced products/manufacturers, while the price differential with private insurers diminishes, intensifying margin headwinds for RMD. Hold.
Key forecasts
FY10A EBITDA (US$m) 306.6 194.8 194.8 2.51 32.20 0.00 0.00 12.03 13.80 5.69 21.20 FY11A 338.5 227.8 227.8 1.45 15.40 0.00 0.00 20.85 11.70 20.30 21.60 FY12F 346.0 227.0 227.0 1.49 2.59 0.00 0.00 20.32 11.70 18.50 18.20 FY13F 375.8 245.5 245.5 1.65 11.10 0.00 0.00 18.29 10.30 16.50 18.30 FY14F 411.7 272.7 272.7 1.83 11.10 0.00 0.00 16.47 8.81 14.00 19.30
A$2.98
Price
A$2.95
Short term (0-60 days)
n/a
Price performance
(1M) Price (A$) Absolute (%) Rel market (%) Rel sector (%)
Oct 08 4.0 3.6 3.2 2.8 2.4 2.0 RMD.AX S&P/ASX200 Oct 09
Reported net profit (US$m) Normalised net profit (US$m)

(3M) 2.97 -0.7 9.0 15.0
Nov 10
(12M) 3.15 -6.3 4.5 6.5
2.85 3.5 0.9 4.4
Normalised EPS (US$) Normalised EPS growth (%) Dividend per share (US$) Dividend yield (%) Normalised PE (x) EV/EBITDA (x) Price/net oper. CF (x) ROIC (%)
1. Pre non-recurring items and post preference dividends Accounting standard: US GAAP Source: Company data, RBS forecasts
year to Jun, fully diluted
Competitive bidding set to heat up with Round 2 While Rnd 1 competitive bidding delivered large Medicare reimbursement cuts for OSA products (~34%), the financial impact on RMD was negligible given its small scope (0.6% of US population). However, we believe the more than 10 fold increase in Rnd 2 (on-line mid2013) is likely to have material impacts, especially as DMEs likely push for greater price concessions and migrate to lower priced products/manufacturers to support margins. Medicare reimbursement cut likely to flow-on to private insurers While 13% of RMDs sales are exposed to US Medicare, 37% emanates from US private insurers. Although some private payers may garner volume-based discounts at rates 15-20% below those of Medicare, a recent survey of 4k DME professionals suggests a significant amount of Medicare price matching (47% of Rnd 1 contract winners), with high expectations for other insurers to follow suit (90%). Taken together, we estimate 29% of total revenue is at risk with Rnd 2 Medicare competitive bidding. Scenario analysis consensus looks optimistic We performed a scenario analysis to better assess the changing DME market dynamics from Rnd 2 competitive bidding. Our base case (30% Medicare cuts; 15% cut by private insurers; 40% passed on to RMD; marginal shift to lower priced products/manufacturers) derives a 20320bp decline in FY13-15 EBITDA margins and shaves 1-8% off the top line. We believe our estimates already better reflect the negative impacts of competitive bidding vs Bloomberg consensus, with EBITDA margins -290bp and revenue -4.4% below on average for FY13-15. Maintain Hold; no changes to estimates; target price A$2.98 Given the changing market dynamics via the progression competitive bidding, ongoing uncertainty over growth rates, FX impacts and optimistic consensus margin estimates, we believe share outperformance is limited. Important disclosures can be found in the Disclosures Appendix.
Market capitalisation
A$4.50bn (US$4.61bn)
Average (12M) daily turnover
A$17.90m (US$18.40m)
Sector: BBG AP Health Part of: ASX/S&P 200 RIC: RMD.AX, RMD AU Priced A$2.95 at close 21 Oct 2011. Source: Bloomberg
Analysts
Dr Derek Jellinek
+61 2 8259 5848 derek.jellinek@rbs.com
Elliott Crane
+61 2 8259 6729 elliot.crane@rbs.com
37
Competitive bidding the story so far

The Medicare Prescription Drug Improvement and Modernisation Act of 2003 (MMA) established a competitive acquisition program for certain durable medical equipment, prosthetics, orthotics and supplies (DMEPOS), which includes continuous positive airway pressure (CPAP) devices and related accessories. Administered by the Center for Medicare and Medicaid Services (CMS), the initiative aims to lower Medicare reimbursement by replacing Medicares existing fee schedule amounts with market-based prices based on several rounds of progressively large tendering followed by nationwide implementation according to the below timelines: Round 1 (Rnd 1): implementation, Jan 2011; affected 9 metropolitan statistical areas (MSA) or ~6% of the US population. Round 2 (Rnd 2): affects a further 91 MSAs; 2HCY11, CMS announced bidding schedule and registration; 2HCY12 bidding begins; mid-2013 implementation; Nationwide rollout: 2016 Rnd 1 implementation entailed substantial cost savings for Medicare beneficiaries in regions affected, with cost savings averaging 34% across products used to treat obstructive sleep apnoea. Chart 1 : Reimbursement rate impact under Rnd 1
0% -5% -10% -15% -20% -25% -30% -31% -35% -40% -45% Flow generators Heated humidifiers Nasal masks Full face masks Heated tubing -39% -34% -29% -23%
Source: CMS
Little effect observed for OSA manufacturers While sizable cost savings were seen with Rnd 1, RMD and other national industry participants have claimed negligible effects on earnings. This observation is not surprising, however, as Rnd 1 only covers around 0.6% of RMDs total revenues (50% US sales; 20% Medicare; 6% Medicare beneficiaries covered in Rnd 1). Chart 2 : FY11 Revenue distribution Chart 3 : US revenue split by payer
ROW 16%
Medicare 20% Medicaid 5%

US 50%
EU 34%
Private 75%
Source: Company data
ResMed Inc | Investment View | 21 October 2011
38
but more pain for DMEs; repealing and replacing not likely Durable Medical Equipment (DME) suppliers are the main distributor of RMDs US products. While DMEs should be in an opportune spot with baby boomers coming of age and increased expenditures on homecare products, the industry is undergoing challenging times as it battles with sharp reductions in fee schedules, rising costs and increased regulation, along with an auditfrantic environment. These businesses continue to restructure and reorganise to adapt to the changing environment and have claimed hundreds of Medicare beneficiary complaints unable to compete against competitive bidding cost constraints, with negative implications for service levels. In addition, attempts to repeal the program are underway, with the latest bill (H.R. 1041) having more than 145 co-sponsors. Nevertheless, CMS officials continue to speak favourably about the program, with only a small number of complaints and no changes in beneficiary health outcomes. Importantly, a recent rescoring by the Congressional Budget Office (CBO) pegs the 10-year cost to repeal the program at US$20bn. Thus, we continue to believe the train has left the station and the days of hoping competitive bidding would go away are like to fade away. Rnd 2 set to pick-up the pace and is bigger than expected We believe the financial impact of Rnd 2 is likely to be much more significant then Rnd 1, as the programs scope is slated to increase more than 10 fold and cover at least 60% of the US population. In fact, the program appears to be larger than most observed expected, with recently released zip codes for the additional 91 MSAs including those in areas around MSAs (some areas including up to 400 zip codes), effectively bringing in higher population areas. As such, we believe DMEs are more likely to push for greater price concessions and volume discounts from manufacturers. In addition, while private payers discounts may have rates below Medicare, we believe there is an increasingly likelihood these insurers follow Medicare with their price decline and beyond the borders of the directly effected areas. How bad could it be? To better understand the potential impact from reimbursement cuts to both government and private payers, we analysed RMDs total exposure (ie, worst case) assuming similar cost-savings as seen in Rnd 1 and complete pass-on concessions to DME from manufacturers. In the table below, Rnd 2 cuts to Medicare revenue would decline by 2.1%, shaving 9% off of earnings. If private insurers follow suit, we estimate nearly 8% decline in revenue or 34% earnings impact. Taken together, we estimate a total impact from Rnd 2 of 10% in lost revenues and 43% negative impact on the bottom line. Table 1 : Summary of revenue exposure and worst case pricing impacts
ResMed Competitive bidding price cut Medicare revenues as % of total % of Medicare patients covered under competitive bidding % of RMD revenues exposed Cuts effect on total revenues NPAT impact US Private insurance as % of revenues % of Private insurance revenues exposed % of RMD revenues exposed to US private insurance Private cuts effect on total revenues NPAT impact Collective revenue impact Collective NPAT impact One-off revenue impact One-off NPAT impact
Source: Company data, RBS forecasts, CMS
Round 1 -34% Medicare worst case 10% 6% 0.6% -0.2% -0.9% Private insurance 37.7% 6% 2.3% -0.8% -3.4% Collective impact -1.0% -4.3% -1.0% -4.3%
Round 2 Full competitive bidding -34% 10% 60% 6.0% -2.1% -9.0% 37.7% 60% 22.6% -7.7% -33.7% -9.7% -42.6% -8.8% -38.4% -34% 10% 100% 10.1% -3.4% -15.0% 37.7% 100% 37.7% -12.8% -56.1% -16.2% -71.1% -6.5% -28.4%
39
Trying to determine the most likely effects of competitive bidding To better understand the real world effects from competitive bidding, we analyse key topics noted below: How likely are private insurers to implement cuts and have DMEs responded? What is the relationship between the DME and manufacturers like RMD? What are the market emerging dynamics? Private insurers likely to pass along cuts and DME look for cost savings A recent sleep survey of 4k HME professionals conducted by HME business magazine (75 responders; 2% participation rate) offers some valuable insights into competitive bidding effects on private insurers and what steps DME have taken with manufacturers to soften the pressure on margins. We highlight below key takeaways: 47% who won Rnd 1 contracts have seen other insurers matching Medicare bid rates 90% expect other insurers to cut reimbursement based on Medicare bid levels (10% are unsure) 50% switched to lower-end products from their existing manufacturers 29% switched to lower priced manufacturers Chart 4 : HME Survey: Have other insurers cut reimbursement based on Medicare bid levels? Chart 5 : HME Survey: Do you expect other insurers to cut reimbursement based on Medicare bid levels?
Unsure 13% Yes 47%
No 0%
Unsure 10%
No 40%
Yes 90%
n=15
n = 52
Source: HME Business Magazine
Chart 6 : Effects of competitive bidding from surveyed DMEs

120% 100% 100%
80%
60%
50%
40% 29% 20%
0% Negotiated lower pricing with manufacturers Switched to lower-end products from the same manufacturer Switched manufactuers
40
Given the flow-though to private insurers from the relatively small-scope of Rnd 1 Medicare reimbursement cuts, we believe it portends more widespread impacts on private insurers as Rnd 2 comes to fruition. However, our channel checks suggest the degree to which private insurers will institute reimburse cuts for OSA products is likely to be less than the full extent of that seen by Medicare, as the former tends to reimbursement these products around 15-20% below those of the government due to volume-based concessions. Thus, we estimate private insurers are likely to pass-on 40% of the rates imposed by Medicare. In terms of DMEs negotiating lower pricing with manufacturers or switching manufacturers or switching to lower-end products, we view increasing likelihood for price concessions and possible brand switching as DMEs look to support their margins. DME and manufacturer dichotomyflat Medicare reimbursement is to blame As the main product distributors, we believe the relationship with DME is critical for product uptake. Even though RMD is not directly associated with reimbursement, the ability to sell products into this channel is contingent upon adequate patient uptake and thus, payment from third-party payers (as discussed previously: Feeing the pressure; 27 July 2011). This dynamic is important to acknowledge as we believe there is a growing dichotomy between manufacturers pushing high-end products into the channel and DMEs focusing on the lower-priced products patients will comply with as Medicare reimbursement rates under Part B are flat across product categories regardless of product quality or wholesale price. Thus, although RMDs ongoing mixshift away from lower priced basic CPAP to higher end APAP support margin uplift (12% price differential), DMEs fair no better between the two products as the reimbursement codes are identical, but will look for products offering compliance monitoring as patient adherence is required for continued coverage (ie Medicare covers up to 3mo, with continuation of coverage up to 13mo only if patient is compliant greater than or equal to 4 hours per night on 70% of nights during a consecutive 30-day period). Manufacturers have avoided large price concession Historically, manufacturers have largely avoided the push from DME looking for large price concession (above the typical 3-5%/yr average), with our discussions with DME providers indicating that competitive bidding is just one of many cuts end distributors have faced over the last 5 years on both the public and private side as reimbursement rates have fallen over 40% over that time. According to DMEs we surveyed, manufacturers have avoided major price cuts due to several reasons: Aggressively marketed higherend product directly to prescription referral sources, driving prescription rates Selling directly to physicians despite a conflict of interest, with physicians prescribing and selling the same equipment Adamantly holding their pricing line with their head in the sand High competition among DME ensuring wide model choice offering Emerging market dynamics- lower priced products with higher data capabilities Given a reimbursement rate that is not finely tuned to free market dynamics and manufacturers avoiding the brunt of the reimbursement cuts for as long as DMEs can survive under them, we believe continued market pressure are changing industry dynamics where the divide between manufacturers focus on premium high end products and DMEs push for lower pricing while maintain compliance is beginning to close. In fact, we note Philips Respironics recently released REMstar Pro with AutoIQ (October 2011), a CPAP with data capabilities that allow it to track a patients progress over several nights, establish or readjust an ideal therapy pressure, reassess the patients progress as needed without the provider needing to visit the patients home and delivers key compliance information. According to CPAP.com, the REMstar Pro retails 12% below RMDs S9 Escape, the most basic CPAP in that series.
Scenario analysis
Given changing market dynamics with the geographic expansion of competitive bidding, DMEs strengthening buyer power and lower cost sourcing and private insurers likely to pass-on price cuts, we performed a scenario analysis to better assess the impact to RMD. Specifically, we assessed:
41
DMEs passing on pricing cuts to manufacturers Private insurers own follow-on cuts DMEs move to lower priced manufacturers products DMEs sourcing lower margin/lower end products Across all scenarios, we assumed the following: Rnd 2 entails 30% price cuts in-line with total Rnd 1 cuts; that it commences in mid-2013, with full coverage effects starting in 2016; 5% GM difference between high and low end products. Bear: 70% of Rnd 2 cuts are passed on to manufacturers, given the DMEs already tight margins. DMEs move to lower margin products (50% Medicare; 5% private insurers) or lower priced manufacturers (30% Medicare; 20% private insurers). This migration is in line with the recent survey by HME Business Magazine. Base: 40% of Rnd 2 cuts are passed on to manufacturers. DMEs mover to lower margin products (25% Medicare; 0% private insurers) or lower priced manufacturers (16% Medicare; 10% private insurers). Bull: 10% or Rnd 2 cuts are passed on to manufacturers. DMEs mover to lower margin products (5% Medicare; -5% private insurers) or lower priced manufacturers (5% Medicare; 0% private insurers). Table 2 : Scenario assumptions
Competitive Private bidding cuts insurance cuts Bull Base Bear
Passed on % Medicare business %PHI business % Medicare business % of PHI business cuts going lower margin going lower margin going to lower cost manf going lower cost manf 10% 40% 70% 5% 25% 50% -5% 0% 5% 5% 16% 30% 0% 10% 20%
-30% -30% -30%
-2% -15% -30%
We highlight below effects on revenues and GM under the scenarios stated above. If we assume impacts are not factored into our model, the base case suggest a 200-320bp negative hit to EBITDA margins for FY13-15, along with top-line downgrades of 6-8%. Chart 7 : Revenues for differing scenario assumptions Chart 8 : Gross Margin impact for differing scenario assumptions
0.0% -0.3%
2,400 2,200
Revenues (A$m)
2,291 2,278 2,084
-2.0%
2,000 1,800 1,600 1,820
-4.0%
-3.8%
-6.0%
-8.0% 1,400 -10.0% 1,200 1,000 2012 2013 Bear 2014 2015 Base 2016 Bull 2017 2018 -12.0% 2012 2013 2014 Bear 2015 Base 2016 2017 Bull 2018 Gross Margin impact (%) -10.7%
No change
Consensus looks overly optimistic we make no changes to our numbers We had previously factored in competitive bidding through moderate reductions in revenues and significant lower EBITDA margins. In comparing our FY13-15F revenues and EBITDA margin to Bloomberg consensus, our EBITDA margin is 290bp below consensus and 100bp below the EBITDA margin implied when we overlay our scenario analysis base case to consensus numbers. On a revenue basis across the same time period, our estimates are 4.4% below consensus and 0.3% above the revenues implied when we overlay our base case scenario to consensus. Hence, we believe our forecasts accurately capture the negative impacts of competitive bidding implied with our scenario analysis and make no changes to our estimates. ResMed Inc | Investment View | 21 October 2011
42
Chart 9 : Revenues: RBS versus Consensus and Consensus with the base case scenario overlay
2,200 Revenue (US$m) 2,100
Chart 10 : EBITDA margin: RBS versus Consensus and Consensus with the base case scenario overlay
30% EBITDA margin
25% 2,000 1,900 1,800 15% 1,700 1,600 1,500 5% 1,400 1,300 FY12 Consensus FY13 RBS FY14 FY15 Consensus + base case overlay 0% FY12 Consensus FY13 RBS FY14 FY15 Consensus + base case overlay 10% 20%
Source: RBS forecasts, Bloomberg
Source: RBS forecasts, Bloomberg
43
RMD financial summary

Year to 30 Jun (US$m) Income statement Divisional sales Total revenue EBITDA Associate income Depreciation/Amortisation EBITA Goodwill amortisation EBIT EBIT(incl associate profit) Net interest expense Pre-tax profit Income tax expense After-tax profit Minority interests NPAT pre significant items Significant items Reported NPAT Divisional sales revenue Air flow generators Masks, accessories, motors and diagnostics products Cash flow statement EBITDA Change in working capital Net interest (pd)/rec Taxes paid Other oper cash items Cash flow from ops (1) Capex (2) Disposals/(acquisitions) Other investing cash flow Cash flow from invest (3) Incr/(decr) in equity Incr/(decr) in debt Ordinary dividend paid Preferred dividends (4) Other financing cash flow Cash flow from fin (5) Forex and disc ops (6) Inc/(decr) cash (1+3+5+6) Equity FCF (1+2+4) Balance sheet Cash & deposits Trade debtors Inventory Investments Goodwill Other intangible assets Fixed assets Other assets Total assets Short-term borrowings Trade payables Long-term borrowings Provisions Other liabilities Total liabilities Preference shares Hybrid equity Share capital Other reserves Retained earnings Other equity Total equity Minority interest Total shareholders' equity Total liabilities & SE US GAAP US GAAP US GAAP US GAAP US GAAP 2009A 2010A 2011A 2012F 2013F 920.7 1092.4 1243.2 1415.0 1597.3 920.7 1092.4 1243.2 1415.0 1597.3 243.7 306.6 338.5 346.0 375.8 -46.3 190.3 -7.1 190.3 190.3 10.2 201.7 -55.2 146.4 0.0 146.4 0.0 146.4 2009A 506.2 414.5 2009A 243.7 -27.1 5.0 16.9 0.0 239.7 -107.9 -1.7 -7.9 -117.5 -65.7 0.0 0.0 0.0 0.0 -65.7 0.0 56.5 131.8 2009A 415.6 212.1 157.4 0.0 213.2 35.0 377.6 97.0 1508.0 67.5 48.3 94.2 11.1 171.6 392.8 0.0 0 468.6 207.8 548.3 -143.0 1081.8 0.0 1081.8 1406.0 -53.5 245.1 -8.0 245.1 245.1 14.0 265.3 -70.5 194.8 0.0 194.8 0.0 194.8 2010A 633.6 458.8 2010A 306.6 0.0 2.2 96.7 0.0 411.7 -56.8 -9.1 9.7 -56.3 -70.0 0.0 0.0 0.0 0.0 -70.0 0.0 285.3 354.8 2010A 488.8 226.9 185.6 0.0 198.6 30.9 387.1 108.4 1626.4 121.7 57.5 0.0 10.8 148.8 338.9 0.0 0 523.3 105.8 694.8 -208.7 1115.2 0.0 1115.2 1508.0 -61.4 266.9 -10.1 266.9 266.9 26.0 301.7 -73.9 227.8 0.0 227.8 0.0 227.8 2011A 695.9 547.3 2011A 338.5 -64.9 29.5 -73.9 0.0 234.4 -61.4 0.0 0.0 -61.4 -50.0 -75.0 0.0 0.0 0.0 -125.0 0.0 48.0 173.0 2011A 735.3 274.4 200.8 0.0 235.5 47.9 462.1 113.0 2068.9 0.2 55.2 100.0 8.1 174.8 338.2 0.0 0 453.3 105.8 874.6 -208.7 1225.0 0.0 1225.0 1634.0 -69.9 266.0 -10.1 266.0 266.0 32.7 300.6 -73.7 227.0 0.0 227.0 0.0 227.0 2012F 772.4 642.5 2012F 346.0 -58.0 32.7 -73.7 0.0 249.0 -69.9 -30.0 0.0 -99.9 -228.7 0.0 0.0 0.0 0.0 -228.7 0.0 -79.6 179.1 2012F 655.6 312.3 228.5 0.0 235.5 48.3 451.6 143.0 2074.8 0.2 62.8 100.0 8.1 174.8 345.8 0.0 0 453.3 105.8 1076.2 -208.7 1426.6 0.0 1426.6 1842.9 -79.0 286.7 -10.1 286.7 286.7 35.4 325.1 -79.7 245.5 0.0 245.5 0.0 245.5 2013F 857.4 739.9 2013F 375.8 -61.6 35.4 -79.7 0.0 273.0 -79.0 0.0 0.0 -79.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 194.0 194.0 2013F 849.7 352.5 258.0 0.0 235.5 50.0 439.8 143.0 2328.4 0.2 70.9 100.0 8.1 174.8 353.9 0.0 0 453.3 105.8 1324.7 -208.7 1675.1 0.0 1675.1 2099.8 Closing price (A$) Valuation metrics Preferred methodology DCF valuation inputs Rf Rm-Rf Equity Beta CAPM (Rf+Beta(Rm-Rf)) E/EV*Ke+D/EV*Kd(1-t) Equity (E/EV) Debt (D/EV) Interest rate Tax rate (t) WACC 2.95 CDI Price target (A$) Val'n (A$) $ 2.98 2.99 4.26% 2.0% 6.26% 9.0% 5771.6 0.0 -635.1 0.0 6406.7 157.2 40.76 2013F 3862.9 2.4 10.3 13.5 18.3 1.3 2013F 10.4 18.5 2013F 11.8 13.0 18.0 1.1
DCF, EV/EBITDA, PE 4.26% 4.50% 1.05 9.0% 90.0% 10.0% 6.26% 24.5% 8.5%
10-yr rate (US) Margin Kd Ke NPV cash flow (US$m) Minority interest (US$m) Net debt (US$m) Investments (US$m) Equity market value (US$m) Diluted no. of shares (m) DCF valuation (US$) 2011A 3977.3 3.2 11.7 14.9 20.8 1.5 2011A 11.9 21.1 2011A 12.1 13.5 18.3 1.1 2012F 4056.9 2.9 11.7 15.3 20.3 1.5 2012F 11.9 20.5 2012F 14.5 16.5 23.8 1.4
Multiples Enterprise value (US$m) EV/Sales (x) EV/EBITDA (x) EV/EBIT (x) PE (normalised) (x) PEG (normalised) (x) At target price EV/EBITDA (x) PE (normalised) (x)
2010A 4245.3 3.9 13.8 17.3 12.0 0.9 2010A 14.0 12.2
Comparable company data (x) Cochlear EV/EBITDA Year to 30 Jun EV/EBIT PE PEG
Per share data No. shares EPS (cps) EPS (normalised) (c) Dividend per share (c) Dividend payout ratio (%) Dividend yield (%) Growth ratios Sales growth Operating cost growth EBITDA growth EBITA growth EBIT growth Norm. NPAT gwth Norm. EPS gwth Operating performance Asset turnover (%) EBITDA margin (%) EBIT margin (%) Net profit margin (%) Return on net assets (%) Net debt (US$m) Net debt/equity (%) Net interest/EBIT cover (x) ROIC (%) Internal liquidity Current ratio (x) Receivables turnover (x) Payables turnover (x)
2010A 77.5 251.1 251.1 0.0 0.0 0.0 2010A 18.6% 16.1% 25.8% 28.8% 28.8% 33.0% 32.2% 2010A 17.4 28.1 22.4 17.8 17.1 -367.1 -22.8 -17.5 15.2 2010A 3.2 5.0 14.8
2011A 156.7 144.9 144.9 0.0 0.0 0.0 2011A 13.8% 15.1% 10.4% 8.9% 8.9% 16.9% 15.4% 2011A 16.8 28.1 22.4 17.8 18.8 -635.1 -24.0 -10.3 19.2 2011A 3.4 5.0 16.0
2012F 148.7 148.7 148.7 0.0 0.0 0.0 2012F 13.8% 18.2% 2.2% -0.4% -0.4% -0.3% 2.6% 2012F 17.1 27.2 21.5 18.3 18.6 -555.5 -32.0 -8.1 20.6 2012F 4.1 4.8 18.1
2013F 148.7 165.1 165.1 0.0 0.0 0.0 2013F 12.9% 14.3% 8.6% 7.8% 7.8% 8.1% 11.1% 2013F 18.1 24.5 18.8 16.0 19.5 -749.5 -39.2 -8.1 24.2 2013F 4.8 4.8 18.3
Source: Company data, RBS forecasts
44
Equity | Australia | Health Care Equip & Serv
21 October 2011
Primary Health Care

Hold
Target price
One overhang lifted

While PRY's debt refinance has done little to our estimates, it has alleviated much of the uncertainty around its capital structure in tight credit markets. However, with soft profitability metrics, aggressive accounting and trading at 14x FY12F earnings, the stock looks to us fully valued. Hold maintained.
Key forecasts
FY10A EBITDA (A$m) 331.0 132.0 132.0 26.82 8.33 25.00 7.94 11.70 7.64 6.89 5.51 FY11A 318.6 78.30 96.50 19.49 -27.4 8.00 2.54 16.20 8.24 7.85 4.87 FY12F 350.9 115.7 115.7 23.18 19.00 18.00 5.71 13.60 7.41 7.54 & 5.12 FY13F 368.5 132.9 132.9 26.24 13.20 20.00 6.35 12.00 7.08 7.15 5.52 FY14F 387.4 145.4 145.4 28.70 9.38 23.00 7.30 11.00 6.75 6.66 5.75
A$3.20 (from A$2.84)

Price
A$3.15
n/a
Price performance
Oct 08 7 6 5 4 3 2
PRY.AX
S&P/ASX200
Reported net profit (A$m) Normalised net profit (A$m)

(3M) 3.45 -8.7 0.2 5.7 (12M) 3.34 -5.7 5.2 7.2
2.95 6.8 4.1 7.7

Oct 09
Normalised EPS (c) Normalised EPS growth (%) Dividend per share (c) Dividend yield (%) Normalised PE (x) EV/EBITDA (x) Price/net oper. CF (x) ROIC (%)
Use of %& indicates that the line item has changed by at least 5%. 1. Pre non-recurring items and post preference dividends Accounting standard: IFRS Source: Company data, RBS forecasts
Nov 10
year to Jun, fully diluted
Capital structure concerns lifted with debt refinance Primary announced the completion of a A$1.02bn debt refinance at 225-250bp above BBSY, a 50-75bp improvement on its expiring facilities, helping to quash concerns about tight credit markets and a possible rights issue. Associated costs include an FY12 interest expense of A$83m (-5.3% yoy; A$44m 1HFY12; A$39m 2HFY12), with higher amortisation of borrowing costs at A$14.5m (+60% yoy; A$8.5m 1HFY12; A$6m 2HFY12), dropping to A$4.5m in FY13. What have we done to our numbers? The debt refinance is broadly in line with our previous estimates, with our FY12 interest cost reducing from A$84m to A$83m, as guided, and with FY12 and FY13 amortisation of borrowing costs changing by +A$5m and -A$5m, respectively, to around A$14.5m and A$4.5m. Given these changes, our FY12F EPS decreases by 2.1% to A$0.23, offset by a 2.3% increase in FY13F to A$0.26, with lower amortisation costs carried throughout. One overhang lifted, but poor earnings metrics remain
A$1.55bn (US$1.59bn)
A$7.53m (US$7.76m)
Sector: BBG AP Health Part of: ASX/S&P 100 RIC: PRY.AX, PRY AU Priced A$3.15 at close 20 Oct 2011. Source: Bloomberg
Analysts
Dr Derek Jellinek
+61 2 8259 5848 derek.jellinek@rbs.com
Elliott Crane
+61 2 8259 6729 elliot.crane@rbs.com
We had previously flagged concerns with the debt position as an overhang, and coupled with a lack of visibility on growth, discounted our valuation by 10% to derive our target price. With this debt refinance, and ongoing strength in Medicare data for GP attendances and pathology volumes, we feel comfortable removing our valuation discount. However, we remain cautious on the name given soft profitability metrics (ROE -870bp to 3.9% over the last four years) and a current negative ROCE-WACC spread of -1.7%. Maintain Hold; target price A$3.20 (previously A$2.84) While the debt refinance has lifted one overhang, and improving volume trends and cost-outs offer support, weak profitability metrics and a stretched valuation (PE of 14x on FY12F) are likely to limit the upside potential. We continue to prefer SHL. Important disclosures can be found in the Disclosures Appendix.
45
Details of the refinance

Primarys A$1.02bn refinance is broken up into the following tiers: A A$770m three-year four-month non-amortising facility, maturing February 2015; A A$100m three-year four-month revolving working capital facility, maturing February 2015; A A$150m five-year non-amortising facility, maturing October 2016.
Valuation
Table 1 : Primary valuation table
Metric DCF valuation P/E valuation* at (13x FY2) EV/EBITDA valuation* at (7.5x FY2) Blended equity valuation Target price
*Based on the FY12F peer group average of companies under our coverage Source: Company data, RBS forecasts
Weight 33% 33% 33% 100%
Valuation (A$ps) 2.86 3.50 3.23
Blended valuation (A$ps) 0.95 1.17 1.08 3.20 3.20
Primary Health Care | Investment View | 21 October 2011
46
PRY financial summary

Year to 30 Jun (A$m) Income statement Divisional sales Total revenue EBITDA Depreciation/Amortisation EBITA Goodwill amortisation EBIT Associate & Other income EBIT(incl associate profit) Net interest expense Pre-tax profit Income tax expense After-tax profit Minority interests NPAT pre significant items Significant items Reported NPAT Divisional sales revenue Medical Centres Pathology Diagnostic Imaging Health Technologies Unallocated Divisional EBIT Medical Centres Pathology Diagnostic Imaging Health Technologies Unallocated/Corporate synergies Cash flow statement EBITDA Change in working capital Net interest (pd)/rec Taxes paid Other oper cash items Cash flow from ops (1) Capex (2) Disposals/(acquisitions) Other investing cash flow Cash flow from invest (3) Incr/(decr) in equity Incr/(decr) in debt Ordinary dividend paid Preferred dividends (4) Other financing cash flow Cash flow from fin (5) Forex and disc ops (6) Inc/(decr) cash (1+3+5+6) Equity FCF (1+2+4) Balance sheet Cash & deposits Trade debtors Inventory Investments Goodwill Other intangible assets Fixed assets Other assets Total assets Short-term borrowings Trade payables Long-term borrowings Provisions Other liabilities Total liabilities Share capital Other reserves Retained earnings Other equity Total equity Minority interest Total shareholders' equity Total liabilities & SE
AIFRS 2010A 1286.8 1296.6 331.0 -72.9 258.1 0.0 258.1 0.0 258.1 -75.0 180.3 -46.1 134.2 -2.2 132.0 0.0 132.0 2010A 259.0 720.7 289.1 46.4 -28.4 2010A 124.4 117.0 15.0 13.3 -11.5 2010A 331.0 7.4 -59.3 -28.4 225.0 -104.3 -71.5 0.0 -175.8 268.1 -1459.8 -52.3 0.0 997.2 -246.8 0.0 -197.6 120.7 2010A 25.8 149.7 24.3 3.2 2999.8 75.6 367.7 50.1 3696.3 4.1 113.5 1000.7 0.0 107.7 1226.0 2318.6 8.4 138.9 0.0 2465.8 4.4 2470.2 3696.3
AIFRS 2011A 1312.9 1312.9 318.6 -82.2 236.4 0.0 236.4 -9.2 227.2 -87.9 139.3 -41.3 98.0 -1.5 96.5 -18.2 78.3 2011A 274.6 740.1 285.0 48.9 -48.1 2011A 122.8 95.3 13.0 11.9 -15.9 2011A 318.6 0.7 -79.4 -24.7 198.6 -99.1 -97.6 0.0 -196.6 0.1 -167.4 -45.2 0.0 266.3 53.8 0.0 55.7 99.5 2011A 43.3 156.7 25.6 1.2 3081.6 82.4 397.9 37.1 3825.7 3.8 122.5 1113.8 0.0 81.2 1321.3 2337.8 7.4 154.3 0.0 2499.4 5.0 2504.4 3825.7
AIFRS 2012F 1361.6 1361.6 350.9 -92.9 258.0 0.0 258.0 -10.1 247.9 -81.9 166.0 -48.1 117.9 -2.2 115.7 0.0 115.7 2012F 298.1 768.4 291.9 51.3 -48.1 2012F 132.3 101.5 17.0 12.2 -15.2 2012F 350.9 -2.2 -81.9 -48.1 208.5 -81.5 -39.5 0.0 -121.0 0.0 0.0 -64.9 0.0 0.0 -64.9 0.0 22.7 127.0 2012F 66.0 162.5 26.6 30.5 3081.6 66.9 402.0 47.2 3883.2 3.8 127.0 1113.8 0.0 105.4 1350.0 2337.8 7.4 180.9 0.0 2526.0 7.2 2533.2 3883.2
AIFRS 2013F 1421.0 1421.0 368.5 -90.1 278.5 0.0 278.5 -9.3 269.2 -78.1 191.1 -55.4 135.6 -2.7 132.9 0.0 132.9 2013F 318.7 797.6 299.0 53.9 -48.1 2013F 145.9 107.5 17.8 13.9 -15.9 2013F 368.5 -2.7 -78.1 -55.4 223.0 -87.8 -45.5 0.0 -133.3 0.0 0.0 -96.2 0.0 0.0 -96.2 0.0 -6.4 135.2 2013F 59.5 169.6 27.7 66.7 3081.6 60.2 406.3 56.5 3928.2 3.8 132.6 1113.8 0.0 112.9 1363.1 2337.8 7.4 210.1 0.0 2555.2 9.9 2565.1 3928.2
AIFRS 2014F 1484.9 1484.9 387.4 -94.0 293.3 0.0 293.3 -8.1 285.2 -76.3 209.0 -60.6 148.4 -3.0 145.4 0.0 145.4 2014F 341.8 827.8 306.8 56.6 -48.1 2014F 156.1 111.8 18.0 15.3 -16.0 2014F 387.4 -2.9 -76.3 -60.6 239.5 -91.7 -47.3 0.0 -138.9 0.0 0.0 -106.3 0.0 0.0 -106.3 0.0 -5.7 147.8 2014F 53.8 177.2 29.0 105.9 3081.6 53.3 410.9 64.6 3976.2 3.8 138.5 1113.8 0.0 121.4 1377.6 2337.8 7.4 240.6 0.0 2585.8 12.9 2598.7 3976.2
Closing price (A$) Valuation metrics Preferred methodology DCF valuation inputs Rf Rm-Rf Equity Beta CAPM (Rf+Beta(Rm-Rf)) E/EV*Ke+D/EV*Kd(1-t) Equity (E/EV) Debt (D/EV) Interest rate Tax rate (t) WACC
3.15 DCF, EV/EBITDA, PE 5.25% 6.00% 1.21 12.5% 65.0% 35.0% 8.00% 29.0% 10.1%
Price target (A$) Val'n (A$) $
3.20 3.20 5.25% 2.75% 8.00% 12.5% 2507.0 7.2 1051.6 1.2 1449.4 506.5 2.86 2014F 2613.8 1.8 6.7 8.9 11.0 8.6 2014F 6.8 11.1 2014F 7.6 9.4 11.4 1.4
10-year rate Margin Kd Ke NPV cash flow (A$m) Minority interest (A$m) Net debt (A$m) Investments (A$m) Equity market value (A$m) Diluted no. of shares (m) DCF valuation (A$) 2012F 2601.7 1.9 7.4 10.1 13.6 10.6 2012F 7.5 13.8 2012F 9.2 11.4 13.9 1.6 2013F 2608.1 1.8 7.1 9.4 12.0 9.4 2013F 7.1 12.2 2013F 8.3 10.4 12.7 1.5
Multiples Enterprise value (A$m) EV/Sales (x) EV/EBITDA (x) EV/EBIT (x) PE (normalised) (x) PEG (normalised) (x) At target price EV/EBITDA (x) PE (normalised) (x)
2011A 2624.4 2.0 8.2 11.1 16.2 12.7 2011A 8.3 16.4
Comparable company data (x) Sonic Healthcare EV/EBITDA Year to 30 Jun EV/EBIT PE PEG
Per share data No. shares EPS (cps) EPS (normalised) (c) Dividend per share (c) Dividend payout ratio (%) Dividend yield (%) Growth ratios Sales growth Operating cost growth EBITDA growth EBITA growth Divisional EBIT growth Medical Centres Pathology Diagnostic Imaging Health Technologies Unallocated/Corporate synergie EBIT growth Norm. NPAT growth (pre GW) Norm. NPAT growth Norm. EPS growth (pre GW) Norm. EPS growth Operating performance Asset turnover (%) EBITDA margin (%) EBIT margin (%) Net profit margin (%) Return on net assets (%) Net debt (A$m) Net debt/equity (%) Net interest/EBIT cover (x) ROIC (%) Internal liquidity Current ratio (x) Receivables turnover (x) Payables turnover (x)
2011A 491.7 15.8 19.5 8.0 65.2 2.5 2011A 2.0% 4.0% -3.8% -8.4% -1.2% -18.5% -13.4% -10.7% 37.7% -8.4% -26.9% -26.9% -27.4% -27.4% 2011A 8.7 24.3 18.0 7.3 9.4 1074.3 42.9 2.7 4.9 2011A 1.3 8.6 8.4
2012F 506.5 23.2 23.2 18.0 77.0 5.7 2012F 3.7% 1.6% 10.1% 9.1% 7.7% 6.5% 30.9% 3.3% -3.9% 9.1% 19.9% 19.9% 19.0% 19.0% 2012F 8.8 25.8 18.9 8.5 10.2 1051.6 41.5 3.2 5.1 2012F 1.3 8.5 8.1
2013F 506.5 26.2 26.2 20.0 78.0 6.3 2013F 4.4% 4.1% 5.0% 7.9% 10.2% 5.8% 4.8% 13.8% 4.3% 7.9% 14.9% 14.9% 13.2% 13.2% 2013F 9.1 25.9 19.6 9.4 10.9 1058.0 41.2 3.6 5.5 2013F 1.3 8.6 8.1
2014F 506.5 28.7 28.7 23.0 79.0 7.3 2014F 4.5% 4.3% 5.1% 5.3% 7.0% 4.1% 1.2% 9.6% 0.6% 5.3% 9.4% 9.4% 9.4% 9.4% 2014F 9.4 26.1 19.8 9.8 11.3 1063.8 40.9 3.8 5.7 2014F 1.2 8.6 8.1
Primary Health Care | Investment View | 21 October 2011
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Equity | Australia
21 October 2011
Australia Small/Mid Caps

Weekly Informer #38, 2011
The Small Ords (-2.5%) underperformed the All Ords (-2.3%) by 23bp for the week, with the Small Resources down 4.4%. The Small Ords is at a premium to the S&P/ASX 100 at a PE relative of 114.0%, above the 99.5% eight-year average.
Chart 1 : Index performance - rolling 12 months
115
105
95
85
75
65 Oct 10 Nov 10 Dec 10 Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11
All Ords
Small Ords
Small Industrials
Small Resources
Source: IRESS
Research summary over the week Key research pieces this week include SKE (AGM update Buy), SMX (AGM update Buy), EHL (update Buy), GUD (AGM update Buy), IMD (strong 1Q12 result Buy), GWA (profit warning Hold), Casinos/gaming (sector update), Chemicals (RBS Agriculture Investment Summit), COH (update Buy), OZL (3Q production update Buy), Construction materials (US starts/permits), CGF (1Q12 FUM update Buy), and productions updates for GRR (Buy) and OMH (Sell). Sector performance The Small Ords (-2.5%) underperformed the All Ords (-2.3%) by 23bp for the week. Small Industrials (-1.3%) outperformed Small Resources (-4.4%) by 314bp. Ytd, Small Industrials (13.2%) has outperformed Small Resources (-27.4%) by 1,421bp. Price-to-earnings performance Analysts
Julian Guido
+61 2 8259 5838 julian.guido@rbs.com
In terms of PE relative, the Small Ords is at a premium to the S&P/ASX 100 at 114.0% (based on one-year forward earnings). The eight-year average is 99.5%. Stock performance best and worst performers The best-performing Small Industrials over the week were Gunns (+42.5%), Pharmaxis (+16.1%) and iiNet (+10.9%), with the worst performing being Pacific Brands (-14.9%), Super Retail Group (-13.8%) and Silex Systems (-11.4%). The best-performing Small Resources over the week were Mineral Deposits (+8.9%), Horizon Oil Ltd. (+8.1%) and Flinders Mines Ltd. (+6.9%), with the worst being Gindalbie Metals (-16.8%), Allied Gold Min PLC (-16.2%) and OceanaGold (-15.5%). The top three weekly contributors in the Small Ords index were GrainCorp (+2.67bp), Gunns (+2.05bp) and Aurora Oil & Gas (+1.97bp), with the worst three being Perseus Mining (-4.54bp), Fletcher Building (-3.53bp) and Medusa Mining (-3.08bp). Important disclosures can be found in the Disclosures Appendix.
Matthew Nicholas
+61 2 8259 6168 matthew.nicholas@rbs.com
Brewin Kwong
+61 2 8259 6891 brewin.kwong@rbs.com
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Weekly Informer #38, 2011

Table 1 : Key stock performance in the last week best and worst performers
Rank Best 1 2 3 Worst 1 2 3 Small Industrials GNS PXS IIN PBG SUL SLX Small Resources +8.9% GNS +8.1% PXS +6.9% IIN -16.8% GBG -16.2% ALD -15.5% OGC Small Ords Small Ords attribution (bp) +2.67 +2.05 +1.97 -4.54 -3.53 -3.08
+42.5% MDL +16.1% HZN +10.9% FMS -14.9% GBG -13.8% ALD -11.4% OGC
+42.5% GNC +16.1% GNS +10.9% AUT -16.8% PRU -16.2% FBU -15.5% MML
* Companies mentioned: GrainCorp (GNC), Gunns Ltd. (GNS), Aurora Oil & Gas (AUT), Perseus Mining (PRU), Fletcher Building (FBU), Medusa Mining (MML), Pharmaxis (PXS), iiNet (IIN), Gindalbie Metals Ltd (GBG), Allied Gold Min PLC (ALD), OceanaGold (OGC), Mineral Deposits (MDL), Horizon Oil Ltd (HZN), Flinders Mines Ltd (FMS), Pacific Brands (PBG), Super Retail Group (SUL) and Silex Systems (SLX). Source: IRESS
We provide a summary of RBS research and research snippets from the past week.
Summary of research reports and snippets

Tuesday, 18 October 2011 Casinos & Gaming: 'The writing is on the wall' Analyst - Michael Nolan The Australian Greens released their gambling policy last Friday, which contains three measures, namely A$1 bet limit, A$500 maximum jackpot and A$20 maximum cash payout on all EGMs nationwide. It is an alternative approach to Independent MP Wilkie's mandatory precommitment scheme. The A$1 bet limit was also among the key recommendations in the Productivity Commission's 2010 Gambling report. The current proposal leaves high intensity players free to play once registered for the scheme, subject to their daily limit. By comparison, the A$1 limit restricts player losses to a fraction of current levels, with greater negative implications for EGM revenue. To illustrate, the average player would need to stay 10x longer for the same revenue outcome at Crown Melbourne and The Star, where the A$10 limit applies to the MGF, based on the Productivity Commission data. EGMs have a low labour requirement and, as a result, are a rich revenue source for the casinos. We forecast the introduction of either a mandatory pre-commitment scheme or a A$1 bet limit will reduce Crown's and Echo's consolidated EBITDA by about 10% each; this presupposes EGMs experience a 20% revenue decline and achieve a 50% EBITDA margin. Wednesday, 19 October 2011 Skilled Group (SKE): 'AGM Update' Buy, TP A$2.30. Analyst - Julian Guido As expected, have exited the Excelior call centre business. Excelior has been sold to Serco Group PLC for A$8.2m on the completion of the transaction, plus a further A$5m of earnouts over the next two years (subject to revenue targets). Assuming 50% of earn-outs are achieved, this will generate a pre-tax profit on sale in FY12 of A$4.5m On a divisional basis, Workforce Services' growth rate has slowed to low single digits, especially in the metropolitan areas (RBS forecasts FY12 sales and EBITDA flat yoy at A$945.9m and A$42.3m, respectively). Other Staffing Services' division continues to see revenue growth, in particular Swan and Mosaic IT. Engineering and Marine Services division has experienced increasing activity levels through 2Q and this is expected to run through to 3Q. We have already factored in a slower sales growth rate in FY12 to +1% (from +8%) and believe that the continued cost-out program will drive bottom-line performance. Furthermore, with the sale of Excelior, the balance sheet is in a much stronger position and allows SKE to focus on its core franchises. Stock looks cheap on 9.8x FY12 PE - whilst we acknowledge macro concerns will limit short-term investor appeal, we do see longer term value at these levels.
Australia Small/Mid Caps | Sector Dynamics | 21 October 2011
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SMS Management & Technology (SMX): 'AGM Update' Buy, TP A$6.82. Analyst - Julian Guido The update reported a strong performance in 1Q12 in the Financial Services, Resources and Infrastructure, Transport and Utilities, and ICT sectors, with an average EBITDA across all regions ex-NSW up about 16% from 1Q last year. NSW has had a slow start given its exposure to State Government, with a number of project delays that have led to a A$2m negative impact on its forecast 1Q EBITDA performance. Positively, Renewtek has been 'consistently profitable' throughout 1Q. Utilisation remains the focus, with management having slowed down recruitment from October to bring utilisation back towards its benchmark of 90%. RBS view - overall the update was as expected - we do expect a pick-up in NSW to occur in 2Q. Whilst macro concerns may act as an overhang, utilisation remains key and we note SMX's solid performance during the GFC (NPAT flat in FY09). We maintain SMX as the highest quality play in the IT space, and on ~10.5x PE, valuation is not demanding at these levels. Chemicals: 'RBS Agriculture Investment Summit' Analyst - Andrew Scott We attended the RBS hosted Agriculture Investment Summit in Singapore. Presentations highlighted the huge demand for global agriculture that will come from the significant population growth expected over the next 10-20 years. China's current and future production of meat alone suggests that a huge increase in demand for corn (which provides around 2/3 of the average feed animal diet) is required. Presentations made it clear that simply increasing land under cultivation is neither a practical nor sustainable solution. Instead, a focus on grain technologies (including both conventional breeding and genetically modified developments), use of crop chemicals and changes to more efficient practices will all be required if future demand is to be met. Positive trends for global agriculture will support the agriculture chemical stocks. Both fertiliser and crop protection chemicals will form an important part of a yield maximization focus going forward. NUF's growing seeds business will also be ideally positioned to provide the needed seed technology to boost yield enhancement via both traditional and GM based technological advances. We retain our Buy recommendation for both IPL and NUF. Thursday, 20 October 2011 Cochlear (COH): "What doesn't kill you..." Buy, TP A$63.05. Analyst - Dr Derek Jellinek Management quarantined the impact of voluntarily recalling the Nucleus CI500 series implants with a A$130m-150m provision for 1H12, post-tax cash cost of A$20m-30m, based on "conservative" estimates of recalled units, stock writedowns and other future costs, which are likely accounted for by the increase in CI500 failure rates recently observed. As it has previously noted in clinic reports, management indicated moisture appears to be the main culprit stopping the implant from working and pointed to some change in process variability in early stage manufacturing, likely ruling out post-implantation concerns. Since the recall, A$1bn in market value has been erased, equating to A$365m in lost sales (3x EV/S; 54% of total cochlear implant sales). In addition, the market is discounting earnings losses into perpetuity, failing to reflect potential cushioning via a functionally equivalent Freedom implant. We update our scenario analysis, with a base case for FY13F sales/EPS impacts of -4.5%/8%, a PE of 16x and a valuation 18% above current trading levels. While questions remain, we believe some concerns have been alleviated, with the long-term story intact, above-peer profitability metrics remaining and risk/return skewing to the upside. OZ Minerals (OZL): 'Gold not as prominent' Buy, TP A$14.10. Analyst - Lyndon Fagan 3Q11 copper production of 27kt was in line with our estimate. However, lower-than-expected gold grades reduced gold output to 36koz, significantly below our 45koz forecast. Cash costs came in at US$0.72/lb vs RBS forecast at US$0.60/lb due to lower-than-expected by-product credits. OZL has now downgraded gold production for the year to 150-160koz (from 185koz+), with a similar outlook for 2012. During the quarter the decline reached the ore body, with work commencing on development Australia Small/Mid Caps | Sector Dynamics | 21 October 2011
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of the first level. Capex for this project has increased to A$148m (less than 10%); however, it remains on track for the first production in 1Q12. Exploration around Prominent Hill is continuing, with an initial resource for the Munda and Ankata zones due by end-CY2011. OZL offers exposure to relatively low-risk copper production, very high margins, a strong balance sheet and relatively cheap valuation metrics. However, near term, the uncertain macro environment and recent pressure on the copper price are likely to weigh on the share price. Longer term, we think the key challenge for the company remains growing the business beyond Prominent Hill. If it can do this through a value-accretive acquisition, we believe it would be a key overhang removed and a rerating event for the stock. Friday, 21 October 2011 Emeco Holdings (EHL): 'This time it's different' Buy, TP A$1.23. Analyst - Matthew Nicholas Industry feedback suggests that the lead times for purchasing large earthmoving equipment show no signs of shortening. Global manufacturing capacity from leading OEMs has increased, in some cases, three-fold over the past five years, yet still not enough to service incremental demand in a more timely manner. We anticipate utilisation remaining at elevated levels over the medium term given strong ongoing demand. Given our view that further price rise opportunities will be limited (with dealer pricing for new kit fairly stable), the vast majority of future growth will be generated by expanding the rental fleet (ie, capex). With demand robust, the key swing factor for earnings is the timing of new kit. Indeed, this is the key driver behind the minor (<3%) downgrade to our FY12 EPS forecast. For investors anticipating a market rally, we would prefer to own more leveraged Mining Services plays (particularly BKN, ASL and IMD). However, if the current volatility is to be prolonged, then we believe EHL's stable earnings profile and strong market position will see the stock outperform. Nonetheless, given the relatively low earnings risk, we view current valuation (9.1x FY12F PE) as undemanding and maintain our Buy call. GUD Holdings (GUD): 'As good as can be expected' Buy, TP A$9.00. Analyst - Matthew Nicholas GUD has confirmed a softer-than-expected 1Q12. Normalised NPAT has arrived flat on the pcp despite a full three month contribution of the Dexion acquisition (vs a loss making ~4 week contribution in the pcp). Management has cited a number of contributing factors: 1) Offshore volatility and domestic political uncertainty impacting (already fragile) consumer confidence, and 2) Project work for Dexion being 'few and far between'. Commentary surrounding the weak consumer environment comes as no surprise and was the driver of our downgrades at the July result (we continue to forecast Consumer EBIT to decline 7%, despite the stronger currency which, we believe, will largely offset softer volumes). It would appear the major change since July has been Dexion's performance, and is the sole driver of the 6-7% EPS downgrades we apply across FY12-13F.. We remain buyers on a long-term view, noting: 1) reasonable valuation (10.7x) and attractive, fully franked yield (8.4%), 2) solid balance sheet (we believe acquisitions will be a focus given many of the key Dexion business restructuring decisions have been made), and 3) GUD's suite of well-managed, branded products which will perform well in a very difficult retail environment. A material interest rate cut is the only potentially positive catalyst on the horizon. Imdex (IMD): 'Fast out of the blocks' Buy, TP A$2.60. Analyst - Matthew Nicholas IMD has reported 1Q sales of A$72.3m, up 54% on pcp (and more importantly up 20% on the strong 4Q11 run rate). Similarly, EBITA of A$21.1m was up 81% on the pcp. The implied EBITA margin is up c500bp on the pcp, reflecting: 1) fixed cost leverage (especially in fluids), 2) strong growth in the higher margin Reflex rental fleet, and 3) we suspect price rises in the fluids business. Not surprisingly, management is not providing full-year guidance given the global market uncertainty but nonetheless remain 'optimistic' about FY12. Notwithstanding the recent volatility, commodity prices (particularly gold) remain at levels that encourage exploration activity (i.e. well above the average global cash costs).
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While IMD's business profile implies it is one of the riskier plays in Small Cap Mining Services, we note a number of features that reflect positively on IMD relative to the sector: 1) A business model that facilitates strong growth in an industry faced with capacity constraints, and 2) We regard IMD as one of the more capital efficient exposures in a sector that is generally capital hungry at present. At 7.2x FY12 EBIT or a 20% discount to the RBS Small Industrials average, valuation remains very reasonable and we maintain our Buy call. GWA Group (GWA): 'Profit warning' Hold, TP A$2.16. Analyst - Julian Guido GWA provided its 1Q12 update today with a 1H profit warning and sale of Sebel. Revenue for 1Q was flat on pcp, despite the inclusion of the Gliderol garage door business (lfl sales down 10% in the core GWA business). Whilst previous guidance was for a reduction in lfl sales of 34%, the reduction in 1Q has been 'greater than expected'. Consequently, whilst headline revenue in 1H will be flat (inc Gliderol), 1H Group EBIT is likely to be down 5-10% on pcp. Reasons for greater than expected decline have been attributed to: 1) Further decline in NSW, 2) Dux water heating sales down 40%, and 3) weak renovation markets. In addition, Sebel has been sold as expected for A$23m (RBSe A$24m), with lower working capital the driver of the slight difference. GWA has also decided to exit Caroma Nth America which has been struggling for some time. Other restructuring initiatives are progressing to plan. RBS View - bearish update doesn't come as a major surprise. We had recently pulled back our numbers ~5% below consensus (RBSe of EBIT down 10.4%), and assuming the trend in 1H is extrapolated for the remainder of the year (barring aggressive rate cuts from the RBA, which appears a reasonable assumption), we expect consensus EPS to come back 4-5%. The stock is starting to look more attractive from a valuation standpoint (noting yields of 8.6% DPS has been held flat for eight years) and the company is prepared to continue to use its balance sheet to seek acquisition opportunities. Construction Materials: 'US starts & permits rise in September' Analyst - Andrew Scott While we focus on original data relative to the pcp, seasonally adjusted starts came in at 658k, 15% above August 2011 levels. This was driven by multi-family starts, which rose 53%. Single-family starts were up 2%. On this basis, permits were 594k, 5% below August levels. Single-family permits were in line with August levels, while multi-family permits fell 14%. We focus on original data versus the pcp, which provides the greatest insight for volumes, in our view. On this basis starts were 60k, 13% above September 2010 levels and 1.2% ahead of our forecast of 59.4k. However, we note that the increase was driven by the multi-family segment, which was 62% above pcp. We note that three of the last four months have now showed an increase in starts vs pcp. Comps over this period were no longer distorted by government tax incentives, which boosted activity in early 2010. This data is consistent with our view that we are at or around the bottom of the second dip in housing starts, and that we will begin to see stabilisation and some initial signs of improvement (albeit gradual and off a low base) through 2H11. We retain our Buy on JHX and Hold on BLD. Challenger Financial Svcs (CGF): '1Q12 FUM Flows' Buy, TP A$5.10. Analyst - Richard Coles CGF has produced another quarter of strong growth in retail annuity sales, up 48% on pcp to a quarterly record of A$509m. This was well ahead of management's FY12 guidance of 25% sales growth. Total life investment assets rose c4% over the quarter to A$8.75bn, positioning CGF well to achieve its targeted 10% net book growth for FY12. The funds management boutiques attracted positive net flows of A$336m during the quarter despite the difficult environment for wealth managers. Given the strength of 1Q12 retail annuity sales, we have marginally increased our FY12 sales growth to roughly 30%. This has increased FY12F NPAT by 2%, with little change in FY13F. However, EPS forecasts for both years have fallen 4% to account for dilution from the recent conversion of the 60m options previously held by James Packer. We previously had these options converting in FY13F. CGF's underlying sales momentum continues to impress. If current momentum in annuity sales growth can be sustained over the remainder of FY12, we see upside to our current Australia Small/Mid Caps | Sector Dynamics | 21 October 2011 5
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forecasts. Despite widening credit spreads impacting investment experience by cA$80m, CGF's balance sheet remains robust given excess capital of A$675m at the FY11 result and a cash balance bolstered by the exercise of the Packer options. With CGF showing clear earnings momentum and trading at a 15% discount to our valuation, we maintain our Buy. Grange Resources (GRR): 'Oversold and overlooked' Buy, TP A$0.70. Analyst - Todd Scott September quarter pellet production at Savage River of 506kt was below our expectations (RBS 540kt). Pellet unit costs remained high at A$128/t, as access to higher grade ore in the North pit was regained only late in the quarter. Importantly, however, management maintained FY11 guidance of pellet production of 2Mt and operating costs of A$215m. Mining production at Savage River had been hampered since a pit wall collapse in June 2010. Remediation of the East Wall is now reaching its conclusion, with access to higher grade ore in the North pit now achieved. It appears this has lifted average grades of ore mined from 33% to 41%. We estimate the current GRR share price implies iron ore pellet prices of US$110/t; this is 39% below current pellet spot rates near US$180/t (cfr China). Notwithstanding the weak macro sentiment for raw materials demand, in our view this is likely an overly bearish scenario. GRR continues to generate strong margins at current pellet prices near US$180/t. With production rates and unit costs likely to fall at Savage River, the operating outlook is improving. In our view, macro level cautiousness has reduced the share price to a level which shows significant valuation appeal. Trading 40% below our NPV, at an FY12F PE of 5x, an FY12F dividend yield of 5%, and A$0.11ps of net cash, we retain our Buy recommendation. OM Holdings (OMH): 'Up Bootu Creek without a paddle' Sell, TP A$0.50. Analyst - Todd Scott Sept quarter production at Bootu Creek of 231kt was below our expectations (RBS 260kt). Production declined 13% over the June quarter despite virtually no rainfall occurring in the quarter. Lower production and higher strip ratios increased unit costs to A$4.95/dtmu from A$3.43.dmtu in the June quarter (unadjusted costs). Manganese prices remain unchanged at US$5.30/dtmu (44% Mn grade, lumpy). Near record high manganese ore inventories at Chinese ports have kept prices depressed. Additionally, events at the corporate level add complexity to the investment case. These include a strategic review which could result in mining operations being demerged from smelting and trading; and a decision on a proposed US$450m Malaysian smelter project due this month. Also, we understand OMH is in the process of renegotiating US$87m of debt. With the share price trading 17% above our NPV, operational challenges at the Bootu Creek mine, a weak macro outlook for manganese prices, and uncertainty on corporate level issues, we maintain our Sell recommendation. Until manganese production costs decline, and manganese prices begin to lift, we remain cautious on the investment outlook for OMH.
54
The Small Ords underperformed the All Ords by 23bp over the past week
Table 2 : Small-cap vs large-cap performance

1 week Small Ordinaries Small Industrials Small Resources All Ordinaries S&P/ASX 300 Industrials S&P/ASX 300 Resources Relative performance (bp) Small Ords vs All Ords Small Ind vs S&P/ASX 300 Ind Small Res vs S&P/ASX 300 Res Small Ind vs Small Res
Source: IRESS
1 month -1.9% 1.3% -6.2% 2.0% 5.5% -4.5%
3 months -11.7% -8.7% -15.7% -8.9% -4.4% -18.7%
6 months -17.6% -13.9% -22.4% -14.8% -10.6% -23.9%
12 months -13.4% -10.0% -18.0% -10.4% -8.2% -15.7%
2011 ytd -19.7% -13.2% -27.4% -13.2% -8.3% -22.5%
-2.5% -1.3% -4.4% -2.3% -0.7% -6.1%
-23 -61 173 314
-385 -421 -171 751
-278 -431 294 704
-273 -334 152 848
-306 -177 -236 807
-646 -493 -495 1421
Small Industrials has outperformed Small Resources by 807bp over the past 12 months
Chart 2 : Index performance rolling 12 months

115
105
95
85
75
65 Oct 10 Nov 10 Dec 10 Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11
All Ords
Small Ords
Small Industrials
Small Resources
Source: IRESS
The Small Ords has underperformed the All Ords by 646bp ytd (CY)
Chart 3 : Index performance ytd

105 100 95 90 85 80 75 70 65 60 Jan 11 Feb 11 All Ords Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Aug 11 Sep 11 Small Resources Small Ords Small Industrials
Source: IRESS
55
The Small Ords one-year forward PE is 12.1x vs the S&P/ASX 100 at 10.7x (source: Datastream), although our FY12 earnings forecasts yield a Small Ords PE of 12.5x and an S&P/ASX 100 PE of 10.4x
Chart 4 : Small-cap vs large-cap PE (x)

18 17 16 15 14 13 12 11 10 9 8 Oct-04 Oct-05 Oct-06 Oct-07 Small Ords Index Oct-08 Oct-09 Oct-10 Oct-11 x
S&P ASX 100 Index
Source: Datastream, RBS
The Small Ords one-year forward PE relative is now 114.0%, above the eight-year average of 99.5%
Chart 5 : Small-cap PE relative

140% 130% 120% 110% 100% 90% 80% 70% Oct-04 Oct-05 Oct-06 Oct-07 Small Ords PE rel Oct-08 Average Oct-09 Oct-10 Oct-11
Source: Datastream, RBS
The overall market is trading below its long-term average oneyear forward PE
Chart 6 : Australian market (All Ords) PE

20 18 16 14 12 10 8 6 Oct 91 Oct 93 Oct 95 Oct 97 Oct 99 Oct 01 Average Oct 03 +1.5 SD Oct 05 Oct 07 Oct 09 Oct 11 Market PE -1.5 SD X
Source: IRESS
56
Small Ordinaries Index performance over the week Chart 7 : Small Ords best performers
Gunns Limited Pharmaxis Ltd iiNet Limited Virgin Blue Holdings Mineral Deposits Imdex Limited Horizon Oil Limited Charter Hall Group Flinders Mines Ltd Tassal Group Limited GrainCorp Limited Transpacific Indust. Samson Oil & Gas Ltd Coalspur Mines Ltd STW Communications Aurora Oil & Gas Platinum Asset Sigma Starpharma Holdings Clough Limited 0% 10% 20% 30% 40%
Chart 8 : Small Ords Index worst performers

Gindalbie Metals Ltd Allied Gold Min PLC OceanaGold Corp. Pacific Brands Northern Iron Ltd Brockman Resources Super Ret Rep Ltd Murchison Metals Ltd Matrix C & E Ltd Ramelius Resources Silex Systems Kagara Ltd Medusa Mining Ltd Alkane Resources Ltd Ivanhoe Australia Gloucester Coal Panoramic Resources Mincor Resources NL Mirabela Nickel Ltd Troy Resources NL -20% -15% -10% -5% 0%
Source: IRESS
Source: IRESS
Small Industrials Index performance over the week Chart 9 : Small Industrials best performers
Gunns Limited Pharmaxis Ltd iiNet Limited Virgin Blue Holdings Charter Hall Group Tassal Group Limited GrainCorp Limited Transpacific Indust. STW Communications Platinum Asset Sigma Pharmaceutical Starpharma Holdings Clough Limited Hills Holdings Ltd SP AusNet Aspen Group Unilife Corporation Spotless Group Ltd IRESS Market Tech. FKP Property Group 0% 10% 20% 30% 40%
Chart 10 : Small Industrials worst performers

Pacific Brands Super Ret Rep Ltd Silex Systems Aristocrat Leisure Mineral Resources. Ausdrill Limited Thorn Group Limited Fletcher Building Ten Network Holdings Sthn Cross Media Wotif.com Holdings Sedgman Limited Perpetual Limited M2 Telecommunication Ceramic Fuel Cells Ausenco Limited Premier Investments Flight Centre The Reject Shop BWP Trust -15% -10% -5% 0%
Source: IRESS
Source: IRESS
Small Resources Index performance over the week Chart 11 : Small Resources best performers
Mineral Deposits Horizon Oil Limited Flinders Mines Ltd Samson Oil & Gas Ltd Coalspur Mines Ltd Aurora Oil & Gas Nexus Energy Limited Molopo Energy Ltd Silver Lake Resource Hunnu Coal Limited Tap Oil Limited AWE Limited Bow Energy Limited Cudeco Limited Sundance Resources Bandanna Energy White Energy Company Rex Minerals Limited Beach Energy Limited Intrepid Mines -5% 0% 5% 10%
Chart 12 : Small Resources worst performers

Gindalbie Metals Ltd Allied Gold Min PLC OceanaGold Corp. Northern Iron Ltd Brockman Resources Murchison Metals Ltd Ramelius Resources Kagara Ltd Medusa Mining Ltd Alkane Resources Ltd Ivanhoe Australia Gloucester Coal Panoramic Resources Mincor Resources NL Mirabela Nickel Ltd Troy Resources NL Ampella Mining Mount Gibson Iron Grange Resources. Platinum Australia -20% -10% 0%
Source: IRESS
Source: IRESS
57
Small Ordinaries Index performance over the month Chart 13 : Small Ords best performers
CSG Limited Gunns Limited Infigen Energy Karoon Gas Australia Tassal Group Limited Mesoblast Limited Pharmaxis Ltd Virgin Blue Holdings Bandanna Energy Sigma Unilife Corporation Linc Energy Ltd AWE Limited Coalspur Mines Ltd Spotless Group Ltd IOOF Holdings Ltd FlexiGroup Limited Aristocrat Leisure FKP Property Group Aurora Oil & Gas 0% 10% 20% 30% 40%
Chart 14 : Small Ords Index worst performers

Murchison Metals Ltd Ivanhoe Australia Brockman Resources Nexus Energy Allied Gold Min PLC Alkane Resources Kagara Ltd Ramelius Resources Carbon Energy Northern Iron Ltd Elemental Minerals Elders Limited Prima Biomed Ltd Straits Res Ltd. South Boulder Mines Greenland Min En Perseus Mining Ltd Eldorado Gold Corp Fletcher Building Medusa Mining Ltd -55% -45% -35% -25% -15% -5%
Source: IRESS
Source: IRESS
Small Industrials Index performance over the month Chart 15 : Small Industrials best performers
CSG Limited Gunns Limited Infigen Energy Tassal Group Limited Mesoblast Limited Pharmaxis Ltd Virgin Blue Holdings Sigma Unilife Corporation Spotless Group Ltd IOOF Holdings Ltd FlexiGroup Limited Aristocrat Leisure FKP Property Group iiNet Limited Adelaide Brighton Fleetwood Corp GrainCorp Limited Decmil Group Limited Acrux Limited 0% 10% 20% 30% 40%

Elders Limited Prima Biomed Ltd Fletcher Building Energy World Corpor. NRW Holdings Limited Starpharma Holdings Thorn Group Limited Credit Corp Group Oakton Limited Pacific Brands Ten Network Holdings Austin Engineering Super Ret Rep Ltd Biota Holdings Industrea Limited Qube Logistics Hldg Ceramic Fuel Cells Astro Jap Prop Group Sedgman Limited Ausdrill Limited -25% -15% -5%
Source: IRESS
Source: IRESS
Small Resources Index performance over the month Chart 17 : Small Resources best performers
Karoon Gas Australia Bandanna Energy Linc Energy Ltd AWE Limited Coalspur Mines Ltd Aurora Oil & Gas Mineral Deposits Eastern Star Gas Western Areas NL Rex Minerals Limited Kingsrose Mining Ltd Molopo Energy Ltd Metminco Limited Hunnu Coal Limited Flinders Mines Ltd Silver Lake Resource Resolute Mining Saracen Mineral Independence Group Mount Gibson Iron 0% 10% 20% 30%

Murchison Metals Ltd Ivanhoe Australia Brockman Resources Nexus Energy Allied Gold Min PLC Alkane Resources Kagara Ltd Ramelius Resources Carbon Energy Northern Iron Ltd Elemental Minerals Straits Res Ltd. South Boulder Mines Greenland Min En Perseus Mining Ltd Eldorado Gold Corp Medusa Mining Ltd Galaxy Resources OceanaGold Corp. Ampella Mining -55% -45% -35% -25% -15% -5%
Source: IRESS
Source: IRESS
58
10
Small Ordinaries Index performance ytd Chart 19 : Small Ordinaries best performers
Sigma Pharmaceutical Mesoblast Limited Samson Oil & Gas Ltd FlexiGroup Limited Hunnu Coal Limited Kathmandu Hold Ltd Bow Energy Limited Beach Energy Limited Alacer Gold Corp. Aston Res Ltd Aurora Oil & Gas Starpharma Holdings Austar United Envestra Limited Telecom Corporation GrainCorp Limited Silver Lake Resource Regis Resources Focus Minerals Ltd Macmahon Holdings 0% 30% 60% 90% 120% 150%
Chart 20 : Small Ordinaries worst performers

Hastie Group Limited Murchison Metals Ltd Ivanhoe Australia Platinum Australia Carnarvon Petroleum Energy Resources Straits Res Ltd. Pharmaxis Ltd Brockman Resources Indophil Resources Nexus Energy Limited Silex Systems Mincor Resources NL Carbon Energy Gindalbie Metals Ltd OM Holdings Limited Arafura Resource Ltd Galaxy Resources APN News & Media Gunns Limited -90% -70% -50% -30% -10%
Source: IRESS
Source: IRESS
Small Industrials Index performance ytd Chart 21 : Small Industrials best performers
Sigma Pharmaceutical Mesoblast Limited FlexiGroup Limited Kathmandu Hold Ltd Starpharma Holdings Austar United Envestra Limited Telecom Corporation GrainCorp Limited Macmahon Holdings Acrux Limited Programmed ARB Corporation SP AusNet Centro Retail Group Ardent Leisure Group Singapore Telecomm. NRW Holdings Charter Hall Retail Qube Logistics Hldg 0% 30% 60% 90% 120% 150%

Hastie Group Limited Pharmaxis Ltd Silex Systems APN News & Media Gunns Limited Elders Limited Transpacific Indust. Alesco Corporation Infigen Energy Sthn Cross Media Ten Network Holdings FKP Property Group Hills Holdings Ltd Astro Jap Prop Group Austal Limited Cash Converters Pacific Brands Watpac Limited GWA Group Ltd Perpetual Limited -90% -70% -50% -30% -10%
Source: IRESS
Source: IRESS
Small Resources Index performance ytd Chart 23 : Small Resources best performers
Samson Oil & Gas Ltd Hunnu Coal Limited Bow Energy Limited Beach Energy Limited Alacer Gold Corp. Aston Res Ltd Aurora Oil & Gas Silver Lake Resource Regis Resources Focus Minerals Ltd Resolute Mining Ramelius Resources Alkane Resources Ltd Troy Resources NL Mineral Deposits Beadell Resource Ltd St Barbara Limited Flinders Mines Ltd Eastern Star Gas Elemental Minerals 0% 20% 40% 60% 80%

Murchison Metals Ltd Ivanhoe Australia Platinum Australia Carnarvon Petroleum Energy Resources Brockman Resources Indophil Resources Nexus Energy Limited Mincor Resources NL Carbon Energy Gindalbie Metals Ltd OM Holdings Limited Arafura Resource Ltd Galaxy Resources Greenland Min En Ltd Intrepid Mines Ampella Mining White Energy Kagara Ltd Panoramic -80% -60% -40% -20% 0%
Source: IRESS
Source: IRESS
59
11
Small Ordinaries Index top 20 index contributors in the last week Chart 25 : Small Ords top 20 contributors (bp)
GrainCorp Gunns Aurora Oil & Gas Coalspur Mines Bradken Mineral Deposits Virgin Blue Holdings Sigma Monadelphous Group Platinum Asset Imdex Charter Hall Group iiNet Pharmaxis Ltd Mesoblast Austar United IOOF Holdings Transpacific Spotless Group Flinders Mines 0 1 2 3
Chart 26 : Small Ords bottom 20 contributors (bp)

Perseus Mining Fletcher Building Medusa Mining Super Retail Group Pacific Brands Ausdrill Aristocrat Leisure Alacer Gold Corp. Mineral Resources Mirabela Nickel Gindalbie Metals Ltd Mount Gibson Iron Perpetual Extract Resources Ltd Ten Network Holdings OceanaGold Corporation Southern Cross Media Group Aquila Resources Ramelius Resources Seven Group Holdings -5 -4 -3 -2 -1 0
Source: IRESS
Source: IRESS
Small Ordinaries Index top 20 index contributors in the last month Chart 27 : Small Ords top 20 contributors (bp)
Mesoblast Karoon Gas Australia Aurora Oil & Gas Sigma Pharmaceuticals IOOF Holdings Adelaide Brighton GrainCorp Western Areas NL Virgin Blue Holdings Aristocrat Leisure AWE Austar United Gunns Coalspur Mines CSG Spotless Group Australian Infrastructure Fund Linc Energy Ltd Platinum Asset Management Carsales.Com 0 2 4 6 8
Chart 28 : Small Ords bottom 20 contributors(bp)

Perseus Mining Fletcher Building Medusa Mining Ivanhoe Australia Alkane Resources Ramelius Resources Aquila Resources Nexus Energy Beach Energy Murchison Metals Ltd Beadell Resources Mineral Resources Kagara Ltd NRW Holdings Mirabela Nickel Energy World Allied Gold Mining PLC Bathurst Resources Gryphon Minerals Intrepid Mines -10 -8 -6 -4 -2 0
Source: IRESS
Source: IRESS
Small Ordinaries Index top 20 index contributors ytd Chart 29 : Small Ords top 20 contributors (bp)
Sigma Pharmaceuticals Limited Mesoblast Limited Telecom Corporation of New Zealand Limited GrainCorp Limited Beach Energy Limited Aurora Oil & Gas Limited Giralia Resources NL Alacer Gold Corp. Aston Resources Limited Regis Resources Limited FlexiGroup Limited Straits Resources Limited Austar United Communications Limited SP AusNet Bow Energy Limited Crane Group Limited Envestra Limited RHG Limited Kathmandu Holdings Limited Silver Lake Resources Limited
Chart 30 : Small Ords bottom 20 contributors (bp)

Aquila Resources Limited Karoon Gas Australia Limited Gindalbie Metals Ltd Intrepid Mines Limited Independence Group NL Energy Resources of Australia Silex Systems Limited Pharmaxis Ltd APN News & Media Limited White Energy Company Limited Mount Gibson Iron Limited Fletcher Building Limited Southern Cross Media Group Limited Mirabela Nickel Limited Kingsgate Consolidated Limited Flight Centre Limited Ivanhoe Australia Limited Whitehaven Coal Limited AWE Limited Transpacific Industries Group Ltd
10
15
-20
-15
-10
-5
Source: IRESS
Source: IRESS
60
12
Australia Small/Mid Caps | Sector Dynamics | 21 October 2011 13
Table 3: RBS small/mid-cap coverage

ASX Code Company Name RBS analyst Share price (A$) 0.86 2.16 1.20 2.52 3.69 1.06 0.67 12.02 5.46 0.89 3.33 2.31 0.82 8.16 3.52 3.02 7.55 2.21 14.14 2.37 0.63 5.05 10.00 0.52 4.14 1.60 8.07 9.15 6.00 2.00 4.45 1.84 6.04 1.42 1.24 22.38 3.90 0.44 0.83 13.46 55.44 3.15 18.60 2.90 Price target (A$) 1.37 2.60 1.37 2.68 4.30 1.50 0.72 11.25 7.15 1.44 3.47 2.20 0.95 8.65 3.65 2.95 9.00 2.60 17.25 2.55 0.92 5.58 12.70 0.60 4.25 1.30 12.38 9.32 6.46 3.02 5.10 2.72 7.50 2.17 1.38 25.35 5.25 1.00 1.15 13.92 63.05 2.84 17.95 2.98 Rec Mkt Cap (A$m) 539 1,173 1,526 1,416 2,539 748 244 1,583 1,840 326 2,150 3,097 857 591 898 1,573 529 2,348 1,396 1,383 587 783 261 942 3,193 233 1,819 3,347 333 536 2,462 2,081 1,388 176 149 1,000 2,189 57 221 1,766 3,155 1,576 3,759 4,513 NPAT (A$m) Pre abormals FY11F FY12F 83.1 56.6 84.4 94.8 184.3 68.6 27.2 68.7 104.6 40.6 115.1 279.5 78.1 37.9 118.0 168.1 49.0 242.0 134.4 163.2 103.4 61.1 16.1 135.2 248.3 21.6 166.9 336.2 23.9 32.7 248.0 122.4 111.5 22.9 15.9 72.9 190.5 8.7 25.8 121.7 180.1 96.5 204.7 227.8 96.4 94.6 101.6 92.7 135.6 98.9 28.8 80.2 131.1 43.1 281.3 329.8 80.6 42.0 111.7 147.6 49.7 243.7 137.7 142.0 86.5 61.1 23.7 128.9 276.9 25.0 262.9 337.2 26.8 35.9 275.4 151.2 120.2 36.4 16.2 67.8 211.2 12.0 29.6 136.3 139.1 118.5 227.7 227.0 EPS (cps) Pre goodwill FY10A FY11F FY12F 17.2 10.2 4.2 14.0 39.3 14.9 5.0 40.2 24.5 10.8 44.9 22.1 9.3 46.3 57.2 34.1 76.5 27.3 106.1 28.1 9.7 41.8 89.5 13.4 31.1 16.1 83.8 77.1 39.0 19.3 42.7 10.0 42.1 9.7 12.3 169.2 26.6 8.3 10.6 80.0 274.5 26.8 88.2 251.1 13.5 10.5 6.5 16.6 26.8 14.8 7.4 53.1 31.0 11.4 37.5 21.5 7.5 52.2 46.3 33.0 71.7 22.8 120.2 28.0 11.1 39.4 61.4 9.8 32.3 14.8 71.3 87.0 43.6 20.4 48.1 11.9 48.1 16.8 13.2 165.5 32.4 6.6 9.6 91.5 316.1 19.5 101.1 144.9 15.6 17.4 7.8 16.5 19.7 14.0 7.9 61.1 38.8 12.3 41.9 25.0 7.7 58.0 43.7 28.8 71.6 22.9 138.4 24.3 9.3 39.4 89.6 7.1 36.0 17.1 104.3 85.7 48.4 22.4 51.2 13.8 51.6 29.2 13.4 156.7 35.9 9.1 11.0 102.9 244.0 23.7 112.4 148.7 PER (x) Pre goodwill FY11F FY12F 6.4 20.6 18.6 15.2 13.8 7.1 9.0 22.6 17.6 7.8 8.9 10.7 11.0 15.6 7.6 9.2 10.5 9.7 11.8 8.5 5.7 12.8 16.3 5.3 12.8 10.8 11.3 10.5 13.8 9.8 9.3 15.5 12.6 8.4 9.4 13.5 12.0 6.7 8.6 14.7 17.5 16.2 18.4 2.0 5.5 12.4 15.4 15.3 18.7 7.6 8.5 19.7 14.1 7.2 7.9 9.2 10.6 14.1 8.1 10.5 10.5 9.6 10.2 9.7 6.8 12.8 11.2 7.3 11.5 9.4 7.7 10.7 12.4 8.9 8.7 13.4 11.7 4.9 9.2 14.3 10.9 4.8 7.5 13.1 22.7 13.3 16.6 2.0 Dividends EV/EBIT (x) (cps) Ex assoc. FY11F FY12F FY11F FY12F 6.3 15.4 14.4 n/a 11.4 10.5 7.7 15.4 15.1 6.5 19.6 8.2 9.1 11.1 9.1 6.7 8.1 7.1 8.2 6.8 4.4 9.4 11.5 6.2 9.0 9.2 7.4 6.9 16.1 5.5 6.9 7.8 8.3 5.5 6.1 6.2 6.9 4.3 6.2 13.9 12.9 11.1 12.1 14.6 5.4 9.3 12.9 n/a 12.3 6.9 7.1 12.7 11.5 6.2 7.1 7.0 9.0 9.6 8.1 7.7 7.7 6.8 7.5 7.7 5.0 7.5 8.1 6.1 8.1 8.0 4.7 6.6 15.6 4.8 5.9 6.4 7.6 3.0 4.8 7.1 6.3 3.0 5.8 12.5 15.8 9.9 10.8 15.0 8.1 5.4 0.0 16.5 0.0 10.0 4.5 26.0 14.3 7.4 45.0 21.5 5.0 23.0 29.0 28.0 64.0 12.0 77.0 22.5 6.2 36.0 31.0 7.8 27.0 2.0 54.0 60.0 25.5 17.5 16.5 7.2 43.0 15.0 13.0 185.0 27.5 3.5 7.0 32.4 225.0 8.0 52.0 0.0 9.3 8.7 0.0 16.5 10.0 9.1 5.5 30.5 21.4 8.6 35.0 22.5 5.8 26.5 29.0 24.0 64.0 11.0 85.0 20.0 6.1 35.5 68.0 5.7 29.0 6.0 69.0 61.0 30.0 20.0 18.5 9.2 47.0 32.0 13.4 146.0 30.5 4.8 7.6 42.2 240.0 18.0 58.0 0.0 Net yield (%) FY11F 9.4 2.5 0.0 6.5 0.0 9.4 6.7 2.2 2.6 8.4 13.5 9.3 6.1 2.8 8.2 9.3 8.5 5.4 5.4 9.5 9.8 7.1 3.1 14.9 6.5 1.3 6.7 6.6 4.3 8.7 3.7 3.9 7.1 10.6 10.5 8.3 7.1 8.0 8.4 2.4 4.1 2.5 2.8 0.0 FY12F 10.9 4.0 0.0 6.5 2.7 8.6 8.2 2.5 3.9 9.7 10.5 9.7 7.1 3.2 8.2 7.9 8.5 5.0 6.0 8.4 9.6 7.0 6.8 11.0 7.0 3.8 8.6 6.7 5.0 10.0 4.2 5.0 7.8 22.5 10.8 6.5 7.8 10.8 9.1 3.1 4.3 5.7 3.1 0.0
FY10A 103.1 54.4 54.1 89.5 270.7 48.0 18.4 51.4 82.9 38.7 96.2 282.4 96.9 32.6 145.9 174.0 46.4 290.0 118.6 163.5 90.3 63.2 23.5 183.5 238.5 22.6 189.1 291.0 20.3 30.9 232.5 84.6 97.2 11.9 14.8 72.8 155.0 8.9 28.5 106.2 155.2 132.0 178.8 194.8
FY13F 105.9 117.6 130.2 96.6 179.9 110.3 29.2 95.0 153.9 45.5 293.6 197.4 108.5 46.1 124.6 158.3 55.3 270.7 155.6 160.7 104.3 71.3 29.1 141.5 304.4 27.4 292.7 364.7 29.5 39.3 300.6 163.6 130.7 27.5 16.8 69.2 227.8 17.9 32.8 152.0 183.2 129.7 252.1 245.5
FY13F 17.1 21.5 10.0 17.2 25.8 15.6 8.0 71.3 45.6 13.0 41.8 15.0 10.4 63.6 48.6 30.7 79.5 25.5 155.1 27.6 11.2 46.0 109.4 7.2 39.6 18.6 112.3 90.5 53.1 24.6 53.4 14.8 55.8 22.0 13.9 162.9 38.7 13.4 12.2 117.0 321.4 25.6 124.4 165.1
FY10A 5.0 21.2 28.7 18.1 9.4 7.1 13.3 29.9 22.2 8.2 7.4 10.4 8.8 17.6 6.2 8.9 9.9 8.1 13.3 8.4 6.5 12.1 11.2 3.9 13.3 10.0 9.6 11.9 15.4 10.4 10.4 18.5 14.3 14.6 10.1 13.2 14.7 5.3 7.8 16.8 20.2 11.7 21.1 1.2
FY13F 5.0 10.0 12.0 14.7 14.3 6.8 8.4 16.9 12.0 6.9 8.0 15.4 7.9 12.8 7.2 9.8 9.5 8.7 9.1 8.6 5.6 11.0 9.1 7.2 10.5 8.6 7.2 10.1 11.3 8.1 8.3 12.4 10.8 6.4 8.9 13.7 10.1 3.3 6.8 11.5 17.3 12.3 15.0 1.8
FY10A 5.6 17.3 18.4 n/a 12.9 9.2 10.3 20.9 17.6 6.5 15.9 9.4 6.5 12.8 6.2 6.4 7.5 6.0 8.1 6.3 5.0 6.9 8.7 5.4 9.1 10.0 6.6 7.6 18.7 6.0 8.2 11.2 9.6 10.0 6.6 6.1 9.1 3.7 5.7 15.4 14.7 9.8 14.8 17.0
CONSUMER DISCRETIONARY (Media/Gaming) APN APN Fraser McLeish ALL Aristocrat Michael Nolan AUN Austar Fraser McLeish CMJ Consolidated Media Fraser McLeish EGP Echo Entertainment Michael Nolan SXL Southern Cross Media Ashley Wallace PRT Prime TV Ashley Wallace REA REA Group Ashley Wallace SEK SEEK Limited Fraser McLeish SGN STW Communications Matthew Nicholas SWM Seven West Media Ltd. Fraser McLeish TTS Tatts Group Michael Nolan TEN Ten Network Fraser McLeish CONSUMER DISCRETIONARY (Retail) ARP ARB Corporation BBG Billabong DJS David Jones GUD GUD Holdings HVN Harvey Norman JBH JB Hi-Fi MYR Myer PBG Pacific Brands PMV Premier Investments TRS The Reject Shop Matthew Nicholas Daniel Broeren Daniel Broeren Matthew Nicholas Daniel Broeren Daniel Broeren Daniel Broeren Julian Guido Julian Guido Julian Guido
Buy Buy Buy Buy Hold Buy Hold Hold Buy Buy Hold Hold Hold
Hold Hold Hold Buy Buy Buy Buy Buy Hold Hold
CONSUMER STAPLES (Agriculture + Food/Beverage) GFF Goodman Fielder Michael Nolan MTS Metcash Daniel Broeren TGR Tassal Group Matthew Nicholas FINANCIALS (Banks) BOQ Bank of Queensland BEN Bendigo & Adelaide Bank FINANCIALS (Diversified) AUB Austbrokers BTT BT Investment Mgmt CGF Challenger Fin.Group HGG Henderson Group PLC IFL IOOF Limited IMF IMF Australia MOC Mortgage Choice PPT Perpetual PTM Platinum Asset Mgmt TSM Think Smart WHG WHK Group HEALTHCARE ANN Ansell COH Cochlear PRY Primary Health Care RHC Ramsay Health Care RMD Resmed John Buonaccorsi John Buonaccorsi Julian Guido Julian Guido Richard Coles Julian Guido Julian Guido Julian Guido Julian Guido Richard Coles Julian Guido Matthew Nicholas Julian Guido Dr Derek Jellinek Dr Derek Jellinek Dr Derek Jellinek Dr Derek Jellinek Dr Derek Jellinek
Hold Hold Hold
Buy Hold
Buy Buy Buy Buy Buy Buy Hold Hold Hold Buy Buy
Hold Buy Hold Hold Hold
Priced at close of business 20 October 2011. Recommendations may lie outside the structure outlined in the disclosure page. Source: Company data, RBS forecasts
61
RBS small/mid-cap coverage (contd)

ASX Code Company Name RBS analyst Share price (A$) Price target (A$) Rec Mkt Cap (A$m) NPAT (A$m) Pre abormals FY10A FY11F FY12F EPS (cps) Pre goodwill FY10A FY11F FY12F PER (x) Pre goodwill FY11F FY12F Dividends EV/EBIT (x) (cps) Ex assoc. FY10A FY11F FY12F FY11F FY12F Net yield (%) FY11F FY12F
FY13F
FY13F
FY10A
FY13F
IT & TELCOS AMM Amcom CRZ Carsales CUS Customers DWS DWS Advanced Business HTA Hutchison Telec IIN iiNet IRE IRESS Market Tech OKN Oakton RKN Reckon SGT SingTel SMX SMS Management TEL Telecom Corp INDUSTRIALS (Construction) BLY Boart Longyear BLD Boral CSR CSR Ltd JHX James Hardie INDUSTRIALS (Miscellaneous) ALS Alesco ASB Austal Limited ASL Ausdrill Limited DLX DuluxGroup GWA GWA International HIL Hills Industries IMD Imdex Limited IVC Invocare NVT Navitas PPC Peet REX Regional Express SAI SAI Global VBA Virgin Blue INDUSTRIALS (Support Services) CAB Cabcharge Australia CND Clarius Group PRG Programmed Maintenance SGH Slater & Gordon SKE Skilled Group SLM Salmat SPT Spotless Group TWO Talent2 International
Alan Stuart Ashley Wallace Julian Guido Julian Guido Ian Martin Ian Martin Julian Guido Julian Guido Julian Guido Ian Martin Julian Guido Alan Stuart Andrew Hodge Andrew Scott Andrew Scott Andrew Scott Julian Guido Julian Guido Matthew Nicholas Julian Guido Julian Guido Matthew Nicholas Matthew Nicholas Julian Guido Julian Guido Matthew Nicholas Michael Newbold, CFA Julian Guido Mark Williams Julian Guido Matthew Nicholas Julian Guido Julian Guido Julian Guido Julian Guido Julian Guido Matthew Nicholas
0.81 4.90 1.10 1.32 0.06 2.55 7.05 1.73 2.60 3.16 5.34 2.00 3.00 3.45 2.47 5.85 1.33 2.17 2.81 2.61 2.15 1.12 2.04 6.98 3.85 1.20 0.96 4.70 0.35 4.30 0.51 2.00 1.80 1.77 2.65 2.03 1.15 7.40 0.27 0.99 2.94 0.11 18.82 1.13 2.12 11.99 2.86 4.46 13.40
0.97 5.38 1.68 1.42 0.13 3.20 8.70 2.43 2.37 3.16 6.82 2.01 4.03 4.04 3.25 6.78 1.81 3.75 3.80 3.13 2.16 1.19 2.60 7.60 4.12 2.00 1.26 5.20 0.41 6.63 0.65 2.14 2.50 2.30 4.49 2.25 1.70 9.85 0.49 1.23 5.01 0.12 23.09 1.65 2.13 14.47 3.16 5.05 19.10
Buy 192 Buy 1,146 Buy 148 Hold 175 Buy 787 Buy 382 Hold 896 Buy 162 Hold 347 Hold 50,371 Buy 365 Hold 3,840 1,383 2,569 1,250 2,549 125 408 848 959 648 276 417 768 1,445 382 116 950 785 518 45 236 272 414 423 539 169 1,233 126 625 1,262 151 1,669 180 1,165 1,991 1,820 1,168 2,761
18.4 43.2 21.1 18.5 41.5 34.8 58.4 20.9 15.7 3,911.7 27.9 379.7 84.5 144.5 173.4 133.0 24.0 39.0 52.7 71.5 55.5 40.9 11.8 34.1 64.3 42.1 19.3 40.6 9.7 57.7 3.3 27.4 19.8 19.2 55.9 46.4 9.8 78.4 4.1 40.7 186.2 40.4 83.2 18.3 123.7 151.1 151.5 48.4 126.7
21.6 58.2 21.5 17.4 -90.6 38.0 63.0 16.8 18.1 3,800.0 29.8 387.0 149.4 173.5 90.2 116.7 15.6 40.5 78.5 79.1 63.4 24.7 31.0 40.4 76.0 44.0 17.4 57.8 -48.1 65.6 4.7 28.6 27.9 26.1 51.6 43.1 13.8 90.1 5.4 56.3 155.9 18.7 96.3 21.1 128.2 164.4 153.1 86.1 182.0
16.3 67.1 17.0 19.1 28.0 44.4 75.2 19.6 21.0 3,745.5 35.5 457.0 193.4 203.1 100.3 134.4 14.7 49.7 96.7 80.9 56.6 32.7 41.5 46.7 88.0 39.6 21.7 66.4 64.5 66.0 6.9 29.1 37.3 43.8 60.7 52.0 16.9 120.3 17.4 68.7 190.1 23.6 114.5 24.4 126.3 179.8 165.5 101.9 279.6
18.9 76.0 23.8 20.7 107.4 49.2 83.6 23.4 22.9 4,011.1 39.6 490.7 214.8 275.3 127.8 180.1 18.9 50.2 116.0 84.3 60.4 36.6 48.5 51.1 103.8 44.4 24.0 77.9 114.9 70.6 8.2 33.7 41.2 51.9 68.2 58.8 21.9 143.9 21.6 78.2 221.3 31.8 135.1 27.9 144.0 205.3 197.4 118.5 364.1
5.7 18.6 15.3 14.0 0.3 22.9 46.3 22.9 11.8 24.6 41.9 19.8 18.5 24.1 38.0 30.7 25.5 20.7 25.9 19.5 18.5 17.0 6.1 33.6 18.8 14.1 17.4 25.9 0.4 47.9 4.1 25.7 16.7 11.0 35.1 18.4 7.4 60.2 1.3 6.4 52.1 17.1 95.5 13.7 29.9 91.2 23.9 21.3 65.7
9.0 24.9 15.9 13.1 -0.7 25.0 48.6 18.0 13.6 23.9 44.3 20.2 32.8 24.0 17.8 26.7 16.5 21.5 29.0 21.5 21.0 9.9 15.6 38.9 21.3 14.5 15.7 29.8 -2.2 54.5 5.4 24.2 18.3 12.5 32.4 16.5 9.7 63.5 1.2 8.9 42.6 7.4 110.2 13.3 26.0 98.8 24.1 32.9 88.9
6.8 28.5 12.6 14.4 0.2 29.8 57.0 20.8 15.8 23.5 52.3 23.7 42.5 28.1 19.8 31.6 15.5 26.4 32.1 22.0 18.8 13.4 20.4 43.1 23.4 12.5 19.7 33.3 2.9 54.8 8.0 24.7 23.6 18.3 37.9 19.8 11.5 72.3 3.7 10.9 44.3 1.7 130.3 15.4 23.4 107.5 26.1 38.9 136.1
7.8 32.0 17.7 15.6 0.8 33.8 62.4 24.8 17.2 25.2 58.2 25.5 47.3 38.0 25.3 43.5 20.0 26.7 38.5 22.9 20.0 15.3 23.8 46.9 27.6 14.0 21.9 39.0 5.2 58.7 9.4 28.5 25.5 21.7 42.6 22.3 14.7 84.0 4.6 12.4 51.5 2.3 153.2 17.5 28.4 122.4 31.1 45.3 177.3
14.2 26.3 7.2 9.4 19.6 11.1 15.2 7.6 22.1 12.9 12.7 10.1 16.2 14.3 6.5 19.0 5.2 10.5 10.8 13.4 11.6 6.6 33.7 20.8 20.5 8.5 5.5 18.2 80.3 9.0 12.5 7.8 10.8 16.1 7.5 11.0 15.5 12.3 20.6 15.4 5.6 0.6 19.7 8.3 7.1 13.1 12.0 20.9 20.4
9.0 19.7 6.9 10.1 n/a 10.2 14.5 9.6 19.1 13.2 12.1 9.9 9.1 14.4 13.8 21.9 8.1 10.1 9.7 12.1 10.2 11.3 13.0 17.9 18.1 8.2 6.1 15.8 n/a 7.9 9.4 8.3 9.8 14.2 8.2 12.3 11.9 11.7 23.1 11.1 6.9 1.5 17.1 8.5 8.1 12.1 11.9 13.6 15.1
12.0 17.2 8.7 9.2 29.1 8.6 12.4 8.3 16.5 13.5 10.2 8.4 7.1 12.3 12.5 18.5 8.6 8.2 8.8 11.8 11.5 8.3 10.0 16.2 16.4 9.6 4.9 14.1 12.1 7.9 6.4 8.1 7.6 9.7 7.0 10.2 10.0 10.2 7.2 9.1 6.6 6.4 14.4 7.4 9.0 11.2 11.0 11.5 9.8
10.4 15.3 6.2 8.4 7.6 7.5 11.3 7.0 15.1 12.6 9.2 7.8 6.3 9.1 9.8 13.4 6.6 8.1 7.3 11.4 10.7 7.3 8.6 14.9 13.9 8.6 4.4 12.0 6.7 7.3 5.4 7.0 7.1 8.2 6.2 9.1 7.8 8.8 5.8 8.0 5.7 4.7 12.3 6.4 7.5 9.8 9.2 9.9 7.6
12.4 18.2 5.8 6.1 n/a 9.0 10.2 5.5 15.1 10.6 8.8 10.0 12.3 14.6 5.7 12.9 7.6 9.3 11.1 9.4 8.7 4.7 26.3 15.3 15.6 8.0 5.0 16.9 22.7 9.0 8.2 5.9 9.3 11.9 6.2 7.5 15.9 10.7 14.3 11.0 5.6 4.6 13.6 6.3 9.8 9.6 10.7 13.2 13.0
9.2 13.7 6.9 6.7 n/a 7.9 9.7 7.0 13.4 10.7 8.2 9.6 7.4 12.9 5.5 14.1 5.6 6.7 7.9 8.6 7.9 9.0 9.8 13.5 14.0 8.0 5.1 12.5 n/a 9.0 5.6 7.4 6.9 8.9 7.9 8.0 10.4 9.4 10.7 9.0 5.8 8.3 11.7 5.3 8.7 8.6 10.6 8.5 9.9
7.8 11.6 6.2 6.0 n/a 6.6 7.9 5.5 11.9 10.3 7.0 9.1 5.7 12.5 6.6 13.4 6.7 5.2 6.4 8.4 8.7 7.0 7.1 11.5 11.8 9.4 3.2 11.0 11.4 8.7 3.7 6.0 5.5 7.1 6.2 7.2 8.0 8.0 6.9 7.9 5.3 5.3 9.4 4.2 8.2 7.7 9.9 7.6 6.5
4.8 19.9 5.0 12.0 0.0 12.0 39.0 8.5 8.5 30.0 18.0 9.8 14.5 41.7 0.0 14.0 6.0 12.0 15.0 18.0 10.0 4.5 31.3 20.7 8.5 7.1 14.3 0.0 30.0 4.0 9.0 5.5 3.0 24.0 11.0 5.5 39.5 0.0 10.0 0.0 0.0 95.0 2.0 14.0 70.0 19.0 0.0 47.0
3.5 22.8 6.5 11.0 0.0 15.0 45.5 16.0 9.5 35.5 21.0 12.8 16.0 15.7 6.0 9.0 7.0 13.0 16.0 18.0 11.0 5.5 36.0 23.5 7.5 7.6 16.3 0.0 37.5 5.5 11.0 7.5 7.0 27.1 13.0 6.0 45.0 0.0 6.0 21.0 0.0 112.0 4.0 14.0 75.0 23.6 11.7 68.0
5.9 4.1 4.5 9.1 0.0 4.7 5.5 4.9 3.3 5.6 9.0 3.3 4.2 16.9 0.0 10.5 2.8 4.3 5.7 8.4 8.9 2.2 4.5 5.4 7.1 7.4 3.0 0.0 7.0 7.8 4.5 3.1 1.7 9.1 5.4 4.8 5.3 0.0 10.1 0.0 0.0 5.0 1.8 6.6 5.8 6.6 0.0 3.5
4.3 4.7 5.9 8.3 0.0 5.9 6.5 9.2 3.7 6.6 10.5 4.3 4.6 6.4 1.0 6.8 3.2 4.6 6.1 8.4 9.8 2.7 5.2 6.1 6.3 7.9 3.5 0.0 8.7 10.8 5.5 4.1 4.0 10.2 6.4 5.2 6.1 0.0 6.1 7.1 0.0 6.0 3.5 6.6 6.3 8.2 2.6 5.1
Buy Hold Buy Buy
Hold Buy Buy Buy Hold Hold Buy Hold Hold Buy Buy Buy Buy
Buy Hold Hold Buy Buy Buy Hold Buy
INDUSTRIALS (Engineering contractors) BKN Bradken Matthew Nicholas BOL BOOM Logistics Matthew Nicholas EHL Emeco Matthew Nicholas DOW Downer EDI Andrew Hodge HST Hastie Group Julian Guido MND Monadelphous Andrew Hodge NFK Norfolk Group Julian Guido TSE Andrew Hodge Transfield Services UGL Andrew Hodge United Group MATERIALS ABC Adelaide Brighton NUF Nufarm SGM Sims Group Andrew Scott Andrew Scott Todd Scott
Buy Buy Buy Buy Hold Buy Buy Hold Buy
Buy Buy Buy
62
RBS small/mid-cap coverage (contd)

ASX Code Company Name RBS analyst Share price (A$) Price target (A$) Rec Mkt Cap (A$m) NPAT (A$m) Pre abormals FY11F FY12F EPS (cps) Pre goodwill FY10A FY11F FY12F PER (x) Pre goodwill FY11F FY12F Dividends EV/EBIT (x) (cps) Ex assoc. FY11F FY12F FY11F FY12F Net yield (%) FY11F FY12F
FY10A
FY13F
FY13F
FY10A
FY13F
FY10A
UTILITIES/INFRASTRUCTURE AIX Aust Infrastructure Fund APA APA Group CEU ConnectEast CIF Challenger Infrastructure DUE DUET Group ENV Envestra EPW ERM Power Limited HDF Hastings Diversified Util IFN Infigen Energy MQA Macquarie Atlas Roads SPN SP Ausnet SKI Spark Infrastructure ENERGY (Oil & Gas) LNC Linc Energy OTHER RESOURCES AGO Atlas Iron AQA Aquila Resources ERA Energy Resources GBG Gindalbie Metals GRR Grange Resources ILU Iluka Resources IRD Iron Road MIN Mineral Resources OGC OceanaGold MML Medusa Mining Ltd OMH OM Holdings KCN Kingsgate Consolidated MGX Mount Gibson Iron PDN Paladin PRU Perseus Mining ALK Alkane Resources RRL Regis Resources
William Allott Jason Mabee, CFA William Allott William Allott William Allott William Allott Jason Mabee, CFA William Allott William Allott William Allott William Allott William Allott
1.86 4.26 0.55 1.09 1.65 0.65 1.53 1.63 0.29 1.36 0.96 1.21
1.92 4.80 0.55 1.35 2.00 0.80 1.90 1.95 0.80 1.88 1.00 1.35
Hold Buy Hold Buy Buy Buy Buy Buy Buy Buy Hold Hold
1,151 2,724 2,147 345 1,807 962 248 864 221 629 2,751 1,605
191.3 100.3 -53.6 -210.7 140.0 36.6 21.5 35.6 -66.7 -281.7 209.0 78.4
212.3 108.5 -10.3 -0.8 124.9 47.2 2.0 39.7 -26.0 -57.0 252.9 153.0
160.6 117.4 -13.5 11.0 90.7 63.0 31.5 26.8 -42.7 108.5 244.5 165.2
166.5 132.9 5.5 22.3 89.0 69.7 36.7 19.7 -24.4 23.0 251.2 165.9
33.2 19.4 -1.4 -64.4 16.3 2.7 13.5 7.1 -8.5 -62.3 7.7 6.7
34.2 19.7 -0.3 -0.3 14.1 3.3 1.5 7.7 -3.4 -12.6 9.0 11.5
25.9 18.2 -0.3 3.5 9.2 4.1 19.4 5.1 -5.6 24.0 8.6 12.4
26.8 20.1 0.1 7.0 8.1 4.3 22.6 3.7 -3.2 5.1 8.7 12.5
5.6 21.9 n/a n/a 10.1 23.8 11.4 23.0 n/a n/a 12.5 18.2
5.4 21.6 n/a n/a 11.7 19.6 104.2 21.2 n/a n/a 10.6 10.5
7.2 23.4 n/a 31.4 18.0 15.7 7.9 31.9 n/a 5.7 11.1 9.7
6.9 21.2 397.4 15.5 20.4 15.1 6.8 43.9 n/a 26.8 11.0 9.7
5.4 15.3 576.0 12.2 11.6 13.9 11.3 19.9 69.9 807.2 12.1 9.4
4.8 14.1 78.3 13.0 13.4 12.0 7.9 24.0 39.6 n/a 11.6 10.1
6.1 13.3 47.2 15.3 12.3 10.9 5.7 15.2 28.4 30.3 11.5 9.6
10.0 34.4 2.0 14.0 20.0 5.8 3.5 10.0 1.0 0.0 8.0 9.5
10.5 35.4 2.2 10.0 16.0 5.9 7.7 10.0 0.0 7.0 8.0 9.7
5.4 8.1 3.6 12.8 12.1 8.9 2.3 6.1 3.4 0.0 8.3 7.9
5.6 8.3 4.0 9.2 9.7 9.1 5.0 6.1 0.0 5.1 8.3 8.0
Jason Mabee, CFA Lyndon Fagan Sam Berridge Lyndon Fagan Todd Scott Todd Scott Sam Berridge Todd Scott Todd Scott Phillip Chippindale Phillip Chippindale Todd Scott Sam Berridge Lyndon Fagan Lyndon Fagan Sam Berridge Sam Berridge Sam Berridge
2.06 2.95 5.26 2.04 0.55 0.42 15.40 0.62 10.35 2.18 6.61 0.58 7.52 1.45 1.54 3.01 1.10 2.88
3.75 4.43 5.98 1.91 0.85 0.70 19.00 0.77 11.50 3.00 7.90 0.50 9.06 1.85 1.87 3.64 2.30 2.96
Buy
1,037 2,623 1,969 389 619 485 6,448 88 1,903 572 1,248 295 1,046 1,570 1,287 1,284 296 1,250
-14.4 -40.8 -33.1 52.8 -3.7 33.9 36.1 -11.3 97.2 29.8 65.8 47.2 75.6 130.4 -52.9 -9.7 7.8 -10.1
-204.0 168.6 -63.5 31.2 -5.3 82.8 476.8 -17.5 151.0 67.1 111.5 4.4 32.0 233.8 -59.0 -30.0 -5.4 37.2
81.0 222.9 -41.0 76.8 13.4 95.8 1,092.2 -17.2 184.6 78.0 130.0 16.3 206.7 390.1 -23.6 126.6 -9.9 75.2
186.4 243.1 -156.0 3.5 93.5 76.3 1,296.1 -17.1 205.6 46.9 121.3 26.7 205.7 378.9 26.5 113.3 -50.0 215.4
-3.4 -8.6 -9.3 27.7 -0.5 3.0 8.6 -11.8 66.6 11.4 35.0 9.4 75.2 12.1 -7.4 -2.3 2.9 -2.4
-41.1 20.4 -17.0 6.0 -0.6 7.2 113.9 -13.6 89.8 25.6 59.3 0.9 23.6 21.7 -7.9 -7.1 -2.0 8.6
16.1 26.9 -10.9 14.8 1.1 8.3 260.9 -12.2 101.8 29.8 69.2 3.2 152.7 36.2 -3.0 29.7 -3.7 17.5
37.0 29.4 -41.7 0.7 7.5 6.6 309.5 -12.1 113.4 17.9 64.5 5.3 152.0 35.2 3.4 26.6 -18.6 50.0
n/a n/a n/a 7.4 n/a 14.2 178.6 n/a 15.5 19.1 18.9 6.2 10.0 12.0 n/a n/a 38.0 n/a
n/a 14.5 n/a 33.9 n/a 5.8 13.5 n/a 11.5 8.5 11.1 65.9 31.8 6.7 n/a n/a n/a 33.3
12.8 10.9 n/a 13.8 50.8 5.1 5.9 n/a 10.2 7.3 9.6 17.9 4.9 4.0 n/a 10.1 n/a 16.5
5.6 10.0 n/a 302.3 7.3 6.4 5.0 n/a 9.1 12.2 10.2 10.9 4.9 4.1 45.3 11.3 n/a 5.8
n/a n/a n/a 10.4 n/a 7.2 78.2 n/a 21.2 8.7 19.1 6.0 11.3 6.9 n/a n/a 39.0 n/a
n/a 11.3 n/a 5.9 n/a 1.9 9.1 n/a 8.7 5.4 11.0 35.3 31.3 3.7 n/a n/a n/a 31.4
0.1 6.5 111.3 3.9 37.6 2.6 3.4 n/a 7.0 5.1 9.1 11.7 3.7 1.8 68.7 7.7 n/a 16.1
0.0 3.0 0.0 0.0 0.0 3.6 50.0 0.0 42.0 0.0 10.0 1.0 15.0 4.0 0.0 0.0 0.0 0.0
0.0 6.0 0.0 0.0 0.0 2.1 105.0 0.0 51.0 0.0 10.0 0.8 35.0 4.0 0.0 0.0 0.0 0.0
0.0 1.0 0.0 0.0 0.0 8.6 3.2 0.0 4.1 0.0 1.5 1.8 2.0 2.8 0.0 0.0 0.0 0.0
0.0 2.0 0.0 0.0 0.0 5.0 6.8 0.0 4.9 0.0 1.5 1.4 4.7 2.8 0.0 0.0 0.0 0.0
Buy Hold Sell Buy Buy Buy Buy Hold Buy Buy Sell Buy Buy Buy Hold Buy Hold
63
Equity | Australia | Energy
21 October 2011
Woodside Petroleum
Buy
Target price Price
Solid 3Q, but Shell overhang remains

WPL delivered a solid 3Q production result. Market sentiment remains weighed down as the November escrow period draws closer and uncertainty over key growth projects is worrying investors. In our view, Shell is likely to extend the current escrow period and this should help to kick up the share price. Buy.
Key forecasts
FY09A EBITDA (US$m) 2,448 1,474 1,052 149.6 -32.8 95.00 2.76 23.05 13.40 16.30 18.10 FY10A 2,861 1,575 1,418 185.1 23.80 105.0 3.05 18.62 11.00 12.50 10.30 FY11F 2,961 1,582 1,807 225.4 21.80 110.0 3.19 15.29 10.20 12.80 11.70 FY12F 4,167 2,094 2,094 255.3 13.20 130.0 3.77 13.50 8.17 9.64 12.90 FY13F 5,065 % 2,659 % 2,659 % 316.0 % 23.80 150.0 4.35 10.91 6.51 9.25 14.10
A$39.00 (from A$46.00) A$33.60

n/a
Price performance
Oct 08 56 52 48 44 40 36 32 28 WPL.AX S&P/ASX200 Oct 09
Reported net profit (US$m)

(3M) 39.69 -15.3 -7.1 -0.4
Nov 10
(12M) 44.15 -23.9 -15.1 -11.0
Normalised net profit (US$m) Normalised EPS (c) Normalised EPS growth (%) Dividend per share (c) Dividend yield (%) Normalised PE (x) EV/EBITDA (x) Price/net oper. CF (x) ROIC (%)
Use of %& indicates that the line item has changed by at least 5%. 1. Pre non-recurring items and post preference dividends Accounting standard: IFRS Source: Company data, RBS forecasts
33.35 0.7 -1.8 2.5
year to Dec, fully diluted
3Q production of 16.1mmboe was slightly ahead of our 15.8mmboe forecast A stronger bounce back in oil production (Stybarrow) was the key positive variance (+1.9%), which gives us increased comfort in our FY forecast of 63.4mmboe (guidance 62-64). Sales revenue of US$1.312.6bn also outperformed our expectations (+5%), generally aided by very strong average realised liquids prices (US$116.2./bbl for crude and US$96.9/bbl for condensates vs Brent avg US$112.5/bbl) and the shift in timing of shipping from 2Q to 3Q. Still no long lead time items being ordered for P2 No new drilling results were announced regarding Pluto expansions, but the Noblige-2 appraisal well is the next cab off the rank and, if successful, could give management the confidence to pull the trigger on long lead time items. No update on talks with OROs, but we assume they are bubbling along in the background. We are certainly encouraged by progress on Sunrise and remain bullish that this project will gain new life under the new CEO (RBS 50% risked value of A$1.80/share). Buy maintained, but in our view WPL's peers are offering a better risk/reward profile Woodside offers solid value at current levels, in our view, but the company's outlook is clouded by some uncertainty. Not only is the new CEO's strategy yet to be fully forged, but also Shell 24% stake overhang is looming large as November draws closer, when Shells self-imposed escrow period ends. We would expect Shell to extend the escrow period by six to 12 months given the current circumstances, but we wouldn't be surprised if it dumped the stock on the market before Christmas. Our sum of the parts evaluation remains unchanged at A$46.00, however we have applied a discount of roughly 15% to our valuation to encapsulate the market's concerns.
A$26.93bn (US$27.63bn)
A$149.46m (US$154.47m)
Sector: BBG AP Oil & Gas Part of: ASX/S&P 20 Leaders RIC: WPL.AX, WPL AU Priced A$33.60 at close 20 Oct 2011. Source: Bloomberg
Analysts
Jason Mabee, CFA
Australia +61 2 8259 5380 jason.mabee@rbs.com
Philipp M-O Kin

Australia +61 2 8259 6080 philipp.kin@rbs.com
65
Key news items from 3Q

Pluto Pluto Train 1 is currently proceeding according to latest guidance, with Pluto first cargo estimated for March 2012. Pluto expansion remains a hot topic, with drilling and discussion with other resource owners continuing. Browse LNG Browse is progressing on schedule, with front-end engineering and design studies continuing along with work to secure the necessary environmental approvals. Invitations to tender were issued for the construction and installation of the central processing facility topsides and jacket. During the quarter, Woodside also commenced the Tridacna three dimensional seismic survey of the Torosa lagoon. The survey is on schedule to be completed in November and will assist in defining final volumes of the Browse LNG project. Sunrise FLNG We are encouraged by Peter Colemans visit to Timor Leste in August and we look forward to seeing more engagement and progression on the Sunrise project. NWS The NWS North Rankin redevelopment project remains on schedule for 2013 completion. The North Rankin jacket was successfully launched and positioned during the last quarter. The NWS oil redevelopment project recommenced, with production of first oil into the Okha floating production storage and offloading vessel on 24 September, ahead of previous guidance of October. The infield commissioning of the system will continue with the objective of achieving steady state production within a two- to three-week window. Vincent Phase III production wells came online in September at a rate of 20,000 bbl/day. Exploration programme A further six exploration wells are planned to be spudded over the period 4Q11 to mid 2012, to enable Woodside to find sufficient equity gas to support Pluto expansions. There has been a lot of negative speculation (eg Australian Financial Review, 20 October 2011) around the decision to let the Maersk discoverer go early. This decision (after the discoverer completed two commitment wells in the Claudius hub) was born out of economic rationality, as it was described as a very expensive rig. Woodside has confirmed that no wells that were going to be drilled will be delayed, and re-iterated that all scheduled drilling programmes can be completed by the drill ships Ocean America and Nanhai. Table 1 : Exploration/Appraisal wells planned commencing in 4Q
Well name Basin area Target Woodside interest(%) 60 60 70 100 100 15.78 Water Proposed Comments depth total depth (meters) 840 840 1160 2005 1880 107 2030 Exploration, Bottom hole section 2150 Appraisal Bottom hole section 4280 Exploration 4900 Exploration 3510 Exploration 3544 Exploration
Opel-1 Opel-2 Ragnar Cadwallon-1 Genseric-1 Tidepole East -1
Exmouth sub-basin, WA-39-R Oil Exmouth sub-basin, WA-39-R Oil Exmouth sub-basin, WA-430-P Gas Outer Exmouth, WA-434 Outer Exmouth, WA-434 Carnarvon basin, WA-5-L Gas Gas Gas
Source: Woodside drilling programme
Woodside Petroleum | Investment View | 21 October 2011
66
WPL- Financial Summary

Year to 31 Dec (A$m) Income statement Total revenue Operating costs EBITDAX Exploration costs EBITDA Depreciation EBIT Net interest expense Pre-tax profit Income tax expense PRRT NPAT Normalised items Reported NPAT Production Oil (mmbbl) Condensate (mmbbl) Gas (PJ) LNG (Mt) Total production (mmboe) Gas production (mmboe) Liquids production (mmboe) Divisional sales revenue North West Shelf Business Unit Australian Business Unit Pluto Train 1 Pluto Train 2 Pluto Train 3 Browse Business Unit United States Business Unit Other Divisional EBIT North West Shelf Business Unit Australian Business Unit Pluto Train 1 Pluto Train 2 Pluto Train 3 Browse Business Unit United States Business Unit Other Per BOE metrics (US$) Sales revenue Sales revenue WTI differential Depreciation EBIT NPAT Cash flow from ops Equity FCF Capex Exploration expenditure Cash flow statement EBITDA Change in working capital Net interest (pd)/rec Taxes paid Cash flow from ops (1) Capex (2) Exploration expenditure Disposals/(acquisitions) Other investing cash flow Cash flow from invest (3) Incr/(decr) in equity Incr/(decr) in debt Ordinary dividend paid Preferred dividends (4) Other financing cash flow Cash flow from fin (5) Forex and disc ops (6) Inc/(decr) cash (1+3+5+6) Equity FCF (1+2+4) Balance sheet Cash & deposits Total assets Debt Shareholders' equity AIFRS 2010A 4258.0 -931.0 3327.0 -466.0 2861.0 -749.0 2112.0 18.0 2130.0 -532.0 -165.4 1418.0 157.0 1575 2010A 20.8 10.6 96.8 2.6 72.7 39.1 33.6 2010A 2791.6 1291.7 0.0 0.0 0.0 0.0 118.8 55.9 2010A 1469.0 601.1 0.0 0.0 0.0 0.0 42.0 0.0 2010A 54.2 -31% 9.5 26.9 18.0 26.8 -3.5 38.0 8.4 2010A 2861.0 -70.0 -150.2 -799.0 2104.0 -2989.0 -660.0 0.0 660.0 -2989.0 1197.0 -42.0 -547.0 0.0 608.0 0.0 -277.0 -277.0 2010A 963.0 20196.0 4915.0 11686.0 AIFRS 2011F 4669.8 -1067.0 3602.8 -417.0 2960.8 -568.8 2391.9 -35.9 2356.0 -736.8 -37.1 1582.2 0.0 1582 2011F 13.0 11.3 94.8 2.6 63.4 41.0 22.4 2011F 3141.7 1128.9 0.0 0.0 0.0 0.0 92.3 307.0 2011F 1756.0 563.9 0.0 0.0 0.0 0.0 36.5 0.0 2011F 75.1 -30% 9.2 38.5 25.5 34.6 0.0 48.8 6.7 2011F 2960.8 27.7 -35.9 -773.9 2150.5 -3034.1 -417.0 0.0 0.0 -3451.1 842.6 1300.6 -842.6 0.0 1300.6 0.0 0.0 0.0 2011F 963.0 22761.1 5812.6 13248.4 AIFRS 2012F 5574.5 -1173.9 4400.6 -233.3 4167.2 -839.6 3327.7 -248.9 3078.8 -923.6 -61.1 2094.1 0.0 2094 2012F 13.8 9.4 86.8 4.6 84.1 59.7 24.4 2012F 2911.7 1042.6 1558.4 0.0 0.0 0.0 61.9 0.0 2012F 1794.8 463.3 799.3 0.0 0.0 0.0 21.3 0.0 2012F 66.3 -30% 10.0 39.6 24.9 34.9 0.0 49.2 4.2 2012F 4167.2 195.7 -248.9 -984.7 2934.0 -4135.0 -350.0 0.0 0.0 -4485.0 951.9 1551.0 -951.9 0.0 1551.0 0.0 0.0 0.0 2012F 962.6 25466.3 7363.6 13974.2 AIFRS 2013F 5693.0 -529.1 5164.0 -99.0 5065.0 -948.4 4116.6 -203.6 3913.0 -1173.9 -80.3 2658.8 0.0 2659 2013F 13.6 10.6 86.3 5.2 89.9 65.8 24.1 2013F 2702.8 972.2 1933.9 0.0 0.0 0.0 84.2 0.0 2013F 2099.7 504.0 1276.3 0.0 0.0 0.0 32.9 0.0 2013F 60.1 -33% 10.0 43.5 28.1 33.1 0.0 25.1 1.6 2013F 5065.0 19.1 -203.6 -1254.2 3135.1 -2376.6 -148.5 0.0 0.0 -2525.1 1136.3 -610.0 -1136.3 0.0 -610.0 0.0 0.0 0.0 2013F 1434.7 29214.2 6753.6 17728.1 Price target (A$) Valuation metrics Net asset value (2011) Pluto Train 1 Pluto Train 2 Pluto Train 3 Browse B2K Sunrise Enfield Lady Nora Laminaria/Corallina Mutineer Exeter Area Stybarrow Vincent NSW GOM (TOTAL) Exploration Program Total Operations Net Debt Corporate & Franking Total Valuation No. of shares (m) A$m 12292 4473 1388 2093 1448 752 17 81 23 548 237 13310 241 2436 39,340 -5043 2573 36,871 A$ps 15.33 5.58 1.73 2.61 1.81 0.94 0.02 0.10 0.03 0.68 0.30 16.61 0.30 3.04 49.08 -6.29 3.21 46.00 801.6 A$/BOE 17 6 0 3 6 31 6 16 16 27 24 19 20 39.00 Valuation inputs Rf 5.25% Rm-Rf 6.00% Beta 1.13 Kd 5.75% Kd 6.00% Ke 12.0% WACC 9.6%
Key assumptions Exchange rate (A$1:US$) Brent oil price (US$/bbl) Multiples Enterprise value (A$m) EV/Sales (x) EV/EBITDA (x) EV/EBIT (x) PE (pre-goodwill) (x) At target price EV/EBITDA (x) PE (pre-goodwill) (x) Per share data No. shares EPS (cps) EPS (normalised) (c) Dividend per share (c) Dividend payout ratio (%) Dividend yield (%) Dividend franking (%) Growth ratios Sales growth Operating cost growth EBITDA growth EBIT growth NPAT growth Pre-goodwill NPAT growth Normalised EPS growth Production growth Operating performance Asset turnover (%) EBITDA margin (%) EBIT margin (%) Net profit margin (%) Return on net assets (%) Net debt (A$m) Net debt/equity (%) Net interest/EBIT cover (x) ROIC (%) ROIC - WACC (%) Comparable company data Santos Year to 31 Dec Oil Search Year to 31 Dec
2010A 0.925 79.00 2010A 31584 7.5 11.0 15.0 18.6 2010A 12.6 21.6 2010A 783.4 205.6 185.1 105.0 60.4 3.05 100.0 2010A 20.2% 33.3% 16.9% 24.5% -3.8% -32.3% 23.8% -10.2% 2010A 5.6 70.0 48.5 42.2 18.1 3952.0 33.8 -117.3 10.3 0.7
2011F 1.020 107.00 2011F 32481 7.4 10.2 12.4 15.3 2011F 11.6 17.7 2011F 801.6 197.4 225.4 110.0 46.6 3.19 100.0 2011F 4.0% 22.3% 11.4% 23.9% 11.6% 27.4% 21.8% -12.8% 2011F 5.4 67.2 49.6 33.3 18.1 4849.6 36.6 66.7 11.7 2.1 2011F 7.6 12.9 19.8 19.7 22.3 42.0 2008A 1327.7 1703.2 1939.6 1383.2
2012F 1.000 95.00 2012F 34033 6.1 8.2 10.2 13.5 2012F 9.2 15.7 2012F 820.3 255.3 255.3 130.0 45.5 3.77 100.0 2012F 27.8% -17.7% 30.8% 27.2% 32.4% 15.9% 13.2% 32.6% 2012F 5.8 63.4 51.2 33.9 23.8 6401.0 45.8 13.4 12.9 3.3 2012F 8.1 13.5 19.2 25.5 29.6 50.7 2009A 1295.9 1651.5 1866.6 1367.6
2013F 0.950 90.00 2013F 32950 5.8 6.5 8.0 10.9 2013F 7.4 12.7 2013F 841.5 316.0 316.0 150.0 42.7 4.35 100.0 2013F 2.1% -55.4% 21.5% 23.7% 27.0% 27.0% 23.8% 7.0% 2013F 5.2 74.8 59.7 37.6 23.2 5318.9 30.0 20.2 14.1 4.5 2013F 8.3 13.4 17.7 35.1 42.5 65.9 2010A 1308.0 1680.1 1813.0 1405.6
EV/EBITDA EV/EBIT PE EV/EBITDA EV/EBIT PE 2007A 1227.1 1688.1 2403.0 1365.8
Reserves Proved (mmboe) Proved & probable (mmboe) Contingent resources (mmboe) Gas reserves (mmboe) (2P)
Woodside Petroleum | Investment View | 21 October 2011
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AUSSIE ALPHA COMMENT

Ahead of the 23 October meeting of European leaders, mixed messages are emerging in terms of a possible resolution to the European crisis. European lawyers have apparently been warned that using the bailout fund to provide direct guarantees violates the EU Treaty, ruling out the Allianz model on providing insurance on a first-loss basis for periphery risk. That's a negative for market sentiment. (Alva Devoy +61 2 8259 5831)
Equity | Europe
20 October 2011
Produced by: The Royal Bank of Scotland N.V.
Global Views
Quick thoughts on EFSF and the need for Collateral guarantees
Some interesting spanners are being thrown in the plans for the EFSF to be made larger via the insurance model. According to a story from the credible source of the WSJ European correspondents, the Euro leaders are looking at providing collateral to back up bond issues of troubled countries. European lawyers have apparently been warned that using the bailout fund to provide direct guarantees violates the EU Treaty. This seems to rule out the Allianz model on providing insurance on a first-loss basis for periphery risk. That's a negative for market sentiment outright because the legality of what is possible has always been tough for investors to get their heads around and while most continue to dream that some idea will pop-up at some point the Treaty is a real hurdle, not least for the German constitutional court. So what about the alternative? The article says that countries who want the insurance would "borrow an additional amount from the EFSF when they need to tap markets for financing. That extra amount would be kept aside to provide some compensation to creditors in the event of a default." There is only one positive here and big negatives. The positive is that this is cash up-front and so the correlation risk of Germany and France crashing if Italy crashes, is less relevant if there is a SPV somewhere that has 20% of a bond issue waiting to be a backstop for the recovery value. The negatives are much more serious. Firstly, we are now talking about dealing with a debt crisis with more hard debt (not a contingent liability). This is simply a bad idea and will erode market confidence further, if this collateral is the chosen path. For instance, if Italy wanted to access markets and now has to add effectively 20% extra liability on roughly EUR 200 bn in bond supply a year then it adds 2.6% to debt/GDP metrics. It simply does not have that wiggle room. Second, the cost of the insurance here will not be some economic variable decided by politicians but will be the actual funding cost of the EFSF. EFSF bonds have been hit and are likely to be hit even further if there is a big supply pipeline coming due. This will limit the volumes that can be done and so can limit the extent of insurance. Net/net, and if this story is correct, the EFSF leverage via the collateralised insurance route will be a disappointment to markets. Expect more headlines in coming days but overall we don't see anything that Europe can bring to the table at the G20 to solve the crisis or even buy that much time. They have neither the legal flexibility, they have a set of flawed policy tools (e.g. The ESM) and as yet they do not have appetite to abuse the ECB balance sheet. When we talk about a near death experience for the Euro, we mean that even core countries get hit, and this is starting with Belgium and France. At the point of pain for Germany, the use of the ECB balance sheet will be a more serious option. Until then risk assets have a lot further to fall. We continue to look for the next 50bp in Bund yields to be lower. Harvinder Sian, RBS Analysts
Equity Research 250 Bishopsgate, London, EC2M 4AA, United Kingdom www.research.rbsm.com
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This is our second monthly collaborative piece on global traffic trends. With trends apparently worsening, we continue to prefer airlines with lower exposure to premium travel . (Mark Williams +61 2 8259 6921)
Equity | Global
20 October 2011
Produced by: The Royal Bank of Scotland N.V., (Hong Kong) Branch
Airlines
September traffic
This note summarises the latest traffic data from the global industry. Passenger data in September held up well, but red flags abound. Cargo traffic remains soft, usually a precursor to softer travel ahead. RBS analysts globally currently prefer LCCs to network carriers in this volatile environment for premium travel.
Table 1 : Key recommendations
Company Air Berlin Recomm Sell Sell Buy Buy Buy Hold Hold Buy Hold Buy Target Price 2.25 4.75 4.50 3.50 1.50 1.65 10.00 4.00 A$ 1.68 A$ 0.41 Actual Company Price 2.67 Air China 5.52 China Eastern Airlines 3.50 China Southern Airlines 2.83 Asiana Airlines 0.69 Cathay Pacific 1.64 Korean Air 9.89 Malaysian Airlines 3.23 Singapore Airlines A$ 1.49 Tiger Airways A$ 0.35 Recomm Hold Hold Buy Sell Hold Hold Sell Sell Buy Target Price HK$ 8.20 HK$ 3.60 HK$ 6.25 W 8,000 W 47,000 Rm 1.60 S$ 10.00 Rm 3.40 S$ 1.20 Actual Price HK$ 5.73 HK$ 2.62 HK$ 4.18 W 8,290 HK$ 13.16 W 49,800 Rm 1 S$ 11.07 Rm 3.74 S$ 0.68
Sector performance
(1M) Absolute Absolute (%) Rel market (%) NASDAQ: 2608.57 Source: Bloomberg 3.8 0.1 0.0 (3M) -219.3 -7.8 0.0 (12M) 177.9 7.3 0.0
Air France-KLM easyJet* Finnair Flybe IAG Lufthansa Ryanair SAS Qantas Airways Virgin Blue Holdings
Hold HK$ 16.50
Sell Skr 9.50 Skr 11.05 AirAsia
* RBS Hoare Govett Ltd is a broker to this company Source: Bloomberg, RBS
A strong September for European carriers, but warning clouds gather Overall, the European airlines witnessed a strong September. However, commentary from the airlines suggests that October numbers could start to look slightly softer. Airlines are guiding for deterioration across different parts of their individual business Lufthansa is highlighting softness in the back of the plane, while IAG, Flybe and Finnair are warning of declining premium traffic or business related travel. The European low-cost carriers continued to report strong numbers in September with improving load factors. Asia shows better passenger, weaker cargo data; Australian loads soften Most Asian airlines are still seeing some yoy improvement in passenger travel numbers. However, load factors are trending down as capacity growth continues. Premium traffic has continued to hold up moderately well but with budget cuts coming, airlines believe this is likely to fall. Cargo volumes remain mediocre as well. Over in Australia, Qantas and VBAs August data both show falling loads too; trends in the former are likely to deteriorate following the current industrial action, with Virgin Blue likely to pick up the slack in this drop-off. Americas data shows disparity between network and low-cost airlines Overall, network carrier traffic was little changed in the month. Most carriers are reporting better load factors, indicating some capacity discipline. The low-cost airlines continue to grow in the single digits, with loads here also improving. Considering the growth profile of the region, the South American airlines are understandably reporting higher traffic growth rates at the moment. RBS still prefers low-cost carriers to network Considering the faltering macro backdrop, we continue to see greater risks for carriers with long-haul premium traffic exposure. Our preference remains with the LCCs as we see a more robust environment still existing for leisure travel. Key Buys across our global coverage are Ryanair, Tiger, VBA and China Southern, and our key Sells are Air France and SIA. Important disclosures can be found in the Disclosures Appendix.
Analysts
Andrew Orchard
+852 3988 7191 andrew.orchard@rbs.com
Andrew Lobbenberg
andrew.lobbenberg@rbs.com
Mark Williams
mark.williams@rbs.com
Vince Ng, CFA

vince@kaf.com.my
John Rachmat
john.rachmat@rbs.com
38/F Cheung Kong Center, 2 Queen's Road Central, Hong Kong http://research.rbsm.com
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Steady September traffic, but warnings ahead

Globally, passenger data in September held up well, but red flags abound. Cargo traffic remains soft, usually a precursor to softer travel ahead. RBS analysts globally currently prefer LCCs to network carriers in this volatile environment for premium travel.
Key findings
Capacity: Across the carriers reviewed, the unweighted average increase in capacity was 6.1% yoy, with the European carriers adding seats the most quickly. Growth of 10.2% in the region was boosted especially by Norwegian, Turkish and Finnair. In Asia Pacific, average growth was 3.4%, but this was weighed down by capacity cuts at JAL; ex-JAL, capacity increased at a rate of 5.5% instead. Over in the Americas, capacity was up just 5% in total as the North American majors such as Delta, American and United Continental kept ASK growth flat to negative. Traffic: A Passenger traffic growth rate of 5.9% was slightly lower than capacity growth, and overall in line with what was observed in August (+6.3%). The European carriers continue to average a higher rate of growth (+11%), whereas the Asia-Pacific and the Americas are growing at rates of just 1.1% and 6% respectively. For Asia-Pacific, this growth rate moderates to 4.6% yoy after removing Tiger and JAL. Cargo traffic remains weak. On average, there was a decline of 0.4% yoy across the airlines we reviewed. However, this includes businesses which are expanding. After removing growth rates from Finnair, China Eastern and LAN, average cargo traffic fell by 3.4% instead. Load factors: On average, load factors declined 0.1ppt despite decent traffic numbers. American carriers showed the biggest improvement, with loads rising 0.7ppt on average as capacity was better controlled. In Europe, loads improved 0.6ppt whereas in Asia, loads declined 1.5ppt in absolute terms, the European carriers reported the highest loads of 81.1%, against 77.6% and 78.7% in Asia-Pacific and America respectively.
Latest IATA commentary

We believe that the regular data distributed by IATA tends to be lagging and that the monthly traffic statistics provided by the airlines below provide a reasonably good forward look at what is actually reported. However, we find that the latest commentary from the group will gives investors added colour into where trends might further develop. We thus highlight the most recent commentary from IATA here. IATAs passenger traffic data has not shown a significant dip as yet, with RPK up 4.5% in August on a 4.6% increase in capacity. At the same time, IATA is highlighting that the fall in business and consumer confidence is a likely signal that air travel will see further decline in the coming months. To exacerbate matters, IATA has highlighted that there was a degree of slippage in August load factors as well as decline in twin-aisle aircraft utilization. As a consequence, it added that the challenges of maintaining favourable supply-demand conditions are growing, which in turn is likely to have an adverse impact on airlines profitability. The group states that yields outside North America are not strong. The outlook for premium travel is also gloomy. Latest data from IATA still shows positive trends, although the rate of growth slipped from 7.5% in July to 2.3% in August. However, IATA also notes that premium travel has now fallen back to the levels of 4Q10. The strongest flight segment has been within the Far East, whereas European and North American premium traffic is still seeing some deterioration. With trade and business confidence in the manufacturing sector waning, IATA believes that confidence has now fallen to levels consistent with the expansion in premium travel stalling in 4Q11. As for air freight, August FTK declined 3.8% yoy as opposed to a 1.5% growth in capacity. IATA believes this to be the result of stagnant world trade. The decline in air freight volumes has been taken by the industry body to be an early indication of further declines in trade and economic conditions ahead. Load factors and yields continue to fall. Airlines | Investment View | 20 October 2011
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Europe
Overall, the European airlines witnessed a strong September. However, commentary from the airlines offers a hint that October numbers could start to look slightly softer. Obviously, part of this is likely to be seasonality with winter approaching, but we note too that Lufthansa, Flybe and Finnair have all recently guided for lower than expected profit in the current earnings period. Interestingly, the airlines that have guided for some deterioration are flagging softness across different parts of their individual businesses Lufthansa is highlighting softness in the back of the plane, while IAG, Flybe and Finnair are warning of declining premium traffic or business related travel. The European low-cost carriers continued to report strong numbers in September with improving load factors. In general, summer trading has been strong but they are starting to worry about the winter. Chart 1 : European September passenger traffic growth
35% 30.7% 30% 25% 20% 15% 10% 5% 0.9% 0% IAG FIN RYN TK IBE VLG AF LH AB BA SAS NAS EZJ 9.3% 4.6% 8.5% 4.3% 6.0% 0.8% 0% IAG FIN RYN IBE TK 1.9 pt TK SAS NAS VLG 4.1 pt VLG AF AB LH EZJ BA 6.0% 5.5% 14.9% 11.9% 15% 10% 5% 0.7% 27.0% 25% 20% 14.7% 20.0%
Chart 2 : European September passenger capacity growth

30%
27.6%
7.5% 8.0% 8.2% 4.2% 5.3% 1.8%
7.2% 5.0%
9.0%
Chart 3 : European September passenger load factor
Chart 4 : European September passenger load factor change

5 pt
95% 90% 85% 80% 75% 70% 65% IAG FIN RYN IBE TK VLG AF LH BA AB SAS NAS EZJ 85% 83% 80% 83% 83% 83% 90% 85% 81% 79% 75%
4 pt 3 pt 2 pt 80% 1 pt 0 pt -1 pt -2 pt -3 pt AF AB -2.5 pt IAG FIN RYN IBE LH BA SAS -1.8 pt 1.5 pt 0.5 pt
4.0 pt
0.1 pt
0.0 pt
0.1 pt
0.0 pt
73%
-0.8 pt -1.0 pt
Airlines | Investment View | 20 October 2011
NAS
EZJ
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Chart 5 : European September cargo traffic growth

18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% IAG FIN AF LH 1.0% 2.3% 4.2% 16.9%
Chart 6 : European September cargo capacity growth

16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% IAG FIN AF LH -3.4% 0.8% 3.7% 13.3%
Chart 7 : European September cargo load factor

78.0% 76.0% 74.0% 72.0% 70.0% 68.0% 66.0% 64.0% 62.0% 60.0% 58.0% IAG FIN AF LH 64.7% 64.8% 75.5%
Chart 8 : European September cargo load factor change

0.0 pt -0.5 pt -1.0 pt -1.5 pt -2.0 pt -0.4 pt
-1.0 pt
64.0%
-2.5 pt -3.0 pt -3.5 pt
-2.0 pt
-3.0 pt IAG FIN AF LH
Lufthansa (Hold, TP Eur10.00): Modest negative

Group traffic up 4.6%, capacity 8% and hence load down 2.5 points to 80.1%. Cargo load factor down 1 point, with traffic up 0.8% on capacity up 2.3%. Load factor down across all businesses except for Germanwings, which is cutting capacity with vigour to good effect. BMI data was dreadful, Austrian worse than Lufi mainline and Swiss better than in recent months. Commentary flags slightly weakening pricing environment. By geography, loads decline in every region. Americas hold up the best, with load only down 1.6 points. Asian loads down 3.4 points, mid east Africa down 3.8 points and Europe down 2.4 points. This is bad data, but then they did profit warn, so not wholly surprising. But the data is slightly worse than we had anticipated. Looking to the future, the key issue is what happens to premium traffic, and Lufthansa has not identified weakening trends yet.
Air France-KLM (Sell, TP Eur4.75): Better than expected

September passenger traffic up 9.3% on a capacity increase of 7.5%, hence load factor up 1.5ppt to 85.2%. Indications are that passenger RASK was slightly up for September but commentary hints that October could be less dynamic, which would be consistent with IAG commentary. The high volume growth reflects ATC strike effects last September, aircraft reconfigurations and the switch of some long haul services capacity from Martinair to KLM mainline.
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The commentary flags a recovery on Ivory Coast, which is a notably important route for AF. Cargo traffic down 3.4%, load factor down 3 ppt. Cargo unit revenues were down slightly. Capacity outlook for the company was reiterated they forecast winter 11/12 capacity to rise 3.4%, weighted to medium haul (6.2%) which reflects the Marseilles base launch. AF plans to hold long haul growth in summer 12 and winter 12/13 to 3%. Overall better than expected, with no profit warning.
IAG (Hold, TP 165p): Strong September; weaker October?

September traffic rose 4.3% on capacity up 4.2%, with load factors thus 0.1ppt higher to 82.8%. Premium traffic rose 9.3% while non premium grew 3.5% in the month. This is better than we anticipated across all metrics. By carrier, loads improved at BA and deteriorated at Iberia as we expected. By region, the impact of network restructuring at Iberia continue to play out with falling short haul capacity. Whilst September data was good, the company flags a deteriorating outlook: it says indications so far for October point to a softer demand picture in premium traffic and cargo. Overall, then, Sept was indeed decent and better than we expected, but October is declining for cargo and premium, as we would expect. The trends in non premium are unchanged it has been tough for some time. Three long-haul planes have been pulled form Iberia for winter, but work is ongoing about optimising the overall networks and of course BA has bought six slot pairs from bmi, which will actually boost BA capacity into the winter. We should expect more details at the investor day on November 11. In terms of profitability, the company guides to expecting significant growth in operating profit in 2011 compared to 2010. Last year the company made EUR225m. We have lowered our estimate for FY11 operating profit from EUR527m to EUR468m. (Please see our note from 13 September 2011, Baggies not Bolly)
SAS (Sell, TP Skr9.50): In line with expectations

September traffic 5.4% higher against capacity growth of 5.0%. Load factor up 0.3ppt to 74.6%. August RASK confirmed up 0.7%, yield down 2.2%. Yield and RASK indicated down yoy for September. Traffic is in line with our expectations, although August RASK was worse than anticipated. Market outlook flags good growth but unpredictable outlook, with added uncertainty to unit revenues in the future. No profit warning yet. Load factor performance positive at Scandinavian Airlines (up 0.7 points), dismal at Blue1 (down 7.5 points to 57.9%). By region, Norwegian domestic market improves a lot, intra Europe improves a bit, intra Scandinavia, long haul and Sweden deteriorate a bit, Danish domestic a lot.
Finnair (Buy, TP EUR3.50): Slow Asia a warning signal

Finnair traffic data for September showed traffic jumped 12% on a 15% rise in capacity, hence, load factor declined 1.8ppt to 73.1%. Load factor fell 5.6 points on Asia routes to 77%, where the notably high 28% growth in capacity was not fully absorbed by the market. In contrast transatlantic and European loads improved. Cargo load factor fell a whopping 8.7 points. As usual, with the traffic data of the closing month of the quarter, Finnair disclosed its RASK performance down 3.2% yoy, principally driven by the weak load factor on Asia routes. The company flags a disappointing performance on Asia routes and European business travel. Finnair also profit warned this month. It says it will not meet its previous objective of a profitable 2H11. 3Q11 has been profitable but trends into 4Q11 are unfavourable with weak business travel, poor cargo profitability and continuing poor trading in tour operating. The profit guidance is consistent with an EBIT loss above EUR60m for the full year. BBG consensus is for a full year EBIT loss of EUR40m. This warning is notably depressing for the overall industry since Finnair serves predominantly Asia, which is the least bad economic area of the world and is benefitting from sequentially recovering trends in the Japanese market, recovering post the earthquake.
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Flybe (Buy, TP 150p): Yet another profit warning

Flybe published a pre close statement for 1H flagging a marked deterioration in trading from September. 1H12 revenues improved 9%, with unit revenue per seat up 6%, which seems broadly encouraging. However, the management flags that a significant slowdown in September led to 1H revenue in total 1% behind management expectations. Since everything was looking decent through to August, this implies a 4-5% miss relative to management expectations in September. Forward sales for 2H12 are indicated up 1% yoy on flat capacity, which is a marked deterioration on 1H12's 6% unit revenue improvement. The company says the volume slowdown has come in higher- and medium-fare categories, implying that it is business traffic rather than leisure traffic that is weakening.
Ryanair (Buy, TP EUR4.00): Neutral data

Ryanair announced traffic that showed a 6% rise in September, although loads were down 1ppt to 85%. This was slightly shy of the flat load factor we predicted, but volumes were as expected. The load factor of 85% is consistent with recent Septembers. Neutral data in our view.
Easyjet (Buy, TP 450p): Strong September traffic

Traffic up 8.5% and load factor up 0.3 points to 89.6%. We expected traffic growth in the high single digits and the load factor to be down a point or two from last year's high level of 89%, which had been boosted by the tail of the flight irregularities. EZJ is outperforming Ryan across volume, absolute load factor and load factor development. Strong data and supportive notably in the context of the profit warning from Flybe. To be fair though, the data should not be astonishing since the company upgraded YE Sept 11 recently, which implied a solid end to the financial year.
Air Berlin (Sell, TP EUR2.25) September data as projected

Traffic 1% higher and load factor up 0.1 point to 82.8%. We expected traffic growth traffic up low single digits with the load factor up a couple of points on last year's 82.7%. Very slightly below our expectations but neutral data per se.
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Asia
Some Asian carriers, such as MAS, ANZ and JAL (among others) report data with a lag. Based on airlines that have reported, we find that most airlines are still seeing some yoy improvement in passenger travel numbers. However, much like their European peers, a growing number of carriers are now beginning to highlight that forward bookings are looking less impressive. Premium traffic has continued to hold up moderately well but with budget cuts coming, airlines believe this is likely to fall. Air freight in general continues to be weak, with most of the major cargo carriers like Cathay Pacific and Korean Air stating that they have not as yet seen much of a seasonal pickup in cargo shipments. Chart 9 : Australia/Asia passenger traffic growth
25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% -25.0% -30.0% TGR SIA AIRA JQ ANZ QAN QAN- Grp VBA MAS CA CX CEA CSA -15.0% -24.3% JAI THA JAL ANA -2.8% 5.0% 0.4% 5.0% 18.2% 9.1% 7.0% 9.0% 4.7% 0.1%
Chart 10 : Australia/Asia passenger capacity growth

20.0% 15.0% 17.4% 9.8% 8.1% 9.1% 6.8% 5.8% 5.8% 2.8% 0.0%
7.2%
7.6% 0.4%
10.0% 6.4% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% -25.0% -30.0% 2.6%
7.1%
7.1% 5.0%
3.0%
-2.8%
-23.4% TGR AIRA SIA JAI QAN ANZ QAN- Grp VBA MAS ANA CEA CSA THA JQ JAL CA CX
Note: August data for QAN, VBA, MAS, ANZ, JAL and Jet, September for others Airasia has to date only reported July traffic numbers Source: Company data
Note: August data for QAN, VBA, MAS, ANZ, JAL and Jet, September for others AirAsia has to date only reported July traffic numbers Source: Company data
Chart 11 : Australia/Asia passenger load factor

85.0% 80% 80.0% 78% 78% 75.0%
Chart 12 : Australia/Asia September passenger load factor

2 pt 1.1 pt 0.1 pt -0.7 pt -1.6 pt -2.1 pt -4.3 pt 1.4 pt 0.3 pt
82%
83% 81% 80%79% 80% 78%
0.6 pt
0.8 pt 0.0 pt
78%
0 pt -2 pt -1.2 pt -1.7 pt -4 pt -6 pt
77% 75% 74% 70%
-0.9 pt
72%
70.0%
-4.9 pt
65.0%
-8 pt -10 pt TGR AIRA SIA JAI QAN- Grp QAN ANZ VBA MAS ANA CEA CSA THA JQ JAL CA CX AIRA JQ QAN- Grp QAN ANZ VBA CA CX MAS CEA CSA -9.0 pt TGR SIA JAI ANA THA JAL
60.0%
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Chart 13 : Asian September cargo traffic growth

15.0% 13.5%
Chart 14 : Asian September cargo capacity growth

10.0% 8.0% 7.9% 6.9%
10.0% 4.6% 2.8%
6.0% 4.0% 2.0% 3.5% 3.2%
5.0%
0.0% -2.3% -6.2% -10.0%
0.6%
-5.0% -7.9% -8.0%
0.0% -2.0% -4.0% CA CX -0.8% -1.5% -2.6% SIA JAI MAS CEA CSA THA
-6.1 pt THA
-9.2%
-15.0% SIA JAI MAS CEA CSA THA CA CX
Note: August data for MAS and JAL, September for others Source: Company data
Chart 15 : Asian September cargo load factor

80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% SIA JAI MAS CEA CSA THA CA CX 57.7% 50.0% 70.2% 64.8% 64.4% 63.7% 61.1% 56.1%
Chart 16 : Asian September cargo load factor change

4.0 pt 2.0 pt 0.0 pt -2.0 pt -4.0 pt -6.0 pt -8.0 pt CEA CSA MAS SIA JAI CA CX -5.0 pt -5.9 pt -4.9 pt 0.0 pt 0.2 pt
3.2 pt
-1.3 pt
Cathay Pacific (Hold, HK$16.50): Still not looking up

Overall revenue passenger kilometres (RPK) rose 7% yoy on a 10% increase in capacity. Loads slipped below 80% for the first time since May, although this was expected after the summer peak. Japan continued to recover while the US was buoyed by its new Chicago service. CX states that demand in the economy segment still lags capacity growth and yield is under continued pressure. Premium travel volume and yields held up well in September, with currency movements working in their favour. However, CX guided for a more uncertain outlook as companies begin reviewing travel policies. Freight tonne kilometres (FTK) declined 10% yoy, the sixth consecutive month of negative yoy growth. Weakness was observed in outbound cargo from Hong Kong and China as demand to long-haul destinations, particularly Europe, was below management's expectations. More worryingly, CX notes there has been little seasonal pick up to the year-end. However, intra-Asia traffic remains strong. The company trimmed cargo capacity by 1% last month as a result of this continued pressure on air cargo. In both 2001 and 2008, RPKs turned negative after six months of negative FTK growth. We believe this pattern is likely to continue. CX stated last month that October bookings had not kept pace with capacity growth, and it was now offering promotions to stimulate demand. Considering the current macro environment, we think either volumes or yields will decline.
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Singapore Airlines (Sell, S$10.00):

SIA registered September revenue passenger kilometre (RPK) growth of 5% yoy, just shy of capacity growth of 6% yoy. Load factor fell 1ppt to 80%. However, with the exception of April 2011 (which was distorted by low-base effects of the volcanic eruption in Europe), the pace of RPK growth last month was the fastest recorded since June 2010. In addition, Silkair again recorded a strong set of numbers last month. Traffic growth of 13% yoy outpaced capacity growth of 12%. Load factor of 72% was 1ppt higher than what was recorded last year. SIA saw cargo traffic in freight tonne kilometres (FTK) decline 2.3% yoy even though freight carried actually increased by 4%. We believe this is down to the resilience of cargo demand on the intra-Asia routes in SIAs network. Cargo capacity fell 2.6% yoy, indicating that SIA, too, believes cargo traffic is likely to weaken further and is trying to manage capacity to buoy loads. The FTK declines last month were the first since November 2009.
Malaysia Airlines (Hold, TP Rm1.60): Softening traffic

Passenger traffic in August was down 0.5% yoy. The 0.7% yoy improvement in international traffic was offset by a 3.1% yoy decline in domestic passenger volumes. For the domestic segment, ASK was down 2% yoy, while the international side was up 7.8% yoy, but load were down 1.4pts and 5.4pts respectively. For the 8M11 period, MAS passenger traffic was 4.5% higher than the corresponding period last year. The improvement came mainly on the back of a recovery in international traffic, which was up 9.3% in the period under view, but was negated by a 4% drop in domestic traffic. Ytd domestic capacity was up 1.9%, while international was up 10.7%. Load factor for the domestic segment was down 3.4pts while international loads were up 0.6pts. On the cargo side, August volumes (measured by load tonne kilometres) were down 19.3% yoy and 14.3% for the 8M11 period. Despite a 12.5% yoy and 4.4% ytd cut in capacity, loads fell 5.6pts and 7.8pts for the respective periods.
Air China (Hold, TP HK$8.20): Humming along

Strong summer trading continued. Overall revenue passenger kilometres (RPK) grew 9% yoy against an 8% yoy increase in available seat kilometres (ASK). Load factors did slip mom to 83% but this was still 1ppt higher yoy. Domestic travel remains strong despite perceived high base effects from the Shanghai expo last year. RPKs rose 7% yoy against a 5% yoy increase in ASKs. Load factor of 84% last month was the best ever recorded in September. International RPKs rose 13% yoy, indicating that demand for overseas travel seems to be holding steady for now. ASKs were up 14% yoy, causing load factors to slip 1ppt to 81%. In light of macro concerns over the month, we see this as a credible performance. Cargo traffic remains soft, although we think this is as expected. International cargo traffic in freight tonne kilometres (FTK) fell 9% yoy in September against a 1% increase in capacity. Load factors slipped to 61%, a drop of 7ppt.
China Southern (Buy, TP HK$6.25): Still in a groove

CSA's domestic RPK traffic rose 3% yoy against a 1% yoy increase in ASK. Even though September is usually a seasonally slower month for travel, domestic load factors of 82% represent the best utilisation rate ever recorded in the month. Moderately more surprising was the company's 38% yoy improvement in international RPK on a 36% yoy growth in ASK. As a consequence, load factors also improved 1ppt to 76%. Even though CSA is still in a ramp-up phase of its international operations and large gains in traffic are expected, we are optimistic that this is a sign that travel demand can be resilient. Cargo volumes were better than expected. Overall freight tonne kilometres rose 3%, in line with the rate of growth in capacity.
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China Eastern (Hold, TP HK$3.60): Still lagging peers

China Eastern (CEA) did a better job of matching capacity with demand. The company recorded domestic revenue passenger kilometre (RPK) growth of 3.6% yoy against domestic capacity growth of 3.2% yoy. Domestic load factors improved for the first time in three months, rising 0.3ppt on the yoy to 81%. However, load factors are still the lowest among the big three carriers. International RPKs rose 4% yoy on a 5% yoy rise in international capacity. Load factors fell 0.7ppt to 76%. Among the big three airlines, CEA observed the lowest growth rate in international traffic, as well as the lowest overall load factors and the largest yoy decline in utilization. International freight tonne kilometres (FTK) grew 20% yoy against an 11% yoy increase in capacity. Load factors of 69% imply a 5ppt change. Freight load factors have hovered around 70% since March, and we attribute this change partially to the restructuring of its air freight unit to incorporate investments and expertise from SIA Cargo and EVA Air.
Tiger Airways (Buy, TP S$1.20): Hurt by Australian grounding

Tiger Airways posted a 15% yoy decline in its passenger number for September 2011 to 395,000 people, with load factor also falling from 87% in Sep 2010 to 78% in Sep 2011. Unfortunately, Tiger does not separate its Singapore and Australian operations. Much of the damage arose from the suspension of its Australian operations for six weeks starting in early July, and even after the suspension was lifted, Tiger Airways Australia is operating 22 sectors per day now compared to the 66 sectors a day that it did before the suspension. However, we believe the airline has seen the worst of this problem. Tiger Airways Australia said that its Sep 2011 load factor has improved compared to Aug 2011, and we expect the permitted maximum number of sectors per day will gradually rise as the Australian authorities gain increasing confidence that Tiger Airways has resolved the various safety-related issues that resulted in its AOC's suspension in July. Meanwhile its Singapore-based operations appear to grow strongly. Tiger Airways started new routes between Singapore and Cebu, Davao and Bangalore. In addition Tiger Airways is raising its flight frequencies on a number of existing routes.
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Australia
Australian carriers report with a greater lag than other carriers. We expect that comparisons in Qantas numbers going forward are likely to be distorted by the effect of the industrial action at present, with Virgin Blue likely to pick up the slack in this drop-off.
Qantas (Hold, A$1.68): Softening loads and yields

QAN August operating statistics remained relatively consistent with that of previous months, with 5% demand growth at the Group level on 6% capacity growth. However, slightly surprising is the softening trend in load factor movements and downward trend in yield growth already being seen, despite conditions remaining relatively positive for the airlines. We thought they may have remained marginally stronger at this point. 8% growth in domestic operations was again driven mostly by Jetstar, with 22% growth vs 2% for Qantas. We expect Jetstar growth to moderate over the remainder of the fiscal year as Tiger continues to operate on a reduced network. The Tiger grounding in July and early August again contributed to an improved load factor for Jetstar, with Qantas's 1pt decline mirroring the previous month. Yield growth of only 5.7% (vs 9.4% in July) was surprisingly low in our view given the competitive environment is better for QAN with Tiger's issues ongoing. 6% growth in International operations was mostly due to Jetstar Asia growth, although Qantas recorded marginal growth (2.6%) in the mainline business. Load factors declined 2pts, indicating demand still remains subdued despite the stronger AUD encouraging outbound travel. Yield growth also softened to 4.1% (from 7.0% in July). While QAN is still tracking along reasonably well with underlying fundamentals holding in there, we remain concerned that a slower global economic growth environment will impact Australian airline travel over the next 12 months. QAN is very cheap at current levels in our view, but with industrial action looking like it will get worse before it gets better, we advocate waiting for that to run its course.
Virgin Blue (Buy, A$0.41): Soft loads from overseas growth

August saw Group capacity growth of 7.1% outstrip demand growth of 5.0%, leading to a load factor decline of 1.6pts to 78.1%. Total passengers carried declined 2.7%, reflecting the exiting of NZ Domestic operations in October 2010. The decline in load factor was driven primarily by a 3.6pt decline in International as VAustralia continued to build up its presence on the Abu Dhabi route. Domestic loads fell marginally (-0.2pts) to 79.6% as the 5.5% increase in capacity was largely consumed by increased demand. This was a solid result given that VBA is now flying the larger A330s trans-Tasman and highlights good take-up of this new offering. We expect Domestic traffic in September to be a little stronger with VBA's key competitor, Qantas, experiencing industrial action. Qantas last saw industrial action in 2008 and it resulted in a temporary 2pt shift in market share to VBA.
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Americas
RBS does not have coverage of the US airlines. However, considering that airlines generally must be looked at within a global context, we provide below some factual commentary of the US airline data. Overall, network carrier traffic was little changed in the month. Most carriers are reporting better load factors, indicating some capacity discipline. The low-cost airlines continue to grow in the single digits, with loads here also improving. Considering the growth profile of the region, the South American airlines are understandably reporting higher traffic growth rates at the moment. Chart 17 : Americas September passenger traffic growth Chart 18 : Americas September passenger capacity growth
25.0% 20.0% 15.0% 10.4% 10.0% 5.0% 3.8% 0.0% -0.9% -5.0% JBU DAL ACA AA ASA SWA -1.0% -1.7% TAM LAN GOL UAL US COPA WJA 1.9% 7.6% 6.4% 6.9% 4.0% 5.0% 3.0% 0.3% 0.0% -5.0% ACA ASA AA -2.2% JBU DAL SWA -1.0% -2.8% COPA WJA TAM -3.3 pt ACA COPA SWA WJA TAM JBU GOL ASA DAL LAN UAL AA US GOL 2.2 pt LAN 0.5 pt UAL US 3.2% 11.1% 10.5% 10.0% 8.7% 8.0% 10.4% 8.9% 7.0%
30.0% 25.0% 20.0% 15.0%
26.4%
22.0%
7.2%
Source: Company data; Note July data for GOL and TAM, August for others
Chart 19 : Americas September passenger load factor

85% 84% 81% 80% 80% 78% 75% 73% 70% 70% 69%
Chart 20 : Americas September passenger load factor

3 pt 2 pt 1 pt 0.6 pt 0 pt -1 pt -2 pt -3 pt -0.8 pt -0.5 pt -0.8 pt
83%
84%
83%
83% 80%
2.4 pt 1.3 pt 1.1 pt
2.3 pt 1.5 pt
2.5 pt
75%
65% ACA COPA SWA WJA TAM JBU GOL ASA DAL LAN UAL AA US
-4 pt
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Chart 21 : Americas August cargo traffic

15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -15.7% -20.0% LAN DAL UAL AA
11.2%
1.2%
-5.2%
American Airlines (NR): Traffic and load factor up

American airlines passenger traffic grew 1.9% yoy on a 0.3% increase in capacity. Load factors rose 1.3 points increase in September over same period last year to 81.4%. Domestic capacity was down 1.1% yoy while traffic increased 1.7% driving up load factor by 2.3 points to 81.9%. International traffic increased 2.2% yoy driven by 5.7% increase in Pacific operations and 3% increase in Latin America. International capacity was up 2.4% led by 12.5% increase in Pacific and 2.4% increase in Atlantic capacities while Latin American saw capacity decline 0.5%. International load factor was at 80.6%, a decrease of 0.2 points versus the same period last year; Pacific load factor was down 4.9 points. Americans cargo traffic declined 5.2% yoy.
Delta Airlines (NR): Load factor up, traffic down

Delta airlines reported 0.9% decline in traffic for September 2011 with a capacity decline of 2.2% over same period last year. These capacity cuts caused load factor to increase 1.1 points to 83.6%. Domestic traffic increased 0.5% on 3.3% decline in capacity driving up load factor by 3.2 points to 83%. International traffic declined 2.8% yoy; Latin American traffic increased 13.7% and Pacific by 0.8% while Atlantic traffic declined 7.6% over same period last year. International capacity was marginally down 0.6%, Atlantic capacity declined 7.5% which was partly offset by 8.3% increase in Pacific and 11.1% increase in Latin American capacities. International load factor was down 2.0 points at 84.5% led by drop in Pacific (6.1points) and Atlantic (0.2points) load factor while Latin American saw a up tick of 1.8 points in load factor. Deltas cargo increased 1.2%.
United Continental (NR): Loads down, PRASM up

United and Continentals combined traffic declined 1.7% in September versus same period last year. Capacity was down 1.0% reducing load factor by 0.5 points to 82.8%. Consolidated and mainline passenger revenue per available seat mile (PRASM) increased 11.0-12.0% and 10.511.5% respectively, on management estimates, as compared to the pro forma results from September 2010. Domestic traffic was down 2.5% on 3.9% capacity decline bringing up the load factor by 1.2 points at 84.7%. International load factor declined 2.4 points yoy to 82.2% due to increase in capacity (1.6% yoy) and decline in traffic (1.3% yoy). Capacity increase was weighted to Pacific and Latin America while Atlantic and Pacific traffic declined. United Continentals cargo declined 15.7%.
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US Airways (NR): Volume down, load factor and PRASM up

US airways reported consolidated September traffic down 1.0% with 2.8% decline in capacity driving up load factor by 1.5 points at 83.3%. Consolidated (mainline and express) passenger revenue per available seat mile (PRASM) increased approximately 14% versus the same period last year, as per management estimates. Domestic capacity and traffic declined 4.6% and 1.8% respectively, leading to 2.5 points increase in load factor at 83.7%. International capacity and traffic increased 2.4% and 1.1% respectively, led by increase in Atlantic capacity (4.3% yoy) and traffic (3.1% yoy). International load factor declined 1.3 points at 82.3%.
Southwest (NR): Volume, load factor and PRASM up

Southwest and newly acquired AirTrans combined September traffic and capacity increased 6.4% and 3.25 respectively, implying an increase in load factor by 2.3 points to 77.8%. For September 2011, the company estimated 12% increase in passenger revenue per ASM (PRASM) as compared to September 2010's combined PRASM.
JetBlue (NR): Traffic and PRASM up, load factor down

JetBlues September traffic increased 7.6% but load factor was down 0.8points to 79.8% due to 8.7% increase in capacity. JetBlue's preliminary passenger revenue per available seat mile (PRASM) for the month of September increased 13% yoy.
Unit revenue and qualitative data

Qualitative data for the month was broadly favourable although there seems to be some disparity between regions. Unit revenue data from the European and Australian carriers suggests slowing (or negative) rates of growth. The difference might be with IAG, which reported strong premium traffic, but even they are warning of further bumps down the road. On the other hand, the US companies reported strong unit revenue growth last month, with the rate of increase mostly in the low teens. This compares favourably to yield growth of 6-9% in August. Table 2 : Qualitative data
Region Europe Airline IAG SAS Norwegian Oceana Qantas Group Air New Zealand Metric Premium traffic growth Non premium traffic growth Scandinavian Airlines Yield Scandinavian Airlines total RASK Yield RASK Domestic Yield International Yield System Yield Short haul Yield Long Haul Yield Americas United Continental US Airways JetBlue Southwest GOL
Time period Sep yoy Sep yoy Sep yoy est Sep yoy est Sep yoy Sep yoy Aug yoy Aug yoy Aug YTD yoy Aug YTD yoy Aug YTD yoy Sep yoy est Sep yoy Sep yoy Sep yoy Aug yoy Aug yoy 9.3% 3.5% Weaker Weaker -2.0% 4.0% 5.7% 4.1% 6.5% 4.3% 4.9% 11.5% 14.0% 13.0% 12.0% -3.6% -6.9%
PRASM PRASM PRASM PRASM PRASM Yield
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Valuation tables
The varying capital structures of carriers globally and the varying nature of competitive pressures lead to different relative rankings of the carriers, depending on whether PE multiples, EV/EBITDAR or dividend multiples are considered. Among the network carriers, the American carriers have the lowest Bloomberg consensus PE multiples on average. The lowest consensus EV/EBITDAR multiples are generally found in Europe, while the Asian airlines overall have the highest consensus dividend yields. Amongst the low cost carriers, the lowest consensus PE multiples are seen on average at the European low-cost carriers. However, we note that the more established carriers such as Ryanair, Easyjet, AirAsia and Virgin Blue are all trading above median PEs.
Table 3 : Global network carrier multiples

Ticker RBS Recom Div Yield (%) EV /EBIT (x) EV/ EBITDA (x) 3.0 EV/ 2 YR FWD EBITDAR EPS CAGR (x) 2.4 26.8% P/E (x) P/B (x) P/CF (x)
Australian Network Carriers Qantas Asia-Pacific Network Carriers Air New Zealand Singapore Airlines Cathay Pacific China Eastern China Southern Air China Malaysian Asiana Korean Thai All Nippon Airways Average Median Europe Network Carriers IAG Air France-KLM Lufthansa Average Median North America Network Carriers American Airlines Delta United Continental US Airways Air Canada Average Median Global Average Global Median AMR US DAL US UAL US LCC US AC/A CN 0.0 0.0 0.0 0.0 0.0 0.0% 0.0% 1.5% 0.3% 21.6 6.4 4.1 4.3 7.4 8.8 6.4 11.8 11.0 5.7 3.9 2.7 3.2 2.1 3.5 3.2 5.6 4.4 4.1 3.9 3.6 1.8 1.7 3.0 3.6 3.3 3.6 n/a 61.5% 24.6% 268.8% n/a 1.2% 0.6% 41.7% 20.0% n/a 4.0 4.1 3.8 11.8 5.9 4.0 9.3 6.5 -0.2 2.2 1.6 2.7 5.5 2.4 2.2 1.3 1.0 1.0 2.1 2.2 1.9 0.6 1.6 1.9 16.1 2.3 IAG LN AF FP LHA GR Hold Sell Hold 0.8 0.0 3.6 1.5% 0.8% 11.4 n/a 17.3 14.4 14.4 2.9 3.5 3.6 3.4 3.5 n/a 1.6 2.0 1.8 1.8 36.0% n/a 14.1% 25.1% 25.1% 11.9 n/a 26.2 19.1 19.1 0.7 0.3 0.6 0.5 0.6 259.4 1.2 2.0 87.5 2.0 AIR NZ SIA SP 293 HK 670 HK 1055 HK 753 HK MAS MK 020560 KS 003490 KS THAI TB 9202 JP Hold Sell Hold Hold Buy Hold Hold 6.8 4.5 3.6 0.0 0.0 2.3 0.0 1.2 0.3 5.1 1.1 2.3% 1.2% 6.1 10.1 7.3 15.2 12.5 13.1 n/a 9.0 26.9 11.0 17.3 12.9 11.8 2.7 3.2 4.4 6.1 5.6 6.4 26.6 5.9 8.0 4.9 5.7 7.2 5.7 2.3 n/a 4.2 6.3 5.6 n/a n/a 4.0 2.1 3.5 n/a 4.0 4.0 8.2% 35.2% 16.1% 4.5% 2.6% 5.1% n/a 20.0% n/a 45.9% n/a 17.2% 12.1% 7.8 14.9 5.4 4.4 5.7 5.7 n/a 5.5 10.4 7.3 19.3 8.7 6.5 0.7 1.0 0.8 0.9 0.8 1.0 2.5 1.0 1.3 0.5 1.1 1.1 1.0 2.7 4.8 3.7 1.9 2.3 3.7 5.6 2.8 2.3 1.6 3.5 3.2 2.8 QAN AU Hold 4.0 7.9 6.6 0.5 1.6
Source: RBS forecasts (where recommendation exists); Bloomberg (all others), valuations as of 19 Oct 2011
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Table 4 : Global low cost carrier multiples

Ticker RBS Div Yield EV /EBIT Recom (%) (x) EV/ 2 YR FWD EV/ EPS EBITDA EBITDAR CAGR (x) (x) 4.4 3.2 58.3% P/E (x) P/B (x) P/CF (x)
Australian LCCs Virgin Blue Asia-Pacific LCCs AirAsia Tiger Spicejet Average Median Europe LCCs Ryanair Easyjet Air Berlin Norwegian Vueling Average Median North America LCCs JetBlue Southwest Westjet Gol Average Median Global Average Global Median JBLU US LUV US WJA CN GOL US 0.0 0.2 1.7 1.8 0.9% 1.0% 1.7% 0.1% 7.1 5.1 5.1 n/a 5.8 5.1 6.0 6.4 4.5 3.4 3.0 n/a 3.7 3.4 3.8 4.2 4.6 3.8 2.8 n/a 3.8 3.8 3.3 3.6 79.8% 66.9% 21.1% n/a 55.9% 66.9% 27.1% 20.2% 8.8 11.1 10.0 21.3 12.8 10.6 9.6 9.4 0.7 0.9 1.1 0.7 0.9 0.8 1.1 1.0 2.8 5.3 4.4 2.6 3.8 3.6 51.2 4.3 RYA ID EZJ LN AB1 GR NAS NO VLG SM Buy Buy Sell 13.8 2.2 0.0 0.0 0.0 3.2% 0.0% 8.3 7.9 n/a 5.7 -4.0 4.5 6.8 4.9 4.3 4.2 3.7 -3.7 2.7 4.2 n/a 3.6 1.4 3.6 n/a 2.8 3.6 7.5% 2.8% -40.3% 52.3% 42.6% 13.0% 7.5% 9.9 9.4 n/a 6.2 6.7 8.1 8.1 1.2 0.9 0.7 1.0 0.6 0.9 0.9 5.3 567.7 4.2 3.4 3.4 116.8 4.2 AIRA MK TGR SP SJET IN Sell Buy 0.9 0.0 0.0 0.3% 0.0% 10.5 8.4 5.6 8.2 8.4 7.4 6.3 3.5 5.7 6.3 n/a n/a n/a n/a n/a 18.9% 19.3% n/a 19.1% 19.1% 9.8 4.5 7.4 7.2 7.4 1.5 1.0 2.2 1.6 1.5 6.0 5.0 3.9 5.0 5.0 VBA AU Buy 0.0 11.4 12.2 0.8 2.4
Source: RBS forecasts (where recommendation exists); Bloomberg (all others), valuations as of 19 Oct 2011
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17
QAN and VBA continue to benefit from Tiger's reduced flying schedule, though it is beginning to again ramp-up operations. The question is just how damaged the Tiger brand is in Australia and how sticky recent market share win by Jetstar and Virgin is. (Mark Williams +61 2 8259 6921)
Equity | Singapore | Transportation
20 October 2011
Produced by: The Royal Bank of Scotland Asia Securities (Singapore) Pte Limited
Tiger Airways
Buy
Target price
Thriving in times of recession

In times of recession consumers generally downgrade to cheaper products. At this time, Tiger Airways, one of the world's lowest-cost carriers, stands to benefit from a volume spurt and falling oil price to boot. Its Australian problem is, in our view, in the process of being resolved, and we reiterate our Buy rating.
Key forecasts
FY10A Revenue (S$m) 486.2 15.00 28.20 28.20 0.06 0.00 0.00 11.21 36.90 2.11 2.09 FY11A 622.2 69.90 39.90 39.90 0.07 0.00 0.00 10.14 12.80 2.08 4.38 FY12F 569.2 FY13F 748.7 FY14F 956.9
S$1.20 (from S$1.85)

Price
S$0.67
n/a
Market view
Overweight
Price performance
(1M) Price (S$) Absolute (%) Rel market (%) Rel sector (%)
May 10 2.4 2.0 1.6 1.2 0.8 0.4 TAHL.SI Straits Times Index Oct 10
EBITDA (S$m) Reported net profit (S$m)

(3M) 1.13 -41.4 -33.3 -37.1
Apr 11
-39.0 & 61.40 & 96.50 & -62.3 & 30.40 & 58.50 & -62.3 -0.09 & 0.00 0.00 -7.82 -23.9 1.67 -0.16 30.40 0.04 & 0.00 0.00 18.47 13.90 1.75 2.31 58.50 0.07 & 0.00 0.00 9.59 8.02 1.48 3.25
(12M) 1.89 -64.8 -58.7 -59.0
0.90 -26.1 -25.1 -25.4
Normalised net profit (S$m) Normalised EPS (S$) Dividend per share (S$) Dividend yield (%) Normalised PE (x) EV/EBITDA (x) Price/book value (x) ROIC (%)
Use of %& indicates that the line item has changed by at least 5%. 1. Post-goodwill amortisation and pre-exceptional items. Accounting standard: Local GAAP Source: Company data, RBS forecasts
year to Mar, fully diluted
Tiger Airways: a winner in recessionary times Our price checks indicate that Tiger Airways offers the lowest fares on almost all major routes in Southeast Asia, a region where it has the second lowest CASK (unit operating costs). A recession therefore could even boost Tigers passenger growth, in our opinion. Sweeping management changes should resolve its Australian troubles Tiger stock has lost 68% of its value since its high in August 2010, more recently due to the suspension of its Australian air operators certificate. The core issue, in our opinion, lies with the attitude of previous management. We believe Tiger has turned the corner with sweeping management changes. Its new CEO was recently the CEO of Silk Air, whose earnings rose five-fold under his leadership (2007-11) despite rising fuel costs. Tiger Australia has now been allowed to resume operations, and we expect earnings to stabilise by FY13. Stronger SIA support and Mandalas stake open up considerable possibilities SIA is also moving aggressively into the low cost carrier sphere, starting up a new long-haul budget carrier that can bring in feeder traffic to Tiger. The JV agreement to revive Mandala Airlines in Indonesia also gives Tiger a 33% stake in a clean-slate airline, with landing rights in 17 domestic airports and route allocation to Singapore, Hong Kong, Macau and others. At a stroke this opens up considerable possibilities for Tiger to expand in the region. Reiterate Buy with 80% upside potential; 2Q12 results could be a catalyst
S$549.07m (US$432.27m)
S$6.03m (US$4.73m)
Sector: BBG AP Transport RIC: TAHL.SI, TGR SP Priced S$0.67 at close 20 Oct 2011. Source: Bloomberg
Analyst
John Rachmat
Singapore +65 6518 7996 john.rachmat@rbs.com
RCB Reg 198703346M, Permit MICA (P) 155/08/2011, Level 21, One Raffles Quay, South Tower, 048583, Singapore http://research.rbsm.com
We reiterate our Buy rating with 80% upside to our DCF-based fair value of S$1.20, reduced from S$1.85 due to rights issue dilution and Australian losses. The stock is attractively priced in our view at 10.1x 2011 PE and a 20% EPS 2011-16F CAGR. Its 2Q12 earnings announcement in mid-November should settle any lingering safety concerns over its Australian operations, clarifying the potential extent of the damage and thus potentially acting as a catalyst for its valuation. The key risks are oil price and the length of time Tiger may need to stabilise its Australian earnings. Important disclosures can be found in the Disclosures Appendix.
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The basics
Vs consensus (S$ cents)
EPS 2012F 2013F 2014F Ours (8.6) 3.6 7.0 Cons (3.6) 6.2 10.4 % diff (58) (42) (33)
Catalysts for share price performance

We expect Tigers 2Q12 earnings announcement in mid-November 2011 to be a catalyst to its valuation. Investor concerns about the potential damage from its safety record in Australia are, in our opinion, the main factor dragging down Tigers stock price performance at the moment. We expect management to give sufficient guidance to provide far greater clarity on the full extent of this downside risk.
Source: Reuters, RBS forecasts
Earnings momentum
While we expect the damage from the Australian troubles to be substantial, and we have reduced our FY12 forecast from S$68m profit to a S$62.3m loss, and our FY13 net profit forecast from S$82.6m to S$30.4m to reflect this risk, we also believe this issue is in the past. Over the next five years (2011-16), we expect Tiger Airways to deliver 20% EBITDAR and EPS CAGRs on the back of strong organic growth in its current operations in Southeast Asia, plus new expansion possibilities that will come with its investment in Mandala Airlines in Indonesia.
Valuation and target price

Forced ranking*
Company Tiger Airways China Southern Cathay Pacific Korean Air AirAsia Singapore Airlines Rec Buy Buy Hold Hold Sell Sell Upside / Downside 80% 50% 25% -6% -9% -10%
We have reduced our DCF-based target price to S$1.20 per share (from S$1.85) to account for the dilution from the recent rights issue and the potential damage from Tigers difficulties in Australia. This still offers 80% upside potential from current trading levels.
How we differ from consensus

Our earnings forecasts over 2012-14 are substantially lower than Reuters consensus expectations as much as 58% lower on 2012F EPS. The main issue for us is that Tiger Airways does not maintain sufficiently high disclosure standards for the investing community to work out the potential damage of its Australian difficulties with a high degree of confidence. Hence, we have decided to make stern assumptions about the potential losses from Australia, and the length of time needed to stabilise operations there. There might therefore be some renewed stock price weakness if the 2Q12 earnings announcement comes with guidance that comes close to our new, reduced forecasts. However, we expect the removal of uncertainty to be a positive catalyst in itself, as we believe Tigers stock price has been severely oversold; not just on the back of the bad news coming out of Australia, but also due to uncertainty about the full extent of that bad news.
* by difference to target price as at time of publication. Recommendations may lie outside the structure outlined in the disclosure page. Source: RBS forecasts
Risks to central scenario

Key events
Date 14 Nov 2011 14 Feb 2012 14 May 2012 Event 2Q12 earnings announcement 3Q13 earnings announcement FY12 earnings announcement
The key risks to our earnings forecasts and valuation are (1) the time needed by Tiger Airways to stabilise its operation in Australia, and (2) the oil price. Our earnings forecasts assume that Tigers Australian operation will only break even in FY13, and will then stabilise going forward. We assume that the Australian operation will stay stagnant with a fleet of six aircraft (vs ten deployed prior to the AOC suspension, and eight currently in use), as we expect Southeast Asia to be the main driver of Tigers earnings growth in future. We believe this is a severe set of assumptions, and the remaining downside risk to these assumptions would be if Tiger Airways Australia were to close down completely. We rate that risk as negligible. On the oil price, we assume jet fuel costs stay stable around US$120 per barrel over the next five years. If anything, we expect the oil price to face stronger downward pressure in recessionary times due to weakening demand in the face of declining economic activity. Table 2 shows the sensitivity of Tigers FY13 earnings to the jet fuel price. A 10% reduction in its jet fuel cost would improve Tigers earnings by 85%. Given that fuel costs account for 41% of its CASK and Tiger is minimally hedged, it is no surprise that the oil price would have such an outsized impact.
Source: Company
Tiger Airways | The Basics | 20 October 2011
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Key assumptions and sensitivities

Table 1 : Critical assumptions
FY ending March ASK (millions) - Consolidated ASK (millions) - Singapore ASK (millions) - Australia RPK (millions) - Consolidated RPK (millions) - Singapore RPK (millions) - Australia Passenger load factor Number of passengers ('000 people) Passengers growth rate Ancillary income per PAX (S$) Ancillary income per PAX Growth Rate Passenger yield (S$ cents per RPK) Revenue per ASK (S$ cent) Cost per ASK (S$ cent) W T I (US$ per barrel) Jet fuel price (US$ per barrel) USD SGD average exchange rate USD AUD average exchange rate AUD SGD average exchange rate Singapore 3M Sibor Singapore CPI Australia CPI Singapore real GDP growth Split of year end balance no. of aircraft based in Singapore based in Australia Fleet for own use operated in the Philippines (associate) operated in Indonesia (associate) operated in Thailand (associate) Total
Mar 2008 5,046.9
Mar 2009 6,459.5
Mar 2010 7,847.0
Mar 2011 9,583.0 5,685.3 3,897.7
Mar 2012 10,885.4 8,422.8 2,462.6 8,330.2 6,437.7 1,892.6 76.5% 5,513.5 (7.6%) 23.03 8.0% 5.31 5.23 5.80 101.27 120.00 1.170 0.943 1.240 0.6% 3.2% 2.7% 6.0%
Mar 2013 12,223.4 9,692.8 2,530.5 10,532.9 8,351.9 2,180.9 86.2% 7,001.1 27.0% 24.44 5.8% 5.48 6.12 5.83 101.27 120.00 1.185 0.995 1.191 2.1% 2.3% 2.9% 5.0%
Mar 2014 15,046.6 12,516.1 2,530.5 13,022.6 10,832.4 2,190.2 86.5% 8,659.4 23.7% 25.86 5.8% 5.63 6.36 5.89 101.27 120.00 1.132 0.970 1.167 2.5% 2.3% 2.9% 5.0%
Mar 2015 16,813.1 14,282.6 2,530.5 14,696.0 12,483.9 2,212.1 87.4% 9,782.0 13.0% 27.37 5.8% 5.78 6.65 5.99 101.27 120.00 1.081 0.946 1.143 2.8% 2.3% 2.9% 5.0%
Mar 2016 18,600.0 16,069.5 2,530.5 16,421.8 14,187.5 2,234.2 88.3% 10,917.8 11.6% 28.91 5.8% 5.93 6.93 6.13 101.27 120.00 1.060 0.935 1.134 3.0% 2.3% 2.9% 5.0%
4,134.9
5,245.2
6,768.0
8,209.0 4,869.4 3,339.6
81.9% 2,223.5 50.7% 6.71 158.0% 6.99 6.02 5.90 82.26 96.96 1.476 1.153 1.281 1.1% 7.1% 4.2% 8.4%
81.2% 3,166.9 42.4% 15.85 136.4% 6.25 5.85 6.59 86.18 107.79 1.440 1.296 1.134 1.1% 2.6% 2.5% 1.9%
86.2% 4,872.0 53.8% 19.31 21.9% 5.79 6.20 5.86 70.56 77.35 1.427 1.181 1.214 0.7% 1.5% 2.9% (0.8%)
86.4% 5,968.0 22.5% 21.38 10.7% 6.03 6.49 6.00 83.37 98.79 1.260 0.990 1.273 0.5% 5.2% 3.3% 14.5%
10 9 12 12 16 16 19 19
14 10 24 2 26
17 6 23 5 3 31
22 6 28 7 7 42
25 6 31 9 12 52
29 6 35 11 16 62
32 6 38 13 19 70
Table 2 : Tiger Airways FY13 earnings sensitivity to jet fuel price assumptions
Jet fuel price (US$ per barrel) FY13F earnings (S$m)
96.00 82.3
108.00 56.3
120.00 30.4
132.00 4.5
144.00 (21.5)
Tiger Airways | The Basics | 20 October 2011
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Thriving in times of recession

Tigers valuation was devastated by its troubles in Australia. We believe it has now turned the corner with the appointment of highly successful new management, plus Tiger stands to benefit from a spurt in passenger volume that recessionary downtrading should bring.
Tiger Airways: the investment choice in troubled times

At first glance, this may sound like an outrageous idea. The stock price has fallen 68% from its peak in August 2010 (vs the Straits Times index down 10% over this period). This is largely driven by regulatory issues in Australia that resulted in Tiger Airways Australia operations being suspended for six weeks, harming the airlines reputation for safety. Chart 1 : Tiger Airways EBITDAR track record and RBS forecasts
350 S$m 332.9
300
269.5
250 210.2 200 152.1 150 84.8 63.0 50 24.2 17.5 25.9 132.2
100
0 FY07 FY08 FY09 FY10 FY11 FY12F FY13F FY14F FY15F FY16F
We argue, however, that this issue is in the process of being resolved satisfactorily. The core issue, in our opinion, is the poor attitude adopted by the previous management. Tiger has now instituted sweeping management changes. The new CEO came with a sterling track record, having helped SilkAir to quintuple its earnings in four years (2007-11), despite rising fuel costs during that period. These changes have allowed Tiger Airways Australia to resume operations, and we expect this division to stabilise its profitability by end-FY13. At the same time, the looming risks of recession should remind investors that low cost carriers stand to gain from the established trend of consumers downtrading to cheaper products at times of economic hardship. Tiger Airways, with the second lowest CASK (cost per ASK, a unit measure of airline operating costs) worldwide, is well positioned to benefit from this trend. In addition, its recent JV agreement to revive Mandala Airlines in Indonesia opens up vast new expansion opportunities. Currently, Tiger is limited to serving just Jakarta and no other destination in Indonesia. Mandala has landing rights in 17 domestic airports in that country, with established routes between Indonesia and Singapore, Hong Kong and Macau. At a stroke, therefore, Tiger can break free of routing limitations on its future expansion. The key risk to this positive outlook is the length of time that Tiger may need to stabilise its operations in Australia. We deal with this risk by slashing our FY12 forecast from S$68m profit to an S$62.3m loss, and our FY13 net profit forecast from S$82.6m to S$30.4m essentially assuming the worst extent of losses for the Australian operation stabilise by March 2013. The remaining downside risks to our forecasts therefore are minimal, in our view. The stock is currently trading at 10.1x 2011 PE and on our estimates the company offers a 20% CAGR in both EBITDAR (see Chart 1 above) and EPS over the next five years. We consider this highly attractive and reiterate our Buy recommendation with 80% upside to our new DCF-based target price of S$1.20.
Tiger Airways | Investment View | 20 October 2011
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A winning combination
In a recession, consumers generally downgrade to lower-priced products. This should benefit Tiger Airways, one of the worlds lowest cost airlines. Its new venture with Mandala Airlines and stronger collaboration with SIA also open up significant new growth potential.
Tiger s low fares will shine in recessionary times

Investors are too focused on Tiger's Australia woes .. ... to notice that Tiger stands to benefit significantly from worsening economic times
While investors may understandably be focusing on Tigers woes in Australia today, we should not forget that Tiger also stands to benefit in a recessionary time. During economic hard times, consumers generally try to maintain their consumption level but economise by buying lower-priced products. In aviation, low cost carriers benefit from this trend and Tiger Airways, being one of the lowest cost airlines in the world (see Chart 2), is well positioned to benefit from any such downtrading by air travellers. Chart 2 : Comparison of various airlines CASK (Costs per ASK) and sector length (2010)
Cost per ASK (US$ cents) Qantas SIA Cathay Pacific EasyJet VBA GOL WestJet AirTran JetStar JetBlue Tiger
10
SouthWest Ryanair
4 AirAsia 2 Average Stage Length (km) 0 0 Source: Company data 1,000 2,000 3,000 4,000 5,000 6,000
It is indeed the case that Tiger Airways often offers the cheapest air fares. We conducted a quick price check in early September. We looked at four of the popular routes in the region: Singapore Jakarta, Singapore Kuala Lumpur, Singapore Phuket and Singapore Manila Clark. For each route, we compared the total air fares of three competing budget airlines (except for Singapore Manila Clark, which is served by only two low cost carriers) and we compared the prices for flights taking place one month ahead and six months ahead. To standardise the comparison, the only ancillary charge we include is for a 20kg checked-in baggage. Chart 3 : Fare comparison (Singapore Kuala Lumpur)
SG$ 180 160 140 120 100 80 60 40 20 0 TIGER AIR ASIA FIREFLY AIRWAYS Source: RBS TIGER AIR ASIA FIREFLY AIRWAYS 0 TIGER AIR ASIA JETSTAR AIRWAYS Source: RBS TIGER AIR ASIA JETSTAR AIRWAYS 100 95 81 150 117.8 105 200 171.00 Next month flight 160.8 Flight in six months 160.8 250
Chart 4 : Fare comparison (Singapore Phuket)

SG$ 300 Next month flight 220.40 Flight in six months 244.00 214.95 170.83 208.00
50
Tiger Airways | Performance and Valuation | 20 October 2011
91
The results show Tiger to offer the lowest fares in all cases bar one (Singapore Jakarta, for flights departing in six months time, where Lion Air offered the lowest fare). Please see Charts 3 to 6. While this is a small sample only, its overwhelming conclusion indicates to us that this is likely to be the norm. Indeed, given Tigers low cost base (world-wide, only AirAsia has a lower cost base), it is also a logical conclusion in our opinion. Chart 5 : Fare comparison (Singapore Jakarta)
SG$ 200 180 160 140 120 100 80 60 40 20 0 TIGER AIR ASIA LION AIR AIRWAYS Source: RBS TIGER AIR ASIA LION AIR AIRWAYS 0 TIGER AIRWAYS Source: RBS CEBU AIR TIGER AIRWAYS CEBU AIR 50 112.00 112.00 98.00 100 154.60 141.00 150 Next month flight 180.00 200 191.2 176.4 152.45 171.2 Flight in six months
Chart 6 : Fare comparison (Singapore Manila Clark)

250 SG$ Next month flight Flight in six months
As travellers are forced to downtrade their travel expenses during a recession, Tigers cost advantage should allow it to benefit from additional passenger volume growth. Even without a recession, its low fares have allowed Tiger to carve strong positioning in a number of important markets. For example, Tiger Airways runs the highest number of seats on Singapore Thailand routes higher than the national full service carriers (SIA, Thai Airways, Cathay Pacific or SilkAir) and competing low cost carriers (Thai AirAsia or Jetstar). See Chart 7 below. Likewise, Tiger runs the highest number of seats for Singapore Vietnam routes, beating both national airlines (SilkAir, Vietnam Airlines) as well as competing low cost carriers (Jetstar or Lion Air). This shows clearly, in our opinion, that there is strong demand for the market segment that Tiger is targeting ie air passengers at the very bottom of all price ranges. We believe this segment can be expected to grow even more strongly in times of economic hardship. Chart 7 : Seat capacity on Singapore Thailand routes
14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Jul-11 Tiger Thai AirAsia Cathay Source: Centre of Asia Pacific Aviation
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12 SIA SilkAir
Feb-12
Thai airways international Jetsrat Myanmar Airways International
Bangkok Airways
Furthermore, Tiger does not earn big money only from country routes in which it dominates. Even routes where Tiger faces stiff competition (such as the crowded Singapore Kuala Lumpur and Singapore Hong Kong routes) rank highly in terms of contributions to Tigers revenue. Those two crowded routes in fact are the No 2 and No 4 routes for Tiger Airways (in terms of number of seats flown every week). See Chart 8.
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Chart 8 : Tiger Airways top 10 routes (No. of seats flown, 26 Sep 2 Oct 2011)
Singapore - Bangkok Singapore - Kuala - Lumpur Singapore - Ho - Chi - Minh - City Singapore - Hong - Kong Singapore - Jakarta Singapore - Chennai Singapore - Phuket Singapore - Macau Singapore - Manila Singapore - Tiruchirapally 0 Source: Centre of Asia Pacific Aviation 2,000 5,040 5,040 5,040 4,680 4,320 3,960 4,000 6,000 8,000 10,000 12,000 7,560 11,160 10,440 10,080
The point here is that Tiger dominates this bottom of the bottom price segment. Its dominance is in our opinion secure, due to its long-term cost advantages (like Ryanair, Tiger has worked out how to strip costs to the very bare necessities). And this is the market segment that can be expected to grow long term, regardless of how economies are doing indeed, it may well grow even more strongly during recessionary periods due to customers need to downtrade.
Tigers low costs may get lower with recession

Oil demand, and hence oil price, tends to decline in recessionary times
The other potentially positive effect of a recession is the prospect of a declining oil price. Recession tends to result in a sharp reduction in demand for oil, and hence its price, as the decline in economic activity also reduces the need for energy consumption. Chart 9 : Tiger Airways operating expenses breakdown (y/e March 2011)
Airport and Handling 11% Route Charges 6%
Others 3%
Staff Costs 14% Depreciation 2%
Aircraft Rentals 11% Marketing and Distribution costs 1% Maintenance, material and repair 11%
Fuel Costs 41%
Fuel (including hedging costs) accounted for 41% of Tigers operating expenses in the year to March 2011, by far its largest cost component. In our analysis, every 1% reduction in its fuel costs would translate to an 8.5% increase in its earnings in the year to March 2013. (The next normal period in our view, as earnings to March 2012 will be dominated by the negative impact of its troubles in Australia.) Ironically, therefore, we believe a global recession would in fact help boost Tigers profitability through a spurt in passenger growth and lower fuel costs.
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Mandala opens up vast possibilities

Absence of foothold outside of Singapore is in our view the main barrier to Tiger's earnings growth
One of Tigers key weaknesses, in our opinion, is that it only has one hub in Southeast Asia (its main theatre of operations) compared to its major competitors such as AirAsia (with 11 hubs, soon to rise to 12 after adding Makassar in South Sulawesi, Indonesia). The main barrier for Tiger Airways is that it does not have a foothold in countries outside of Singapore, again unlike AirAsia with its associate operations in Thailand and Indonesia. As a result, the routes that Tiger can serve depend on the availability of country rights (up to fourth freedom the right to carry passengers from the airliners country of origin to another country) stipulated in bilateral agreements between Singapore and other countries in the region. For example, the only route that Tiger serves to Indonesia is the Singapore Jakarta route, because Singapore has already parcelled out all its fourth freedom rights entitlement with Indonesia among all Singapore-based airlines. Yet the potential for Tiger in Indonesia is extensive, in our view. This can be seen from the fact that, despite the limited service, Tigers Singapore Jakarta service is its No 5 busiest route (see Chart 8 above). So this barrier to Tigers growth in Indonesia is constricting Tigers ability to fulfil its potential. This will soon change, we believe. On 23 September, Tiger Airways finalised an agreement to purchase a 33% stake in Mandala Airlines in Indonesia. Saratoga Investama acquires a 51% stake, creditors swap their debt for a 15% stake and the previous shareholders hold the remaining 1% stake. Chart 10 : Indonesian airlines market share of domestic air passengers (2009)
Trigana Air Indonesia Wings Service Air AirAsia 1% Others 3% 3% 3%
Merpati Nusantara 5% Mandala Airlines 8%
Lion Air 32%
Sriwijaya Air 12% Batavia Air 14% Garuda Indonesia 19%
Source: INACA
Mandala Airlines is one of Indonesias oldest airlines, founded in 1969 by Army and Air Force officers and originally owned by Yayasan Dharma Putra KOSTRAD, a foundation linked to KOSTRAD, the strategic reserve command of the Indonesian army. In 2001, it suffered a scandal when a senior KOSTRAD officer stole Rp135.5bn from the airline, and in 2005 it suffered a high profile accident when its Boeing 737-200 jet crashed into a heavily populated residential area a few minutes after taking off from Polonia International Airport in Medan, North Sumatera. At the same time, political development in Indonesia forced the military to divest many of its businesses, and Mandala Airlines was purchased by Cardig International for Rp300bn (US$34m at the time) in April 2006. Later on, Indigo Partners bought a 49% stake in this airline in October 2006. Indigo Partners currently owns a 4.96% stake in Tiger Airways. Last year, Mandala Airline started to hit financial difficulties, cancelling flights from August 2010 and finally ceasing all flying in January 2011. Yet prior to this terminal downturn, Mandala ran a substantial operation commanding an 8.1% share of Indonesias domestic air passengers in 2009 (the last year when it had a full year of operations see Chart 10) as well as flying to a number of international destinations (Singapore, Hong Kong and Macau) from its bases in Terminal 3, Soekarno Hatta International Airport Jakarta and Sepinggan International Airport Balikpapan (in East Kalimantan). Domestically, Mandala Airlines at that time served 17 destinations in Sumatera, Java, Bali, Kalimantan and Nusa Tenggara.
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We believe Tigers stake in Mandala Airlines will bring the following advantages: 1. Tiger is buying into an almost clean slate airline: All costs of terminating aircraft leases and employment contracts, and all other costs associated with closing down its operations, have been worked over. Unsecured creditors have agreed to swap their Mandala debt into equity. Secured creditors (including Bank Victoria, which is still owed Rp49.9bn by the airline) will receive cash payments the cash will come from Saratoga Investamas equity cash injection of Rp157.3bn (for a 51% stake). So Tiger will face no risks from the past financial history of Mandala Airlines. Tiger is effectively buying the AOC and associated landing and country rights: While Mandalas AOC (air operator certificate) is currently suspended, we believe this can be reactivated by January 2012. Director General for Air Transportation at the Ministry of Transportation Herry Bhakti Gumay was quoted in the media as naming two important conditions before Mandala Airlines is allowed to fly again: (a) it must show that both crew and aircraft are ready for operation, and (b) it must fulfil the new conditions that will apply to all AOCs in Indonesia namely, the airline must own at least five aircraft and operate at least 10 aircraft. This should not be a huge barrier as Mandala Airlines had operated eight aircraft up to the point when it ceased flying, and we are confident the authorities will allow the newlyrevived airline a suitable period in which to ramp up its operations towards this fleet size. Indeed, Indonesia Finance Today reported that the revived airline plans to bring in five A320s by the end of 2011. With this resuscitated AOC, Tiger will have access to the fourth freedom country rights that Indonesia has with other countries in the region, and landing rights in numerous domestic airports. The investments come at little risk to Tiger: Tiger is not paying cash for this 33% stake (only a S$1 nominal investment), but rather in-kind contributions under a separate licensing and technical assistance agreement. The purchase cost of this investment will be entered in Tigers balance sheet at Rp101.78bn (S$14.6m).
2.
3.
Chart 11 : Indonesia air passenger growth (million people)

70 m 60 50 40 30 20 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 4.7 7.6 4.7 9.2 4.8 12.3 19.2 4.3 23.8 28.8 34 5.7 5.4 39.2 37.4 43.5 51.4 6.6 5.7 7.3 2000 - 2010 CAGR 17.8% (21% domestic and 9.5% international) 8.1 11.7
Domestic Source: Biro Pusat Statistik
International
Indonesia offers significant potential for Tiger's low-fare business model...
We should not underestimate the growth potential that Indonesia opens up to Tiger Airways. We believe Tigers business model, the lowest fares for a high safety standard, is particularly suited to Indonesia. Its bottom of the bottom price segment is a market that is growing strongly at this stage of Indonesias economic development. Indonesias domestic air travel has grown at a 21% CAGR over the past ten years (see Chart 11), driven mostly by the low cost carriers. At the same time, Mandalas history of operations in 17 domestic airports will also allow Tiger to develop international routes connecting Indonesias second tier cities to regional centres such as Singapore, Kuala Lumpur, Bangkok and Perth. Prior to its cessation of flights, Mandala Airlines had already served the Balikpapan Singapore route. Up to now it is only Indonesia AirAsia that has demonstrated the commerciality of connecting such second tier cities (Bandung, in its case) to regional centres; according to management, Makassar is likely to be added in 2012. There are not many airlines that possess the low cost base needed to execute such a concept successfully. Indonesia AirAsia has proven that it can be done, and we believe Tiger Airways Mandala venture can do the same. 10
and the Mandala set up will offer Tiger a head-start in opening up international routes to second-tier cities
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Indonesias international air travel has seen a 9.5% CAGR over the past ten years (again, see Chart 11). We believe this growth rate will accelerate once international routes to such underserved secondary cities are opened up. We expect Tiger Airways to drive this accelerated growth. Another strong point of this venture is the strategic partner with whom Tiger Airways is teaming up. Saratoga Capital was founded in 1998 by Edwin Soeryadjaya and Salahudin Sandiaga Uno. As one of the first private equity firms focused on Indonesia, it has engineered some of the largest restructuring events in Indonesia, including the largest Leveraged Buy Out and largest IPO in Indonesia post the 1998 Asian financial crisis. Saratoga currently employs over 20,000 people through its portfolio of companies with over US$2bn assets under management. Its current business interests span natural resources, energy, infrastructure, telecommunications and consumer goods. The portfolio includes Adaro Energy, Bonecom, Global Kalimantan Makmur, iForte, and Tower Bersama Group. Salahudin Sandiaga Uno, also known as Sandi Uno (born in Rumbai, Pekanbaru on 28 June, 1969), is listed as the 29th richest man in Indonesia in 2009 according to Forbes magazine, with an estimated net worth of US$795m. He began his career with Bank Summa in 1990, and had worked for MP Group and NTI Resources Ltd in Canada before moving back to Indonesia and cofounding PT Recapital Advisors with his high school friend, Rosan Perkasa Roeslani, in 1997. In 1998, he co-founded Saratoga Capital with Edwin Soeryadjaya.
Philippines venture may take longer to take off

Collaboration and investments in Southeast Asian Airlines (SEAir) in the Philippines is the other overseas venture that Tiger Airways focuses on at the moment. Unlike the Mandala venture, we are not so optimistic that this venture can take off in a material manner any time soon. Commercially, this is not a venture that we view with much excitement. The reason is that the Philippines is a market that used to be tightly controlled, and is only now gradually starting to open up. This situation can be clearly seen from the current market share of airports where Manilas Ninoy Aquino International Airports has a substantial dominance (see Chart 12 below). This airport, however, is also the home base of the national legacy carrier Philippine Air, and we do not expect SEAir or other low cost carriers to find it easy to win a rising presence in this airport. Chart 12 : Philippines airports market share (2010)
Cebu Mactan International Airport 9.2%
Clark International Airport 5.0%
Kalibo Airport 1.6% Davao Mati Airport 0.1% Manila Ninoy Aquino International Airport 84.1%
Source: Centre of Asia Pacific Aviation
The collaboration with SEAir started in Nov 2010 when it signed a marketing arrangement with Tiger Airways. This allows the Singaporean carrier to sell SEAir flights to passengers through Tigers website. At the same time, SEAir also started offering international flights using aircraft leased from Tiger Airways. Its first flights will be between Clark Freeport in Pampanga and Singapore. Approval from the Civil Aeronautics Board was obtained for the lease then. However, in May 2011, Philippine authorities issued SEAir with a cease-and-desist order on two new routes over concerns that arrangements with part-owner Tiger Airways violated local laws. Four rival domestic carriers had filed a joint opposition to the partnership, saying SEAir was selling Tiger Airways | Performance and Valuation | 20 October 2011
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tickets and accepting bookings through Tiger's website, which they said was not allowed under the agreement covering the lease of two of Tiger's Airbus 320 jets to SEAir. The CAB order is to temporarily stop the Manila-Cebu and Manila-Davao flights. However, SEAir's international flights are not affected. SEAir is therefore focusing now on developing its new Manila-Macau flights, in addition to the current international routes Bangkok Clark, Hong Kong Clark, Macau Clark and Singapore Clark. Tiger is now exploring another route to participate in the Philippines market with its proposal to buy a 32.5% stake in SEAIR for S$6m. At the time of writing, this plan is still being negotiated. Chart 13 : Airport to city centre distances (km)
km Diosdado Macapagal International Airport Incheon International Airport Narita Airport Kuala Lumpur International Airport Hong Kong International Airport Suvarnabhumi Airport Sultan Abdul Aziz Shah Airport Don Muang Airport Soekarno Hatta Airport Changi Airport Haneda Airport Halim Perdanakusuma Airport Manila Ninoy Aquino International Airport 0 Source: Centre of Asia Pacific Aviation 7 10 20 30 40 50 60 70 80 90 10 14 17 20 25 25 24 34 50 57.5 73 85
In our opinion, success for a regional low cost carrier such as Tiger in the Philippines would depend on these two factors: 1. Resolving the total cost of travel issue Given the difficulty that low cost carriers face in using Manilas Ninoy Aquino International Airport, the logical alternative is to use Diosdado Macapagal International Airport instead. This was previously the US Air Force air base in Clark. The airport has one huge disadvantage, however, in that it is located 85km away from Manilas city centre. This makes it the furthest away-from-city-centre airport in Asia Pacific (see Chart 13 above), and with limited transport infrastructure connecting this airport to centre Manila, it also adds significantly to the total cost of travel for the passengers. For budget travellers, this is a significant disadvantage. Overcoming local opposition The existing legacy carriers in the Philippines are trying to hinder the entry of low cost competitors into the country, as can be seen with their concerted efforts to nullify the marketing arrangement between SEAir and Tiger. While we do not see this as an unsurpassable barrier, we do expect it to slow down Tigers full participation in the Philippines market.
2.
Stronger collaboration with SIA

To counter-balance its slow progress in the Philippines, we expect Tiger to benefit from closer collaboration with SIA (Singapore Airlines), Tigers controlling shareholder. SIA is planning to start an entirely new long- and medium-haul budget carrier based in Singapore. The plan is still at its early stage, but SIA clearly has the resources to develop such a new venture the premier airline has a S$7.53bn cash balance as at 30 June 2011 even if the project may take a number of years and iterations before success is finally achieved. Currently, Tigers low cost competitors in the region AirAsia and Jetstar groups both have long- and medium-haul budget operations that deliver feeder traffic to their Southeast Asian operations. At the moment Tiger does not have this benefit those travelling long-haul on SIAs premium fares are clearly the wrong kind of passengers to then hop on Tigers low-cost, no-frills service for short-haul travel within Southeast Asia. SIAs new long- and medium-haul low cost carrier can therefore be expected to change this and help improve Tigers future profitability.
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Easily resolvable issues in Australia

Many investors fear that the suspension of Tiger Australias licence is the beginning of its demise. We believe the core of the problem was the non-compliant attitude adopted by its previous management this makes the problems both self-inflicted and easily resolvable.
The Aussie problem: nothing a new management cant fix

Tiger Australia's problems, while highly damaging, are resolvable in our view, and Tiger is in the process of addressing concerns
Tiger Airways problems in Australia started to become public when Australias Civil Aviation Safety Authority (CASA) issued a show cause notice on 23 March, giving Tiger Airways Australia 21 days to respond. According to media reports by AAP (the Australian Associated Press), CASA raised concerns that the airline was not following proper procedures to ensure the utmost safety of passengers. CASA also demanded answers on concerns that pilot training standards had slipped, and that the airline had taken shortcuts on its maintenance and other operations. A show cause notice is a serious action by CASA. On the basis of the reasons set out in the notice, the airline operator is invited to show cause why CASA should not act to suspend or cancel that airlines licence (or AOC air operator certificate). CASA rarely issues a show cause notice. The notice issued to Tiger Australia was the first issued by CASA since Ansett was hit with a similar warning in 2001, just months before that airline went bankrupt. Tiger Airways management handled the issue with an attitude that, in our opinion, was confrontational and impertinent towards its regulators in Australia. Likewise, its disclosures of the unfolding process to the exchange authorities in Singapore are unapologetically non-transparent in our view. To date, Tiger Airways has yet to disclose all the safety issues raised by CASA, and therefore we list the major issues that have been reported in the mass media and/or commented on publicly by the authorities (CASA and ATSB Australian Transport Safety Bureau). Safety Issue (1) : Not reporting and flying a plane with a faulty wing This is an account of the incident cited in the Australian Transport Safety Bureau report: On 18 May 2009, an Airbus Industrie A320-232 aircraft, registered VH-VNC was on a regular public transport flight from Mackay, Queensland to Melbourne, Victoria when at about 12:49 Eastern Standard Time, the aircraft started to vibrate. Cockpit indications showed that the left aileron was oscillating. The crew diverted the aircraft to the Gold Coast Aerodrome, Queensland and landed. The source of the aileron oscillation was an internal fault in one of the left ailerons hydraulic servos. The fault was introduced during manufacture by an incorrect adjustment of the servo, which caused internal wear in a number of the servos hydraulic control components. The aileron servo manufacturer has incorporated a new method of adjusting the aileron servos during assembly to minimise the likelihood of a recurrence of the problem. During the investigation, it was found that an identical fault had occurred to the same aircraft 8 months prior to this incident. The previous incident was not reported to the Australian Transport Safety Bureau by the operator as required by the Transport Safety Investigation Act 2003. The newspaper daily Herald Sun reported that Tiger Airways spokeswoman Vanessa Regan said that the first incident in 2008 was not safety related, and that it was considered inappropriate to report the event to the ATSB. "At no time was safety compromised or was safety a risk,'' she said, noting that after the first incident a decision was made to undertake a technical assessment in Melbourne where a technician was available. The investigators report attributed the incident to a servo valve controlling the movement of the flaps on the trailing edge of the left wing. "That issue was resolved at that time,'' Ms Regan said, adding that the second incident was immediately reported to the ATSB. We view this response as surprisingly aggressive. It is a legal requirement in Australia that airlines report every incident to the authorities. Whether the airline assesses it to be safety-related is not relevant, and hence for an airline to choose which incidents to report and which ones not to report is a direct challenge to the authority, in our opinion.
Tiger Airways | Management | 20 October 2011
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Safety Issue (2a) : Tigers plane flying too low, 7 June 2011 This is the account of the incident cited in the Australian Transport Safety Bureau report: At 21:02 Eastern Standard Time on 7 June 2011, an Airbus A320 aircraft, registered VH-VNG and operated by Tiger Airways, was on an approach to runway 27 at Melbourne Airport, Victoria. Air traffic control (ATC) had cleared the flight crew of the aircraft to descend to 2,500 ft. Shortly after, the aircrafts track was seen on the ATC radar to descend to 2,000 ft. ATC notified the flight crew, who climbed the aircraft to 2,500 ft, continued the approach and landed. Safety Issue (2b) : Tigers plane flying too low, 30 June 2011 This is the account of the incident cited in the Australian Transport Safety Bureau report: At 23:02 Eastern Standard Time on 30 June 2011, an Airbus A320 aircraft, registered VH-VNC and operated by Tiger Airways, conducted a missed approach procedure after an unsuccessful approach to land on runway 18 at Avalon Airport, Victoria. The flight crew contacted air traffic control (ATC) and was directed to climb to 3,000 ft and, after further discussion, to position as required to return to Avalon for a landing on runway 36. During that re-positioning, the flight crew left the assigned altitude without clearance and descended to 1,600 ft, which was below the minimum safe altitude for that area of 2,000 ft. The aircraft landed on runway 36. According to media reports, these two incidents were the final straw that persuaded CASA to suspend Tiger Airways Australias AOC (air operators certificate) on 2 July 2011. CASA was concerned that Tigers pilot training standards had slipped, such that incidents such as these occurred. CASA spokesperson Peter Gibson told media that it took the action because it believed permitting the airline to continue to fly posed a serious and imminent risk to air safety. The Civil Aviation Safety Authority has lost confidence in Tigers ability to manage safety appropriately, he said. Safety Issue (3) : Some Tiger pilots fail flying test CASA Director of Aviation Safety John McCormick told the media the number of staff employed by Tiger was not sufficient. We certainly didnt have confidence that the (110) pilots were at a standard we required, he said. As a result, we had to put them all through a test; it was a normal simulator test youd expect any airline pilot to be able to pass. There were some failures. Safety Issue (4) : Pilot and cabin crew too tired to fly In the Australian Senates inquiry into air safety on 27 May 2011, Tiger Airways Australias Director of Operations Captain Tim Berry stated that there were 17 cases of fatigue reported by crew and cabin staff since January 2010. This is a small number compared to the 76,000 rostered shifts during that period; however, Captain Berry conceded that it could be the tip of the iceberg. He admitted that Tigers fatigue management system did not take into account factors outside work such as pilots suffering from sleep disturbances due to caring for small children. Tiger instituted new rostering protocols in 2010 that welcomed reports from staff or crew calling in to be removed from flights if they were tired. However, Captain Berry told the inquiry that, We realise the last thing you want to do when you are tired is to sit down and write a report. As the daily newspaper The Daily Telegraph puts it in its news headline, Tiger Airways pilots are too tired to protest. Safety Issue (5) : Maintenance When CASA suspended Tiger Airways Australias AOC on 2 July, its press release on the subject specifically states that CASA demands improvements to Tigers maintenance control and ongoing airworthiness systems. We contacted CASA directly on this subject, and its spokesman Peter Gibson confirms that ineffective oversight of maintenance issues is a cause for concern. We believe this issue is now largely resolved, with Tiger Airways Australia recruiting additional maintenance-oversight personnel. This function was previously handled in Singapore. Safety Issue (6) : Management CASAs press release on suspending Tiger Airways Australias AOC on 2 July also states clearly that it demands that Tiger ensures appropriately qualified people fill management and operational positions. Since the previous Tiger Airways Australia management consisted of highly experienced people, we interpret the specific requirement of appropriately qualified as referring to the attitude rather than the technical/managerial qualification of the management. In hindsight, we do not find this surprising. Tiger Airways | Management | 20 October 2011
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The night after CASA suspended Tiger Airways Australias AOC on 2 July, its then Group CEO Tony Davis went to an interview with ABC News (broadcast in Australia), where he rejected CASAs verdict that Tiger posed an immediate risk to public safety. It is a highly confrontational act to contradict ones industry regulator in public, in our opinion, and this broadcast is likely an indication of the aggressive attitude adopted by Tigers management then in its dealing with the regulators. It has come to such a state that CASA demanded appropriately qualified people to fill management and operational positions in Tiger Airways Australia.
Solutions in progress
Looking at the above list of issues raised by CASA, we assess all of them as being capable of quick and conclusive resolutions. Not reporting an incident, flying a plane too low on approach to land, rostering schedules that resulted in pilots and cabin crew fatigue we believe all these can be remedied by appropriate changes in Tigers internal procedures. Pilots not passing flying tests can be remedied by future recruitment being made contingent on pilots being properly certified by the Australian authority. The maintenance oversight issue, as we mentioned above, appears to have been resolved to CASAs satisfaction also. There is no technical barrier to instituting such changes, in our opinion the only barrier apparently having been the previous managements attitude, which gave the impression that it considered those practices acceptable.
Turning a new page

The key development we would focus on is that Tiger Airways has instituted sweeping management changes. We view these as a critical first step in resolving the core issue of Tigers problems today i.e. the confrontational attitude taken by the previous management. The quality of the new management installed in Tiger Airways, in our opinion, is impressive and its members have a proven track record. See pages 16-17 where we discuss this in detail. We are therefore confident that Tiger Airways Australia will be able to win the regulators approval to operate fully, as before, within the next 12 months.
Tiger Airways | Management | 20 October 2011
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15

3Q11 result note for Galaxy provides a read through for the upcoming Melco Crown result. Melco Crown is 33%-owned by Crown Ltd. (Michael Nolan +61 2 8259 1316)
20 October 2011
Produced by: The Royal Bank of Scotland N.V., (Hong Kong) Branch
Hold
Target price
Wynn Macau
3Q11 results in line with estimates
Wynn's 3Q11 results were in line with our estimates. We have anticipated a qoq decline due to the strength of Galaxy Macau. Wynn noted that its property is at capacity and growth will likely be achieved through optimizing table utilization. We believe growth will remain a concern in the near term. Hold.
Sequential decline expected
HK$22.80
Price
HK$19.56
Equity | Hong Kong | Casinos & Gaming
Flashnote
Wynn Macau reported 3Q11 results through parent company Wynn Resorts (Wynn US, NR) this morning. Overall, the results were in line with our estimates. Net revenue was US$951m, down 3% qoq but up 42% yoy, while adjusted EBITDA was US$296m, down 6% qoq but up 50% yoy. The decline in performance was consistent with our view and was primarily driven by a qoq decline in VIP rolling chip volume but was partially offset by a higher than theoretical VIP win rate. The company reported US$31.4bn in VIP rolling chip volume, down 4% qoq and in line with our estimate while the VIP win rate came in at 2.95%, slightly higher than the theoretical win rate of 2.85% and slightly above our estimate of 2.90%. Adjusting for win rate, we estimate that adjusted EBITDA would have likely missed our estimate by 5%. During the quarter, Wynn Macau generated US$260m in mass market tables and slots revenue, down 4% qoq and 8% below our estimate. In particular, the decline was mainly due to a 16% qoq drop in mass market gaming volume. We believe this decline can be partially attributed to the shifting of customers to from the Wynn property to Galaxy Macau. The parent company declared a cash dividend of US$0.50 per share. However, we do not expect Wynn Macau to pay a dividend this quarter as we expect that they will conserve cash for the Cotai project. Conference call Management noted that they have reached their capacity at the Wynn Macau property. Going forward, management noted that they will likely need to adjust gaming mix and table betting limits to grow. This is consistent with our view that capacity constraints will hurt the company's growth in the near term. In terms of the company's performance in October, management said that the company generated approximately US$73m in adjusted EBITDA in the first 18 days and is on track to make US$100m+ in adjusted EBITDA this month. In addition he noted that gaming volume after Golden Week remained strong. However, Steve Wynn acknowledged that he has seen a
(Continued on page 2)
Wynn Macau: 3Q11 comparative results Analysts

Philip Tulk
+852 3988 7189 philip.tulk@rbs.com
US$m Net revenue Gross gaming revenue (GGR) VIP GGR VIP rolling chip volume (US$bn) VIP win rate MM / slots GGR Adjusted property EBITDA Adj. Ppty EBITDA margin Adj. EBITDA - adjusted for win rate 3Q11A 951.4 1,185.9 926.3 31.4 2.95% 259.6 296.0 31.1% 283.4 3Q11E 961.7 1,186.6 904.3 31.2 2.90% 282.3 303.9 31.6% 297.6 Variance -1.1% -0.1% 2.4% 0.7% 0.05 ppts -8.0% -2.6% -0.5 ppts -4.8% 2Q11A 976.5 1,215.7 944.5 32.7 2.89% 271.2 314.3 32.2% 308.8 Chg Qoq -2.6% -2.4% -1.9% -4.0% 0.06 ppts -4.3% -5.8% -1.1 ppts -8.2% 3Q10A 671.4 824.9 625.0 21.7 2.88% 199.9 198.0 29.5% 195.4 Chg Yoy 41.7% 43.8% 48.2% 44.7% 0.07 ppts 29.9% 49.5% 1.6 ppts 45.1%
Frank Hung
+852 3988 7245 frank.hung@rbs.com
38/F Cheung Kong Center, 2 Queen's Road Central, Hong Kong http://research.rbsm.com
Source: Company data, RBS estimates
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slight shifting of customers to other properties but noted that this likely return to normal once the new property excitement is over. In terms of Wynn Cotai, management discussed the potential financing of the project. In particular, management noted that they will likely fund the project through a combination of internally generated cash flow and bank debt. As of 3Q11, Wynn Macau had approximately US$1.1bn in cash and is in a net cash position. Management also addressed questions relating to the tightening of liquidity in China. They noted that the company have not seen any impact yet and noted that credit repayment cycle remained stable. Valuation and recommendation The 3Q11 results were in line with our expectation. We are reviewing our estimates but are likely to maintain our views at this stage. The company is currently trading on 10.2x 2012F EV/EBITDA, a premium to the sectors 8.1x. In our view, capacity constraints will likely remain in the near term while competition will likely increase further once Sands Cotai Central opens in 2012. Maintain Hold.
Wynn Macau | 20 October 2011
102
Income statement
HK$m Revenue Cost of sales Operating costs EBITDA DDA & Impairment (ex gw) EBITA Goodwill (amort/impaired) EBIT Net interest Associates (pre-tax) Forex gain / (loss) Exceptionals (pre-tax) Other pre-tax items Reported PTP Taxation Minority interests Exceptionals (post-tax) Other post-tax items Reported net profit Normalised Items Excl. GW Normalised net profit
FY09A 14077 -7931 -2968 3178 -762.6 2415 n/a 2415 -311.6 n/a n/a n/a -29.5 2074 -5.59 n/a n/a 0.00 2069 0.00 2069
FY10A 22439 -12847 -3716 5876 -1183 4693 n/a 4693 -253.5 n/a n/a n/a 26.5 4466 -44.1 n/a n/a -0.00 4422 0.00 4422
FY11F 29930 -17266 -4516 8148 -2062 6086 n/a 6086 -183.2 n/a n/a n/a 25.0 5928 -11.9 n/a n/a -0.00 5916 0.00 5916
FY12F 33832 -19407 -5019 9407 -1258 8149 n/a 8149 -105.8 n/a n/a n/a 0.00 8043 -40.2 n/a n/a 0.00 8003 0.00 8003
FY13F 37901 -21729 -5570 10602 -1266 9336 n/a 9336 -105.8 n/a n/a n/a 0.00 9230 -46.2 n/a n/a -0.00 9184 0.00 9184
year to Dec
Balance sheet
HK$m Cash & market secs (1) Other current assets Tangible fixed assets Intang assets (incl gw) Oth non-curr assets Total assets Short term debt (2) Trade & oth current liab Long term debt (3) Oth non-current liab Total liabilities Total equity (incl min) Total liab & sh equity Net debt
FY09A 5229 688.9 8528 398.3 798.3 15642 n/a 3553 8017 301.5 11872 3771 15642 2628
FY10A 3819 1091 8352 398.3 688.1 14348 n/a 4981 4950 121.0 10051 4297 14348 970.7
FY11F 8106 1892 8392 400.0 748.3 19539 n/a 5890 4350 760.4 11000 8539 19539 -3857
FY12F 8927 3158 11042 400.0 708.3 24235 n/a 6155 3850 830.4 10835 13400 24235 -5177
FY13F 8592 3223 17692 400.0 668.3 30576 n/a 6420 4350 830.4 11600 18976 30576 -4342
year ended Dec
Cash flow statement

HK$m EBITDA Change in working capital Net interest (pd) / rec Taxes paid Other oper cash items Cash flow from ops (1) Capex (2) Disposals/(acquisitions) Other investing cash flow Cash flow from invest (3) Incr / (decr) in equity Incr / (decr) in debt Ordinary dividend paid Preferred dividends (4) Other financing cash flow Cash flow from fin (5) Forex & disc ops (6) Inc/(decr) cash (1+3+5+6) Equity FCF (1+2+4)
Lines in bold can be derived from the immediately preceding lines. Source: Company data, RBS forecasts
FY09A 3178 1330 -349.7 -21.0 30.7 4168 -2324 -12561 -79.0 -14964 14490 0.26 -1009 n/a 0.00 13481 0.00 2685 1844
FY10A 5876 1004 -210.5 -6.99 4.73 6668 -996.5 0.00 -21.3 -1018 0.00 -3117 -3943 n/a 0.00 -7060 0.00 -1410 5671
FY11F 8148 1036 -207.8 18.1 40.4 9035 -1140 0.00 -425.8 -1566 0.00 -500.0 -2700 n/a 0.00 -3200 18.0 4287 7895
FY12F 9407 -111.9 -133.0 -40.2 80.2 9202 -3750 0.00 -930.0 -4680 0.00 -500.0 -3201 n/a 0.00 -3701 0.00 820.7 5452
FY13F 10602 83.0 -133.0 -46.2 83.0 10589 -7750 0.00 0.00 -7750 0.00 500.0 -3674 n/a 0.00 -3174 0.00 -334.9 2839
year to Dec
Wynn Macau | Key Financial Data | 20 October 2011
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Equity | Global
21 October 2011
Produced by: The Royal Bank of Scotland N.V.
Global Action Pack

Friday 21 October 2011
Table 1 : This mornings research
Subject Title Flash: Paints under-delivers significantly Flash: 3Q production report - initial thoughts Drill up, sell down Flash: Big C rights issue/Thailand floods Flash: Press reports gas find off Mozambique 3Q11 preview Flash: UK govt to increase biomass support Flash: Initial thoughts on 3Q11 results Time after time....earnings beat Getting there Rebasing (cost) expectations Flash: 3Q11 - Calm before the storm? Flash: Strong EM orders, cost inflation in Asia Limited downside from here Flash: Striving for margin improvement Flash: 3Q11 initial look Flash: Buy into Tanzania drilling campaign Flash: Hard disk shortages Flash: Strong set of results 2Q12 preview Flash: Emerging market cost shock Mexican standoff 10% further cuts ahead, at least Flash: 3Q11 hedge fund industry flows Flash: Initial thoughts on ST-E results Flash: Thai floods impact Flash: And the winner is.....Abellio Flash: Strong 3Q11 update Sleep well Preview 3Q11 results No of pages 4 5 10 4 4 4 5 5 44 10 12 4 6 10 4 5 5 4 4 4 5 10 13 3 6 4 3 5 11 4
European Research
AkzoNobel Anglo American BowLeven* Casino Cove Energy Deutsche Lufthansa Drax Group Ericsson Friday Market Views Getinge Home Retail Group Klepierre Kone Mobistar Nestle Nokia Ophir Energy Pace Pernod Ricard Ryanair Schneider Electric Silic SKF Specialty Finance - United Kingdom STMicroelectronics Tech Hardware & Equip - Europe Transportation - United Kingdom Umicore Whitbread Yara
Asian Research
Airlines - Global Bajaj Auto Banks - China BAT Malaysia Bursa Malaysia Cairn India China Dongxiang China Mobile Construction & Eng - Korea Coromandel Intl Crompton Greaves
*RBS Hoare Govett Ltd is broker to this company. Source: RBS
September traffic Peak performance continues Flash: Bond trials for local governments Encouraging performance A good quarter Flash: 2Q12- near term production constraints Flash: Resignation of CEO hurting sentiment Flash: 3Q earnings below consensus Flash: Pumyang going bankrupt Flash: High margins, but volume uncertainty Challenging outlook
32 11 5 8 4 5 4 5 5 11
Analyst
RBS European Research 250 Bishopsgate, London, EC2M 4AA, United Kingdom http://research.rbsm.com
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Table 1 : This mornings research (contd)

Subject Title Flash: GEG: hogging the ball in 3Q Concerns and lack of triggers Flash: 2Q12: Improvement despite headwinds Flash: Collections slow down Flash: 3Q better on solid offshore margin Unflattering 4Q11 guidance A good defensive player Balance sheet leverage increasing Flash: Weak 3Q11, lower than expected Flash: Feedback from NDR in Hong Kong Going for big hits Flash: Analyst meet highlights Thriving in times of recession Likely weak beverage sales in 3Q11 Flash: Cost pressures rising Margins up, credit quality steady No of pages 5 9 5 5 6 8 11 11 5 5 9 5 28 8 5 10
Asian Research (contd)

Galaxy Entertainment IDBI Bank Indiabulls Real Estate Info Edge India Keppel Corp Largan Precision LG Chem LG Display Maanshan Iron & Steel New World Dept Store NIIT Technologies Rallis India Tiger Airways Tingyi UltraTech Cement Yes Bank
Source: RBS
Global Action Pack | 21 October 2011
106
Global Action Pack summaries

Table 2 : Europe Upgrades/downgrades and initiations
Company BowLeven* Home Retail Group Mobistar SKF Whitbread Ticker Last Actual Year End EPS new FY1 FY2 FY3 EPS old FY1 FY2 FY3 Change (%) FY1 FY2 FY3 Curr Price Target New -34.0 -26.5 Recom Old Buy Buy Sell Sell Buy Buy Buy Old Chg (%) New
BLVN LN Jun-10 -0.17 -0.05 -0.04 -0.10 -0.06 -0.07 -69.6 26.5 36.2 1.65 2.50 Reason for EPS Change: Incorporating exploration and FX write-offs for 2011 HOME LN Feb-11 10.02 10.43 13.90 15.25 16.81 18.48 -34.3 -38.0 -24.8 1.25 1.70 Reason for EPS Change: Reduced cost savings expectations for FY12 and FY13 and lower Argos lfl MOBB BB Dec-10 3.63 3.58 3.63 3.72 3.73 3.82 -2.5 -3.9 -5.0 40.00 42.00 Reason for EPS Change: We lower our forecasts following a weak 3Q11 SKFB SS Dec-10 13.89 13.24 14.28 14.00 14.04 15.13 -0.8 -5.7 -5.6 SKr110.00 115.00 Reason for EPS Change: Lower volumes and margin in automotive and industry division WTB LN Feb-11 128.73 140.49 153.48 126.64 137.00 147.36 1.6 2.5 4.2 20.50 20.50 Reason for EPS Change: Lower interest rate and central costs
-4.8 Hold -4.3 n/a Sell Buy
*RBS Hoare Govett Ltd is broker to this company. Source: Company data, RBS forecasts
Table 3 : Asia Upgrades/downgrades and initiations

Company Bajaj Auto Crompton Greaves IDBI Bank Largan Precision LG Chem LG Display NIIT Technologies Tiger Airways Tingyi Ticker Last Actual Year End EPS new FY1 FY2 FY3 EPS old FY1 FY2 FY3 Change (%) FY1 FY2 FY3 Curr Price Target New 1226 1082 13.4 Recom Sell Sell Old Chg (%) New Old
BJAUT IN Mar-11 102.38 111.45 121.60 98.32 109.15 120.26 4.1 2.1 1.1 Rs Reason for EPS Change: Recent vehicle price hikes and easing commodity costs CRG IN Mar-11 9.19 11.54 13.06 10.74 13.42 15.29 -14.4 -14.0 -14.6 Rs Reason for EPS Change: Disappointing 2QFY12 results reflect structural margin decline IDBI IN Mar-11 19.80 22.02 24.35 20.80 22.50 24.71 -4.8 -2.1 -1.5 Rs Reason for EPS Change: There is no material change to earnings. 3008 TT Dec-10 41.34 52.50 64.02 40.96 53.96 64.75 0.9 -2.7 -1.1 NT$ Reason for EPS Change: Slightly trimmed our numbers due to cautious guidance 051910 KS Dec-10 34700 36311 48790 36346 41310 51263 -4.5 -12.1 -4.8 W Reason for EPS Change: We decrease EPS reflecting petrochemical product demand pick-up delay. 034220 KS Dec-10 -2775 -1670 1954 -2263 -1613 1824 -22.6 -3.5 7.1 W Reason for EPS Change: We increase our 2011F loss to factor in higher-than-expected 3Q11 losses. NITEC IN Mar-11 30.90 34.26 37.25 30.44 32.35 35.30 1.5 5.9 5.5 Rs Reason for EPS Change: Large deal wins and currency change TGR SP Mar-11 -0.09 0.04 0.07 0.12 0.15 0.18 n/m -76.1 -60.7 S$ Reason for EPS Change: Rights issue dilution and impact from losses in its Australian division. 322 HK Dec-10 7.17 10.01 12.67 8.35 10.90 13.65 -14.1 -8.2 -7.2 HK$ Reason for EPS Change: Weaker beverage sales and gross margin pressure
155.00 180.00 114.00 161.00 750.00 750.00 470000 515000 21000 19000 278.00 263.00 1.20 20.00 1.85 21.10
-13.9 Hold Buy -29.2 Hold Buy n/a -8.7 Buy Buy Buy Buy
10.5 Hold Hold 5.7 -35.1 Buy Buy Buy Buy
-5.2 Hold Hold
107
Europe
AkzoNobel (Hold, TP 36.00) - Paints under-delivers significantly 3Q11 EBITDA is in line with consensus, but the mix is disappointing. The Paints division misses EBITDA by 8% due to raw material inflation and customer down-trading. Chemicals saved the day, but we wonder for how long. http://track.sumnet.com/home/00000275/T036FA1/akz_bel_10084812.pdf Anglo American (Buy, TP 35.25) - 3Q production report - initial thoughts This release was mildly disappointing, with copper and nickel volumes well below forecast, offsetting slightly better or in-line volumes elsewghere. There was no comment on demand - a disappointment in the current environment, and we have concerns relating to Codelco's Chilean copper acquisition option. http://track.sumnet.com/home/00000275/T037007/ang_can_10084850.pdf BowLeven (Buy, TP 1.65) - Drill up, sell down A successful placing has given BowLeven a renewed mandate to prove up the Etinde resource. However, we believe management will come under increasing pressure to validate its positive view of Etinde's value through a farm-out and/or an outright sale. We stay at Buy, although reduce our TP to 165p (from 250p). http://track.sumnet.com/home/00000275/T0370F1/bow_ven_20104051.pdf Casino (Buy, TP 83.00) - Big C rights issue/Thailand floods Big C the 63% owned Casino subsidiary has announced a rights issue to raise 595m, according to Big C this is to pay down some debt and to help fund growth. This should cost Casino c375m, with FY11F net debt/EBITDA at 2.1x. The floods in Thailand are a concern but have had minimal impact thus far. http://track.sumnet.com/home/00000275/T03704E/cas_ino_10084878.pdf Cove Energy (Hold, TP 0.64) - Press reports gas find off Mozambique Press reports of Eni making a 15 Tcf gas discovery offshore Mozambique should be positive for Cove. Given the exploration success on Cove's neighbouring Area 1 licence, a discovery on Area 4 would not come as a surprise, in our view, but the scale of the reported find is impressive. http://track.sumnet.com/home/00000275/T036FE7/cov_rgy_10084840.pdf Deutsche Lufthansa (Hold, TP 10.00) - 3Q11 preview Lufthansa is scheduled to report its 3Q11 results on 27 October. We forecast a solidly profitable quarter with operating profit of 646m, moderately below 3Q10's 783m, but delivering 9M results slightly up yoy. We see revenue trends softening into 4Q11 and believe attention will focus on the pace of profit erosion. http://track.sumnet.com/home/00000275/T0370A8/deu_nsa_10084902.pdf Drax Group (Buy, TP 5.60) - UK govt to increase biomass support The UK government has published the long-awaited review of banding in the Renewables Obligation. Support for wind has been slightly reduced, tidal has been significantly boosted. However the most striking change is the support for enhanced biomass burning and ultimate conversion at coal stations. http://track.sumnet.com/home/00000275/T037014/dra_oup_10084854.pdf Ericsson (Hold, TP SKr75.00) - Initial thoughts on 3Q11 results Ericsson reported 3Q11 results this morning. The company beat on revenues and adjusted EPS. Gross margin was however down qoq due to increasing revenues from western Europe and decreasing revenues from North America. In line with our views. Maintain Hold. http://track.sumnet.com/home/00000275/T036FAE/eri_son_10084815.pdf Friday Market Views - Time after time....earnings beat We think the Q3 2011 results season will prove stronger than widely feared. Earnings forecasts have been re-based lower ahead of the event, and may now be too low given the performance of the global economy through the period. Inflation in the major corporate cost lines has likely lagged the top-line advance. http://track.sumnet.com/home/00000275/T0370A3/fri_ews_10084895.pdf Getinge (Buy, TP SKr187.00) - Getting there Organic order growth was 7.1% in 3Q11 (consensus 5.6%, RBS 6.6%) - the fourth consecutive quarter of order growth acceleration. Based on this acceleration, management reiterated that it should reach the upper end of its 3-5% organic sales target for FY11 (consensus 3.9%, RBS 4.5%). Remaining at Buy. http://track.sumnet.com/home/00000275/T0370E9/get_nge_20104052.pdf
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Home Retail Group (Buy, TP 1.25) - Rebasing (cost) expectations Home Retail's 1H12 results forced us to reassess our cost expectations for FY12 and FY13. We make no change to our Argos FY12F lfl of -9.5%, but cut our FY13 lfl forecast to -2.0% vs flat previously. We cut our FY12 and FY13 EPS forecasts 34% and 38%, respectively. In our view, FY12F EPS remains the nadir. http://track.sumnet.com/home/00000275/T036F7A/hom_oup_20103998.pdf Klepierre (Buy, TP 32.50) - 3Q11 - Calm before the storm? 3Q11 total revenue was virtually unchanged versus 2Q11, however the like-for-like change a bit better. The positive tenant performance in the beginning of the year has started to decline, and business up until August 2011 was flat for retailers. http://track.sumnet.com/home/00000275/T0370AC/kle_rre_10084904.pdf Kone (Hold, TP 35.00) - Strong EM orders, cost inflation in Asia Key takeaways from this release: 1) EM orders still strong despite terminal price action in Asia (due to Kones favourable mix, in our view), 2) Kone is now the second company this reporting season commenting on excessive wage inflation in Asia holding back margins. http://track.sumnet.com/home/00000275/T03702D/kone_10084860.pdf Mobistar (Hold, TP 40.00) - Limited downside from here Mobistar reported a slightly weaker 3Q11, with mixed underlying trends. We expect continuing EBITDA decline and lower our forecasts for 2011-13, which results in small dividend cuts (still 9% yield). We remain negative on the business prospects, but upgrade to Hold on valuation with a new 40 TP (from 42). http://track.sumnet.com/home/00000275/T0370F8/mob_tar_20104057.pdf Nestle (Hold, TP SFr53.70) - Striving for margin improvement Q3 organic sales growth was bang in line with expectations. However, they are now 'striving for margin growth' for the full year. At the 1H stage they were 'confident', so a slight negative nuance. We remain holders. http://track.sumnet.com/home/00000275/T036F8C/nes_tle_10084810.pdf Nokia (Sell, TP 3.30) - 3Q11 initial look Strong Q3 with headline revs 5% above cons for D&S. Adj EPS came 3c vs consensus of -2c. The smartphone business posted -5.9% EBIT margin vs -6.2% in 2Q11 while the mobile phone business reported 10.2% vs 8.6% in 2Q11. Nokia said that they expect D&S revenues to be up sequentially. Reiterate Sell. http://track.sumnet.com/home/00000275/T037052/nokia_20104034.pdf Ophir Energy (Buy, TP 3.00) - Buy into Tanzania drilling campaign The CMD reiterated the scale and comparatively low risk of offshore Tanzania gas resource, which should deliver positive share price momentum into the E&A campaign. Management were also convincing in articulating the wider exploration upside. We are buyers into near-term drilling. http://track.sumnet.com/home/00000275/T036FCB/oph_rgy_10084822.pdf Pace (Buy, TP 1.32) - Hard disk shortages Hard disk shortages as a result of flooding in Thailand is causing major disruption to the set-top box industry's supply chain. This is likely to lead to lower profitability at Pace until supply volumes are restored. http://track.sumnet.com/home/00000275/T036FB7/pace_20104014.pdf Pernod Ricard (Hold, TP 62.00) - Strong set of results Pernod reported a strong set of 1Q12 sales this morning along with issuing its full year guidance. There does not look to be any mention of one-off factors that flattered the group's organic sales growth of 11%, and we would expect the shares to react positively this morning. http://track.sumnet.com/home/00000275/T036FC7/per_ard_20104015.pdf Ryanair (Buy, TP 4.00) - 2Q12 preview We forecast a record September quarter for Ryanair, with net earnings to 395m versus 330m last year and a net margin of 26%. On the results call, we expect the focus to be on the winter outlook, and fuel and currency hedging into FY13. http://track.sumnet.com/home/00000275/T037041/rya_air_10084872.pdf Schneider Electric (Hold, TP 45.00) - Emerging market cost shock 10% consensus downgrades on rising EM cost inflation; no comments on inventories at this stage; we expect a sharp 4Q volume slowdown, which may then identify a higher inventory level and pose further downside EPS risks. That said, the 10% downgrades are priced in, in our view. http://track.sumnet.com/home/00000275/T037039/sch_ric_10084864.pdf
109
Silic (Hold, TP 76.00) - Mexican standoff 3Q11 earnings deteriorated from 1H11. Indexation in 2012 (4%) and management optimism about development leasing could be positive for earnings, but this could largely be mitigated by negatives - effective vacancy down, development rents offset by capitalised interest, LTV too high. Hold with a new 76 TP. http://track.sumnet.com/home/00000275/T0370F5/silic_20104050.pdf SKF (Sell, TP SKr110.00) - 10% further cuts ahead, at least We continue to expect the stock to underperform following 3Q results. We cut our FY12F and FH13F EPS by 7% each, below pre-results Bloomberg consensus by 8% and 10%, respectively. Sell with a new SKr110 target price (from SKr115). http://track.sumnet.com/home/00000275/T037064/skf_10084885.pdf Specialty Finance - United Kingdom - 3Q11 hedge fund industry flows Global hedge fund net flows declined to $8.7bn in 3Q but remained positive. While we expect flows to deteriorate further, investment performance looks robust and should act in the sector's favour. Man Group's flows appear to have underperformed the industry. http://track.sumnet.com/home/00000275/T036F94/spe_nce_10084811.pdf STMicroelectronics (Buy, TP 6.30) - Initial thoughts on ST-E results ST-E reported a mixed set of results for 3Q11 with revenues ahead of our expectations but operating loss only in line. The company is guiding 4Q11 revenues to be 'slightly up', which imply a sharp acceleration (+8% to +11% qoq) we believe ex IP sales in 3Q11. http://track.sumnet.com/home/00000275/T036F99/stm_ics_20104011.pdf Tech Hardware & Equip - Europe - Thai floods impact We believe the impact of the floods in Thailand could be substantial to the PC, gaming and settop box supply chain. While we believe the European semiconductor suppliers are less likely to suffer given their low exposure to PCs, we believe it is unlikely they would be immune. http://track.sumnet.com/home/00000275/T036FF8/tec_uip_10084845.pdf Transportation - United Kingdom - And the winner is.....Abellio Abellio has been awarded Greater Anglia. We had thought this was the least likely outcome. GOG would have had more to gain from a win than SGC, the other short-listed bidder, so is likely to see the greatest investor disappointment. We also expect Southern to now become the investor focus at GOG. http://track.sumnet.com/home/00000275/T036FCF/tra_ion_10084825.pdf Umicore (Hold, TP 30.00) - Strong 3Q11 update Umicore's 3Q11 sales growth of 13% was strong and accellerated compared to 1H11. Catalysis and Recycling outperformed, while Performance materials underperformed. Umicore reiterated its FY guidance of REBIT of 400-425m. We expect Vara consensus to move up by some 2-3%. Conference call at 10:00 CET. http://track.sumnet.com/home/00000275/T036F9D/umi_ore_20104012.pdf Whitbread (Buy, TP 20.50) - Sleep well Headline growth rates remain attractive, slightly tarnished by a smidgen of uncertainty derived from 'volatile' current trading. Leading budget brand positioning, coupled with both a robust balance sheet and cash flow should promote ongoing growth. http://track.sumnet.com/home/00000275/T0370ED/whi_ead_20104053.pdf Yara (Buy, TP NKr330.00) - Preview 3Q11 results Yara will report 3Q11 results tomorrow at 08.00 CET followed by a webcast at 09.30, accessible at www.yara.com. We forecast EBITDA of NKr4,882m, which is 2% below company-compiled consensus. http://track.sumnet.com/home/00000275/T036FDE/yara_20104016.pdf
Asia
Airlines - Global - September traffic This note summarises the latest traffic data from the global industry. Passenger data in September held up well, but red flags abound. Cargo traffic remains soft, usually a precursor to softer travel ahead. RBS analysts globally currently prefer LCCs to network carriers in this volatile environment for premium travel. http://track.sumnet.com/home/00000275/T037085/air_nes_20104042.pdf Bajaj Auto (Sell, TP Rs1226.00) - Peak performance continues Bajaj's 2Q PBT result was 5% higher than our forecast as its EBITDA margin recovered to 20% on strong product mix. Building in recent vehicle price hikes and easing commodity costs, we marginally raise our EPS forecast. Given rich valuations and increasing competition, we remain cautious and maintain a Sell. http://track.sumnet.com/home/00000275/T0370B8/baj_uto_10084907.pdf Global Action Pack | 21 October 2011 6
110
Banks - China - Bond trials for local governments A successful bond issuance needs to change the market perception that the quality of the underlying assets of the bonds is problematic. Transparency and pricing are key for successful implementation in our view. We expect more measures to solve the LGFV problem. http://track.sumnet.com/home/00000275/T0370DE/banks_20104056.pdf BAT Malaysia (Buy, TP RM48.60) - Encouraging performance In encouraging 3Q11 results, BAT's normalised net profit grew 2% qoq and 10% yoy on higher sales volume driven by trade loading. The 9-month normalised net profit was up 0.5% yoy and constituted 76% of our 2011F forecast. Maintain Buy. http://track.sumnet.com/home/00000275/T0370E2/bat_sia_20104058.pdf Bursa Malaysia (Sell, TP RM5.84) - A good quarter Bursas 9M11 earnings increased by 38% yoy and constituted 77% of our full year estimates. While we are encouraged by the pickup in trading value and derivative contracts, we think that it will not be spared from the impact of external uncertainties. Valuations are hefty at 25.1x FY12 PE and 3.8x P/B. Sell. http://track.sumnet.com/home/00000275/T036F7B/bur_sia_20103999.pdf Cairn India (Buy, TP Rs310.00) - 2Q12- near term production constraints Cairn India reported net profit was 54% above expectations due forex gains, with operational earnings in line. Companys disclosures on constraints in crude evacuation infrastructure will result in some cuts in our FY12-14 oil production estimates. http://track.sumnet.com/home/00000275/T03709C/cai_dia_20104045.pdf China Dongxiang (Hold, TP HK$1.60) - Resignation of CEO hurting sentiment DX announced the resignation of its CEO, Ms Sandrine Zerbib. We view this negatively in terms of short-term sentiment but will likely be a non-event in the longer run. Our conversations with investors in the past nine months suggested that the investment society seems to think ex-CEO, Qin, has done a better job. http://track.sumnet.com/home/00000275/T037031/chi_ang_20104029.pdf China Mobile (Buy, TP HK$88.00) - 3Q earnings below consensus Revenue and EBITDA are in line with expectation, but high depreciation may be the culprit for the lower than expected earnings. Afterall, the consensus seems high in the first place. We think the fourth quarter looks challenging for the company, but meeting full year consensus may not be impossible. http://track.sumnet.com/home/00000275/T037061/chi_ile_20104035.pdf Construction & Eng - Korea - Pumyang going bankrupt A mid-sized builder, Pumyang Construction filed for a court receivership today, leading major builders' stock prices down 5-8%. However this reaction is over-done, because Pumyang's failure is due to aggressive overseas expansion before 2008. Buy GS E&C, Daelim. http://track.sumnet.com/home/00000275/T03700B/con_eng_20104023.pdf Coromandel Intl (Buy, TP Rs365.00) - High margins, but volume uncertainty In the concall, management indicated that DAP prices were hiked to Rs18200/T (+30%) in end Sep, which should keep margins high for 2H. However, supply issues remain especially from Tunisia. Too early to say if demand is impacted on higher price. http://track.sumnet.com/home/00000275/T037094/cor_ntl_10084897.pdf Crompton Greaves (Hold, TP Rs155.00) - Challenging outlook Post disappointing 2QFY12 results, we reduce our earnings by 14-15% for FY12-14F, a reflection of structural margin decline across segments. Our new DCF-based target price of Rs155 implies a target PE of 13.4x FY13E EPS versus the average PE of 17x over the past five years. We move to Hold from Buy. http://track.sumnet.com/home/00000275/T0370BC/cro_ves_10084908.pdf Galaxy Entertainment (Buy, TP HK$18.00) - GEG: hogging the ball in 3Q GEG's 3Q11 results were impressive and in line with our recently increased estimates. Despite mass market segment at GMR being a bit light, we believe the introduction of new amenities will help boost performance. We expect GEG's strength and momentum to likely be maintained in the near term. Reiterate Buy. http://track.sumnet.com/home/00000275/T037045/gal_ent_20104032.pdf IDBI Bank (Hold, TP Rs114.00) - Concerns and lack of triggers IDBI Bank's asset quality disappointed yet again in 2QFY12. Further, management expects no significant improvement in asset quality in 2HFY12. The bank plans to focus on CASA improvement, meeting priority sector requirements and targets a muted yoy loan growth in FY12. We downgrade the stock to Hold. http://track.sumnet.com/home/00000275/T037098/idb_ank_20104044.pdf
111
Indiabulls Real Estate (Buy, TP Rs120.00) - 2Q12: Improvement despite headwinds While IBREL in 2Q12 reported 11% and 26% yoy revenue and EBITDA growth respectively, higher interest cost (one time) led to 23% yoy decline in PAT. Sequential improvement in sales run-rate (given the current slowdown) and marginal improvement in net debt were positives. http://track.sumnet.com/home/00000275/T0370B4/ind_ate_10084906.pdf Info Edge India (Hold, TP Rs725.00) - Collections slow down Info Edge reported in-line 2Q12 revenues and operating profit. However, a dip in deferred sales implies collections slowed down to 19% yoy vs 25% in 1Q12. A strong 26% ytd outperformance to the BSE IT Index despite deteriorating macros does not leave room for disappointment in our view. http://track.sumnet.com/home/00000275/T037075/inf_dia_10084893.pdf Keppel Corp (Hold, TP S$11.60) - 3Q better on solid offshore margin Keppels 3Q was as better than expected, but we believe this and its record high 2011F orders have been priced in. We maintain our Hold, as we believe orders will peak in 2011F and prefer SMM on stronger near-term order momentum. http://track.sumnet.com/home/00000275/T037025/kep_orp_20104027.pdf Largan Precision (Buy, TP NT$750.00) - Unflattering 4Q11 guidance Management had guided for a cautious 4Q11. Pixel migration should continue but the overall momentum in 4Q11 could slow due to macro uncertainty. We continue to like the stock as technology migration persists and ASP remains steady. Valuation appears attractive at 12.7x 2012F EPS, below its 5-yr average of 15.2x. http://track.sumnet.com/home/00000275/T0370C8/lar_ion_20104047.pdf LG Chem (Buy, TP W470000.00) - A good defensive player LG Chem announced in-line 3Q11 results. The information and electronics division's operating margin is relatively resilient, vs our previous concern. To reflect concerns of a global recession, we cut our EPS forecasts for 2011 by 5% and for 2012 by 12% and lower LG Chem's target price to W470,000. http://track.sumnet.com/home/00000275/T037089/lg__hem_20104043.pdf LG Display (Hold, TP W21000.00) - Balance sheet leverage increasing Although LGD's 3Q11 loss was inflated by non-operating items, normalised results still fell short of the consensus. Cash capex of W4tr in 2012 is higher than we expected, which should lead to a greater need for external sources of financing. We maintain Hold with an increased target price of W21,000. http://track.sumnet.com/home/00000275/T0370B0/lg__lay_10084905.pdf Maanshan Iron & Steel (Buy, TP HK$4.33) - Weak 3Q11, lower than expected Maanshan reported 3Q11 net profit of Rmb15m, down 93% qoq and below our forecast. Higher raw material costs and increased finance costs were the main reason. 9M11 profit only accounts for 49% of our full year forecast, and we see risks of further margin squeeze in 4Q11. http://track.sumnet.com/home/00000275/T037090/maa_eel_10084896.pdf New World Dept Store (Buy, TP HK$5.60) - Feedback from NDR in Hong Kong We took management to meet investors in Hong Kong. We discussed: 1) ytd sales trend and outlook; 2) expansion and rebranding progress; and 3) margins protection and cost reduction. NWDS is now more open with guidance which we believe will help narrowing the valuation gap vs peers. Buy; TP: HK$5.10. http://track.sumnet.com/home/00000275/T037010/new_ore_20104024.pdf NIIT Technologies (Buy, TP Rs278.00) - Going for big hits We see NTL's focus moving from steady growth and margins to aggressive growth with margin volatility. This was seen in 2QFY12: USD revenue growth of 11.6%, order intake of US$200m and adjusted EBITDA margin dip of 57bp. We believe the move will pay off in the medium term and increase FY13F EPS by 6%. http://track.sumnet.com/home/00000275/T036FA6/nii_ies_20104013.pdf Rallis India (Buy, TP Rs210.00) - Analyst meet highlights Company said sales were impacted due to many small factors like sub optimal monsoon distribution, product ban and lower acreage in bajra (for seeds). Product launches continue and Rallis brand strength remains high. 2H outlook is better, and debtors should also decline. http://track.sumnet.com/home/00000275/T03706D/ral_dia_20104037.pdf Tiger Airways (Buy, TP S$1.20) - Thriving in times of recession In times of recession consumers generally downgrade to cheaper products. At this time, Tiger Airways, one of the world's lowest-cost carriers, stands to benefit from a volume spurt and falling oil price to boot. Its Australian problem is, in our view, in the process of being resolved, and we reiterate our Buy rating. http://track.sumnet.com/home/00000275/T037079/tig_ays_20104039.pdf
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Tingyi (Hold, TP HK$20.00) - Likely weak beverage sales in 3Q11 Tingyi is due to report 3Q results on 14/15 November. Based on our channel checks, it will likely post weak beverage sales. We cut our reported earnings forecasts by 7-13% for FY11-13, assuming weaker beverage sales and lower gross margins. Maintain Hold with a reduced target price of HK$20. http://track.sumnet.com/home/00000275/T037035/tin_gyi_20104030.pdf UltraTech Cement (Sell, TP Rs878.71) - Cost pressures rising UT's costs rose sharply both qoq (11%) and yoy (21%) basis, largely offsetting the 24% yoy rise in cement prices. 2QFY12 EBITDA at Rs5.81bn was in-line. We expect volatility in cement margins to persist for the next 4-6 quarters due to surplus conditions, and, at current valuations, the risk reward is unfavourable. http://track.sumnet.com/home/00000275/T037021/ult_ent_10084856.pdf Yes Bank (Buy, TP Rs405.00) - Margins up, credit quality steady Yes Bank's 2QFY12 net profit of Rs2.4bn was ahead of our and Street estimates, with qoq NIM improvement and stable credit quality trends. Higher-than-expected branch add was a positive surprise in the quarter, even as costs remained under control. We maintain Buy. http://track.sumnet.com/home/00000275/T0370D4/yes_ank_20104054.pdf
Note: Links to research are valid for 30 days from the date of publication
113
RBS Top 100 Earnings Forecasts

21 October 2011
ASX code Company name Market cap (A$m) Last year end Price (A$) Target FV (A$) Up/ price down (A$) Rec 12m YTD - YTD -Rel. Abs.
NPAT pre abnormals (A$m) Earnings Quality* Actual EPS pre goodwill (c) EPS ANALYSIS IBES 3m EPS growth EPS (pre goodwill) revisions 12m fwd Fcst 1 Fcst 2 EPS CAGR 3 yr Actual DIVIDEND ANALYSIS Div yield DPS (c) Div frank (%) Fcst 1 PE (x) (pre goodwill) Fcst 1 Fcst 2 PEG VALUATION PE rel (pre goodwill) Fcst 1 Fcst 2 EV/ EV / P/ NTA EBIT (x) EBITDA (x) Fcst 1 Fcst 1 Fcst 1 B/SHEET ANALYSIS ROE ND/EBITDA Gearing (Tier 1 Analyst ratio for banks) Fcst 1 Fcst 1 Fcst 1
Actual
Fcst 1
Fcst 2
Actual
Fcst 1
Fcst 2
Fcst 1
Fcst 2
Fcst 1
Fcst 1
Banks
ANZ BEN BOQ CBA NAB WBC ANZ Banking Group Bendigo & Adelaide Ban Bank of Queensland Commonwealth Bank National Australia Bank Westpac Banking Corp 55,070 3,297 1,844 74,112 52,766 64,690 Sep 10 Jun 11 Aug 11 Jun 11 Sep 10 Sep 10 21.21 9.22 8.18 47.55 24.32 21.50 23.60 9.32 12.38 49.69 29.33 22.68 26.22 9.81 13.75 58.46 32.58 26.68 11% 1% 51% 4% 21% 5% Buy Hold Buy Hold Buy Hold -9% -7% -21% -6% 3% -3% 4% 5% -9% 6% 15% 10% 5,122.0 336.2 166.9 6,793.0 4,581.0 5,879.0 5,612.0 337.2 262.9 7,386.1 5,500.9 6,332.5 6,074.9 364.7 292.7 7,930.4 6,154.4 6,654.1 n.a. n.a. n.a. n.a. n.a. n.a. 198.4 87.0 71.3 420.7 214.8 192.1 211.7 85.7 104.3 450.3 251.3 203.9 223.3 90.5 112.3 475.5 272.8 211.2 -3.2% -2.1% -6.7% -3.0% -2.0% -2.9% 7% -2% 46% 7% 17% 6% 5% 6% 8% 6% 9% 4%
5% 2% 18% 6% 11% 5%
126.0 60.0 54.0 320.0 152.0 139.0
139.0 61.0 69.0 343.0 170.0 153.0
146.0 63.0 75.0 363.0 177.0 157.0
6.6% 6.6% 8.4% 7.2% 7.0% 7.1%
100 100 100 100 100 100
10.0 10.8 7.8 10.6 9.7 10.5
9.5 10.2 7.3 10.0 8.9 10.2
2.0 5.2 0.4 1.8 0.9 2.1
0.82 1.01 0.74 0.99 0.79 0.86
0.89 1.04 0.74 1.02 0.84 0.96
7.0 6.6 4.8 7.2 6.6 7.1
6.0 6.0 3.7 6.5 5.3 6.4
2.0 1.6 1.1 2.7 1.8 2.3
16.2% 8.3% 10.7% 19.2% 15.7% 16.0%
n.a. n.a. n.a. n.a. n.a. n.a.
10.8% 8.4% 8.3% 10.6% 9.5% 9.8%
Andrew Lyons John Buonaccorsi John Buonaccorsi Andrew Lyons Andrew Lyons Andrew Lyons
Chemicals
IPL ORI Incitec Pivot Orica 5,342 8,727 Sep 10 Sep 10 3.28 24.10 4.40 27.82 4.40 27.82 34% 15% Buy Buy -17% -3% -4% 10% 442.8 659.6 530.0 613.8 568.9 752.1 0.9 0.9 27.3 175.0 32.5 169.2 34.9 207.1 0.3% -0.7% 19% -3% 7% 22%
10% 9%
7.8 95.0
9.8 90.0
10.5 100.0
3.0% 3.7%
0 49
10.1 14.2
9.4 11.6
1.0 1.7
0.82 1.16
0.88 1.09
8.4 10.2
7.0 8.3
5.4 6.3
14.0% 16.8%
1.3 1.1
29.8% Belinda Moore 36.0% Andrew Scott
Commercial Services & Supplies

BXB DOW SEK TSE Brambles Downer EDI SEEK Transfield Svcs 9,823 1,245 1,965 1,176 Jun 11 Jun 11 Jun 11 Jun 11 6.64 2.90 5.83 2.14 7.01 5.01 7.15 2.13 7.01 5.01 7.15 2.24 6% 73% 23% 0% Hold Buy Buy Hold -7% -35% -12% -36% 6% -22% 1% -24% 532.1 155.9 104.6 128.2 600.4 190.1 131.1 126.3 718.4 221.3 153.9 144.0 1.0 0.6 1.0 0.5 36.6 42.6 31.0 26.0 40.2 44.3 38.8 23.4 48.2 51.5 45.6 28.4 -2.0% -5.9% -4.2% -18.1% 10% 4% 25% -10% 20% 16% 17% 21%
16% 14% 19% 6%
25.9 0.0 14.3 14.0
30.0 21.0 21.4 14.0
34.0 27.0 27.4 15.5
4.4% 7.2% 3.7% 6.5%
20 0 100 100
15.9 6.5 15.0 9.1
12.9 5.6 12.8 7.5
1.0 0.5 0.8 1.4
1.49 0.62 1.41 0.86
1.32 0.58 1.31 0.77
12.7 5.3 12.2 8.3
8.2 3.1 9.5 5.9
15.9 1.3 2.9
25.0% 12.7% 28.8% 11.9%
2.0 1.1 0.9 1.2
120.8% 40.6% 37.0% 28.6%
Mark Williams Andrew Hodge Fraser McLeish Andrew Hodge
Consumer Services
EGP CWN TAH TTS Echo Entertainment Crown Tabcorp Tatts Group 2,546 5,953 2,055 3,099 Jun 11 Jun 11 Jun 11 Jun 11 3.70 7.85 2.84 2.35 4.30 9.00 3.00 2.20 4.30 9.00 3.00 2.44 16% 15% 6% -6% Hold Buy Hold Hold -5% -8% -9% 8% 4% 4% 184.3 335.9 486.3 279.5 135.6 386.9 364.5 329.8 179.9 422.4 222.7 197.4 1.5 0.9 1.0 1.0 26.8 44.3 74.1 21.5 19.7 52.6 51.6 25.0 25.8 58.0 30.6 15.0 5.7% 5.3% -7.2% -2.1% -26% 19% -30% 16% 31% 10% -41% -40%
2% 15% -27% -8%
0.0 37.0 43.0 21.5
10.0 37.0 25.8 22.5
13.1 37.0 21.4 13.5
2.7% 4.7% 9.1% 9.6%
100 60 100 100
18.8 14.9 5.5 9.4
14.4 13.5 9.3 15.7
9.7 1.0 -0.2 -1.2
1.77 1.40 0.52 0.88
1.47 1.38 0.95 1.61
12.3 14.8 4.4 7.1
8.6 10.3 3.6 6.0
4.3 2.5 -
5.6% 12.1% 26.2% 12.8%
2.5 2.0 0.7 1.4
43.7% 45.4% 32.2% 36.8%
Michael Nolan Michael Nolan Michael Nolan Michael Nolan
Construction
BLD CSR FBU.NZ JHX Boral CSR Ltd Fletcher Bldg James Hardie 2,480 1,245 4,411 2,484 Jun 11 Mar 11 Jun 11 Mar 11 3.45 2.46 6.41 5.70 4.04 3.25 7.32 6.78 4.04 3.25 5.67 6.83 17% 32% 14% 19% Hold Buy Hold Buy -29% -51% -16% -16% -16% -38% -4% -3% 173.5 90.2 275.1 123.4 203.1 100.3 292.2 126.3 275.3 127.8 392.6 165.0 0.8 0.7 0.7 0.8 24.0 17.8 42.7 28.2 28.1 19.8 42.5 29.7 38.0 25.3 57.1 39.9 -15.4% -25.2% -18.8% -2.7% 17% 11% -1% 5% 35% 27% 34% 34%
29% 23% 19% 23%
14.5 41.7 33.0 0.0
16.0 15.7 35.0 6.0
17.0 19.0 37.0 12.0
4.6% 6.4% 5.5% 1.0%
100 100 100 0
12.3 12.4 12.0 18.5
9.1 9.7 8.8 13.4
0.4 0.5 0.6 0.8
1.15 1.17 1.13 1.74
0.93 1.00 0.90 1.38
12.5 6.6 10.2 13.1
6.6 4.3 7.4 9.8
0.8 1.0 2.2 -
6.1% 8.1% 9.8% -29.2% -
2.4 0.2 2.2 0.1
37.9% -4.0% 47.7% 3.3%
Andrew Scott Andrew Scott Andrew Scott Andrew Scott
Containers, Packaging & Paper

AMC Amcor 8,762 Jun 11 7.15 7.54 7.54 5% Buy 6% 19% 570.3 659.2 741.1 0.8 46.5 53.7 60.4 -2.7% 15% 12%
14%
35.0
36.0
40.0
5.0%
13.3
11.8
0.9
1.25
1.21
10.5
7.4
4.5
17.5%
1.9
75.6% Andrew Scott
Diversified Financials
ASX CGF MQG PPT SUN Aust Securities Exchang Challenger Financial Svc Macquarie Group Perpetual Suncorp Group 5,157 2,250 7,847 920 10,614 Jun 11 Jun 11 Mar 11 Jun 11 Jun 11 30.16 4.45 22.53 21.93 8.25 31.77 5.10 31.00 25.35 9.87 31.77 5.10 31.00 25.35 9.87 5% 15% 38% 16% 20% Hold Buy Buy Hold Buy -20% -5% -39% -30% -4% -7% 7% -26% -17% 9% 356.6 248.0 956.0 72.9 637.6 385.9 275.4 942.8 67.8 1,073.9 424.8 300.6 1,116.8 69.2 1,231.6 0.9 4.8 n.a. 1.2 n.a. 204.0 48.1 275.0 165.5 49.7 219.3 51.2 263.9 156.7 83.5 239.2 53.4 308.2 162.9 95.7 -0.6% 2.4% -16.0% -13.8% -1.7% 7% 6% -4% -5% 68% 9% 4% 17% 4% 15%
7% 6% 10% 5% 29%
183.2 16.5 186.0 185.0 35.0
196.5 18.5 186.0 146.0 50.1
214.3 19.5 190.0 152.0 57.4
6.5% 4.2% 8.3% 6.7% 6.1%
100 100 30 100 100
13.8 8.7 8.5 14.0 9.9
12.6 8.3 7.3 13.5 8.6
1.9 1.4 0.9 2.7 0.3
1.29 0.82 0.80 1.32 0.93
1.29 0.85 0.75 1.38 0.88
9.4 5.9 6.0 7.0 45.6
9.0 5.8 5.7 6.1 28.5
7.2 1.9 0.7 7.9 1.3
12.7% 16.9% 7.9% 20.3% 6.9%
0.8 0.4 n.a. 0.6 n.a.
-13.6% -8.9% -26.7% 386.3%
Richard Coles Richard Coles Andrew Lyons Richard Coles Richard Coles
Food Beverage & Tobacco

CCL GFF C-C Amatil Goodman Fielder 9,080 924 Dec 10 Jun 11 12.01 0.53 13.43 0.60 13.43 0.80 12% 13% Buy Hold 11% -58% 23% -45% 506.6 135.2 543.5 128.9 600.0 141.5 0.9 1.1 67.3 9.8 71.7 7.1 78.8 7.2 -0.4% -34.6% 7% -27% 10% 2%
9% -9%
48.5 7.8
55.0 5.7
58.5 5.8
4.6% 10.8%
100 40
16.8 7.5
15.2 7.3
1.8 -0.8
1.37 0.70
1.43 0.75
11.7 6.1
9.4 4.8
19.6 28.5
28.8% 8.9%
1.1 2.1
64.8% Michael Nolan 43.4% Michael Nolan
Healthcare
ANN COH CSL PRY RHC RMD SHL Ansell Cochlear CSL Ltd Primary Health Ramsay Health ResMed Inc Sonic Health 1,885 3,281 15,825 1,624 3,809 4,504 4,214 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 13.60 57.98 30.00 3.30 18.85 2.95 10.85 13.92 63.05 29.31 2.84 17.95 2.98 13.12 13.92 63.05 29.31 2.84 18.00 2.99 13.13 2% 9% -2% -14% -5% 1% 21% Hold Buy Hold Hold Hold Hold Buy 7% -28% -17% -12% 6% -15% -6% 20% -15% -5% 0% 19% -3% 6% 122.9 180.1 940.6 96.5 204.7 229.9 294.5 127.8 139.1 954.9 118.5 227.7 212.7 308.0 138.5 183.2 1,004.2 129.7 252.1 223.7 338.1 0.8 1.0 1.1 1.2 1.2 0.8 1.0 92.4 316.1 173.6 19.5 101.1 14.6 75.5 96.4 244.0 180.9 23.7 112.4 13.9 78.6 106.6 321.4 190.7 25.6 124.4 15.0 86.3 0.8% -23.3% -2.3% -2.7% -0.2% -0.8% -4.4% 4% -23% 4% 22% 11% -5% 4% 11% 32% 5% 8% 11% 8% 10%
12% 9% 5% 13% 11% 7% 8%
32.4 225.0 80.0 8.0 52.0 0.0 59.0
42.2 240.0 81.0 18.0 58.0 0.0 61.0
49.9 240.0 88.0 20.0 64.0 0.0 67.0
3.0% 4.1% 2.7% 5.5% 3.1% 0.0% 5.6%
0 100 0 100 100 0 32
13.6 23.8 16.6 13.9 16.8 20.4 13.8
11.9 18.0 15.7 12.9 15.2 18.3 12.6
1.2 2.6 3.1 1.1 1.5 3.0 1.7
1.28 2.24 1.56 1.31 1.58 1.91 1.30
1.22 1.85 1.61 1.32 1.55 1.87 1.29
12.6 16.5 12.6 10.2 11.0 15.3 11.4
10.5 14.5 11.0 7.6 8.3 11.7 9.1
12.8 19.1 5.0 14.8 3.1 -
22.7% 30.7% 24.6% 4.7% 20.4% 13.1% 12.1%
0.2 0.5 0.2 3.0 1.7 1.6 2.3
6.0% 29.9% -7.6% 41.6% 71.5% -32.1% 56.3%
Dr Derek Jellinek Dr Derek Jellinek Dr Derek Jellinek Dr Derek Jellinek Dr Derek Jellinek Dr Derek Jellinek Dr Derek Jellinek
Infrastructure
CEU MAP TCL ConnectEast MAp Airports Transurban 2,147 6,142 7,824 Jun 11 Dec 10 Jun 11 0.55 3.30 5.42 0.55 3.68 5.90 0.52 3.68 5.90 0% 11% 9% Hold Buy Buy 28% 10% 6% 41% 23% 19% -10.3 127.2 112.5 -13.5 120.0 110.6 5.5 131.9 187.8 0.7 1.1 0.9 -0.3 7.1 7.9 -0.3 6.4 7.7 0.1 7.1 13.0 -42.8% 16.5% -24% -9% -3% 10% 70%
25% 6% 27%
2.0 33.5 27.0
2.2 21.0 29.5
2.4 21.0 32.0
4.0% 6.4% 5.4%
0 0 0
51.2 70.7
46.6 41.7
8.2 2.6
4.18 6.65
40.29 4.38 4.26
47.2 21.1 36.8
20.2 13.6 18.4
1.3 -
-0.8% 2.5% 3.1%
6.7 6.0 6.4
62.2% William Allott 95.7% William Allott 115.2% William Allott
IT
CPU Computershare 4,051 Jun 11 7.29 9.33 9.33 28% Buy -32% -20% 312.3 292.3 321.2 0.8 55.9 52.4 57.5 -5.8% -6% 10%
6%
28.0
28.0
32.0
3.7%
60
13.4
11.8
2.2
1.26
1.22
10.8
9.3
23.8%
1.6
63.4% Richard Coles
Insurance
AMP IAG QBE AMP Ltd IAG QBE Insurance 7,642 6,379 15,361 Dec 10 Jun 11 Dec 10 4.05 3.08 13.77 5.52 3.26 16.91 5.52 3.26 16.91 36% 6% 23% Buy Hold Buy -23% -21% -24% -11% -8% -11% 752.0 425.0 1,447.0 949.3 565.0 1,422.5 1,090.8 755.0 1,695.0 n.a. n.a. n.a. 35.9 20.4 133.1 36.0 27.2 122.6 38.6 36.3 142.1 -8.3% -7.4% -10.7% 0% 33% -8% 7% 34% 16%
6% 26% 5%
30.0 16.0 121.2
29.6 21.0 132.0
31.8 23.0 140.7
7.3% 6.8% 9.3%
60 100 10
11.3 11.3 11.0
10.5 8.5 9.2
1.9 0.4 2.4
0.99 1.12 1.01
1.07 0.90 0.96
22.0 15.5
22.0 15.5
3.1 2.4 3.3
19.2% 12.0% 12.3%
n.a. n.a. n.a.
169.5% Richard Coles 30.5% Richard Coles 42.9% Richard Coles
Source: Company data, RBS forecasts, RBS Morgans forecasts. * Share prices as at close of trading on 21 October 2011. Target prices, forecasts and recommendations for some companies featured in 'The Bulletin' may have been updated overnight. ++ Share prices as at close of trading on 21 October 2011. Financial forecasts in NZD. # JHX, ANN and BXB price and market cap reported in AUD. Financial forecasts in USD. * Earnings Quality: Net Operating Cash Flow/(Net Profit + Depreciation & Amortisation)
115

21 October 2011
Actual
Fcst 1
Fcst 2
Actual
Fcst 1
Fcst 2
Fcst 1
Fcst 2
Fcst 1
Fcst 1
Management and development

LLC
Lend Lease Corp
4,287
Jun 11
7.51
10.75
10.75
43%
Buy
-13%
0%
485.3
476.3
560.9 -
0.1
90.3
87.7
102.5
-1.8%
-3%
17%
10%
35.0
44.0
51.5
5.9%
70
8.6
7.3
0.9
0.81
0.75
8.2
7.3
1.6
12.8%
1.8
35.6% Andrew Hodge
Media
FXJ NWS TEN SWM
Fairfax Media News Corp Ten Network Seven West Media
2,058 43,618 862 2,181
Jun 11 Jun 11 Aug 10 Jun 11
0.88 16.61 0.82 3.35
1.45 19.70 0.95 3.47
1.60 23.97 1.06 4.77
65% 19% 16% 4%
Buy Buy Hold Hold
-37% 4% -42% -48%
-24% 16% -29% -35%
273.8 2,929.6 96.9 115.1
284.8 3,187.4 78.1 281.3
328.6 3,413.0 80.6 293.6
1.2 1.1 1.0 1.0
11.6 111.3 9.3 37.5
12.1 128.9 7.5 41.9
14.0 147.5 7.7 41.8
-9.3% 12.2% -16.4% -10.2%
4% 16% -19% 12%
15% 14% 3% 0%
10% 16% 4% 5%
3.0 17.0 11.0 45.0
3.6 18.7 5.0 35.0
7.0 20.6 5.8 35.0
4.2% 1.1% 6.1% 10.4%
100 0 100 100
7.2 12.4 11.0 8.0
6.3 10.5 10.7 8.0
0.8 0.8 2.9 1.5
0.68 1.17 0.90 0.75
0.64 1.08 1.01 0.82
6.6 8.5 9.1 7.2
5.4 6.9 7.7 6.4
9.5 -
6.3% 12.0% 8.7% 10.8%
2.1 0.6 2.4 2.9
27.6% 15.5% 46.8% 66.1%
Fraser McLeish Fraser McLeish Fraser McLeish Fraser McLeish
Other Capital Goods

BLY LEI UGL
Boart Longyear Leighton UGL
1,374 6,919 2,031
Dec 10 Jun 11 Jun 11
2.98 20.56 12.13
4.03 20.67 14.47
3.40 20.67 13.21
35% 1% 19%
Buy Hold Buy
-35% -32% -16%
-22% -19% -3%
91.8 -107.7 164.4
142.4 609.7 179.8
178.7 672.2 205.3
0.3 1.8 0.7
20.1 -35.1 98.8
31.3 181.2 107.5
39.3 199.7 122.4
3.0% -6.2%
55% 9%
26% 10% 14%
30% 84% 12%
5.5 60.0 70.0
9.8 116.0 75.0
12.8 128.0 85.0
3.2% 5.6% 6.2%
35 100 100
9.3 11.3 11.3
7.2 10.3 9.9
0.3 0.1 1.0
0.76 1.07 1.12
0.68 1.05 1.05
7.3 7.2 7.8
5.0 3.8 6.6
1.8 2.8 11.7
13.4% 25.0% 14.5%
0.9 0.1 0.3
25.6% Andrew Hodge 6.5% Andrew Hodge 7.2% Andrew Hodge
Real Estate
WDC GMG
Westfield Group Goodman Group
17,442 4,437
Dec 10 Jun 11
7.55 0.60
8.69 0.81
8.69 0.76
15% 35%
Hold Buy
-21% -8%
-8% 5%
1,745.7 383.9
1,482.4 476.3
1,575.7 527.9
1.0 0.8
75.7 5.3
64.2 6.2
68.2 6.6
-1.5% -1.7%
-15% 17%
6% 7%
-2% 9%
63.6 3.5
48.4 3.8
50.6 4.2
6.4% 6.3%
0 0
11.8 9.7
11.1 9.1
-7.6 1.1
0.96 0.91
1.04 0.93
15.8 17.6
15.8 17.4
1.0 1.2
8.8% 10.2%
7.0 4.5
79.9% Andrew Hodge 30.2% Andrew Hodge
Retail
BBG DJS HVN JBH MTS MYR WES WOW
Billabong David Jones Harvey Norman JB Hi-Fi Metcash Myer Wesfarmers Woolworths
903 1,591 2,357 1,407 3,191 1,394 35,997 29,709
Jun 11 Jul 11 Jun 11 Jun 11 Apr 11 Jul 11 Jun 11 Jun 11
3.54 3.16 2.21 14.25 4.15 2.39 31.00 24.06
3.65 2.95 2.60 17.25 4.25 2.55 29.45 29.10
3.65 2.95 2.60 17.25 4.25 2.55 29.45 29.10
3% -7% 18% 21% 2% 7% -5% 21%
Hold Hold Buy Buy Hold Buy Hold Buy
-57% -29% -25% -20% 1% -33% -3% -11%
-44% -16% -12% -8% 14% -20% 10% 2%
118.0 168.1 242.0 134.4 248.3 163.2 1,870.0 2,124.0
111.7 147.6 243.7 137.7 276.9 142.0 2,370.4 2,224.8
124.6 158.3 270.7 155.6 304.4 160.7 2,787.9 2,471.8
0.2 0.9 1.1 0.7 1.3 1.0 1.0 1.0
46.3 33.0 22.8 120.2 32.3 28.0 161.6 171.5
43.7 28.8 22.9 138.4 36.0 24.3 203.1 179.7
48.6 30.7 25.5 155.1 39.6 27.6 234.6 199.6
-23.0% -17.4% -12.9% -8.5% -0.3% -14.9% -4.9% -6.2%
-6% -13% 1% 15% 12% -13% 26% 5%
11% 7% 11% 12% 10% 13% 16% 11%
3% -3% 8% 12% 8% 2% 18% 9%
29.0 28.0 12.0 77.0 27.0 22.5 150.0 122.0
29.0 24.0 11.0 85.0 29.0 20.0 180.0 131.0
31.0 27.0 13.0 96.0 32.0 22.5 200.0 141.0
8.2% 7.6% 5.0% 6.0% 7.0% 8.4% 5.8% 5.4%
100 100 100 100 100 100 100 100
8.1 11.0 9.6 10.3 11.5 9.8 15.3 13.4
7.3 10.3 8.7 9.2 10.5 8.7 13.2 12.1
2.7 -3.8 1.2 0.9 1.4 4.0 0.9 1.5
0.76 1.03 0.91 0.97 1.08 0.92 1.44 1.26
0.74 1.05 0.89 0.94 1.07 0.89 1.35 1.23
8.2 8.0 6.8 7.6 8.1 7.7 10.3 9.9
6.5 6.5 5.4 6.5 7.2 5.6 8.3 7.7
2.2 1.0 12.2 218.4 6.0 10.2
9.2% 19.0% 10.8% 79.4% 19.9% 16.9% 9.1% 28.2%
2.3 0.5 0.6 0.7 1.2 1.3 0.9 0.9
40.6% 18.1% 13.0% 88.0% 44.2% 50.8% 16.8% 47.9%
Daniel Broeren Daniel Broeren Daniel Broeren Daniel Broeren Daniel Broeren Daniel Broeren Daniel Broeren Daniel Broeren
Telecommunication Services
TLS
Telstra
39,071
Jun 11
3.14
3.50
3.50
11%
Buy
13%
25%
3,231.0
3,551.0
3,666.1
1.0
25.9
28.5
29.4
4.3%
10%
3%
5%
28.0
28.0
28.0
8.9%
100
11.0
10.7
2.1
1.04
1.09
8.7
5.0
7.8
29.3%
1.3
107.3% Fraser McLeish
Transportation
AIO QAN QRN TOL
Asciano Group Qantas Airways QR National Toll Holdings
4,331 3,364 7,710 3,274
Jun 11 Jun 11 Jun 11 Jun 11
1.48 1.49 3.16 4.61
1.91 1.68 3.35 5.42
2.06 2.55 3.45 5.49
29% 13% 6% 17%
Buy Hold Hold Buy
-8% -41% 15% -20%
5% -29% 28% -7%
189.9 416.0 172.4 269.0
268.3 507.4 390.6 309.4
353.4 642.8 459.5 356.9
1.2 1.1 0.9 1.1
6.5 18.4 7.1 38.1
9.2 22.4 16.0 42.7
12.1 28.1 18.8 48.6
2.3% -2.7% 4.8% -7.6%
41% 22% 127% 12%
32% 26% 18% 14%
30% 25% 40% 13%
2.0 0.0 3.7 25.0
3.0 6.0 8.3 27.0
3.5 9.0 8.6 31.0
2.0% 4.0% 2.6% 5.9%
0 100 0 100
16.1 6.6 19.7 10.8
12.3 5.3 16.8 9.5
0.5 0.3 0.5 0.9
1.52 0.62 1.86 1.02
1.25 0.54 1.72 0.97
10.8 7.9 15.3 9.7
7.4 3.0 8.3 6.2
6.6 0.6 1.1 3.0
8.1% 8.0% 5.5% 10.8%
2.7 1.5 1.5 1.8
71.4% 49.1% 22.8% 43.4%
Mark Williams Mark Williams Mark Williams Mark Williams
Utilities
AGK APA DUE SKI
AGL Energy APA Group DUET Spark Infra
6,740 2,704 1,801 1,605
Jun 11 Jun 11 Jun 11 Dec 10
14.61 4.23 1.65 1.21
16.55 4.80 2.00 1.35
16.55 2.00 1.35
13% 13% 21% 12%
Buy Buy Buy Hold
-4% 4% -1% 7%
9% 17% 12% 20%
431.1 108.5 124.9 78.4
479.1 117.4 90.7 153.0
529.7 132.9 89.0 165.2
1.0 1.5 1.1 0.6
94.4 19.7 14.1 6.7
103.4 18.2 9.2 11.5
113.6 20.1 8.1 12.4
0.7% -11.1% -19.9% -0.8%
10% -7% -35% 73%
10% 10% -11% 8%
10% 4% -17% 23%
60.0 34.4 20.0 13.5
64.0 35.4 16.0 9.5
68.0 36.5 16.5 9.7
4.4% 8.4% 9.7% 7.9%
100 0 0 0
14.1 23.2 18.0 10.5
12.9 21.1 20.4 9.7
1.4 6.4 -1.1 0.4
1.33 2.18 1.70 0.86
1.32 2.16 2.08 0.91
10.6 13.3 12.3 10.1
8.8 10.4 9.1 10.1
2.0 3.2 1.1
7.4% 7.3% 6.5% 10.7%
1.1 5.4 6.8 3.8
15.0% 189.2% 292.3% 67.6%
Jason Mabee, CFA Jason Mabee, CFA William Allott William Allott
Source: Company data, RBS forecasts, RBS Morgans forecasts * Share prices as at close of trading on 21 October 2011. Target prices, forecasts and recommendations for some companies featured in 'The Bulletin' may have been updated overnight. ++ Share prices as at close of trading on 21 October 2011. Financial forecasts in NZD. * Earnings Quality: Net Operating Cash Flow/(Net Profit + Depreciation & Amortisation)
116

21 October 2011
Actual
Fcst 1
Fcst 2
Actual
Fcst 1
Fcst 2
Fcst 1
Fcst 2
Fcst 1
Fcst 1
Aluminium & Steel

AWC BSL OST SGM Alumina BlueScope Steel OneSteel Sims Metal Mgt 3,306 1,529 1,653 2,748 Dec 10 Jun 11 Jun 11 Jun 11 1.36 0.83 1.24 13.38 2.21 0.94 2.10 19.10 2.21 1.26 2.10 19.10 63% 14% 69% 43% Buy Buy Buy Buy -45% -63% -52% -38% -32% -50% -39% -25% 39.9 -113.8 235.0 182.0 144.2 -68.9 275.4 279.6 129.3 94.4 285.1 364.1 5.5 0.1 1.0 0.5 1.6 -6.2 17.6 88.9 5.9 -3.8 20.6 136.1 5.3 5.1 21.4 177.3 -40.7% -55.9% -15.6% -5.6% 262% 65% 17% 53% -10% 4% 30%
86% 15% 19% 32%
6.0 2.0 10.0 47.0
6.0 0.0 8.2 68.0
6.0 2.6 10.7 88.6
4.3% 0.0% 6.7% 5.1%
100 100 50 45
22.4 6.0 9.8
24.2 16.1 5.8 7.5
0.3 0.3 0.3
1.83 0.56 0.92
2.28 1.65 0.59 0.77
21.0 235.6 6.5 6.5
21.0 8.8 4.8 5.1
1.0 0.5 0.8 1.4
4.8% -1.7% 6.0% 9.3%
2.4 3.9 2.7 0.2
13.3% 32.4% 44.4% 4.1%
Lyndon Fagan Todd Scott Todd Scott Todd Scott
Energy
OSH ORG PDN STO WPL WOR Oil Search Origin Energy Paladin Santos Woodside WorleyParsons 7,641 14,970 1,205 11,528 26,757 6,830 Dec 10 Jun 11 Jun 11 Dec 10 Dec 10 Jun 11 5.88 14.05 1.55 12.12 33.38 27.80 7.50 16.50 1.87 15.00 46.00 26.60 7.50 18.35 1.87 15.00 46.00 21.81 28% 17% 21% 24% 38% -4% Buy Buy Buy Buy Buy Hold -16% -13% -69% -8% -22% 4% -4% -1% -56% 5% -9% 17% 156.6 673.0 -59.5 356.1 1,540.5 321.6 178.4 911.4 -22.1 520.5 1,722.7 377.7 144.4 1,038.6 24.1 573.7 1,934.5 443.5 2.1 0.7 2.3 1.5 1.0 0.7 11.9 71.0 -8.0 50.3 201.1 130.0 13.5 84.1 -2.8 61.0 214.9 152.4 10.8 92.5 3.1 62.8 235.8 178.9 -6.2% -5.1% -57.2% -4.7% -5.1% 0.7% 13% 18% 182% 21% 7% 17% -20% 10% 3% 10% 17%
-11% 11% 4% 11% 6% 17%
4.0 50.0 0.0 30.0 105.0 86.0
4.0 52.0 0.0 30.0 110.0 93.0
4.0 56.0 0.0 31.0 130.0 113.0
0.7% 3.7% 0.0% 2.5% 3.2% 3.3%
0 100 0 100 100 55
42.7 16.7 19.9 15.2 18.2
51.6 15.2 46.8 19.3 13.4 15.5
-3.8 1.5 1.9 2.5 1.1
3.49 1.57 1.62 1.24 1.88
4.85 1.55 4.78 1.81 1.26 1.65
22.7 11.7 69.0 12.9 12.4 13.1
20.1 8.4 26.2 7.6 10.2 11.8
2.7 2.2 1.0 1.4 2.1 21.8
6.5% 7.3% -1.8% 6.5% 14.8% 18.6%
2.0 2.0 9.6 0.0 1.5 0.6
29.4% 33.3% 52.3% -0.1% 36.6% 19.3%
Jason Mabee, CFA Jason Mabee, CFA Lyndon Fagan Jason Mabee, CFA Jason Mabee, CFA Andrew Hodge
Diversified Metals & Mining

BHP FMG ILU LYC MCC OZL PNA RIO BHP Billiton Fortescue Meta Iluka Resources Lynas Macarthur Coa OZ Minerals PanAust Rio Tinto 190,051 13,232 6,335 1,876 4,900 3,491 1,687 119,896 Jun 11 Jun 11 Dec 10 Jun 11 Jun 11 Dec 10 Dec 10 Dec 10 35.70 4.25 15.13 1.10 16.22 10.78 2.84 62.57 50.53 8.01 19.00 2.19 16.00 14.10 4.14 109.09 50.53 8.01 19.00 2.19 12.88 14.10 4.14 109.09 42% 88% 26% 99% -1% 31% 46% 74% Buy Buy Buy Buy Hold Buy Buy Buy -21% -35% 66% -47% 27% -37% -36% -27% -8% -22% 78% -34% 39% -25% -23% -14% 21,889.8 23,567.8 24,287.9 1,649.2 2,038.1 1,699.6 36.1 476.8 1,092.2 -22.4 95.4 1,078.9 241.4 255.8 283.9 398.2 320.1 324.6 173.9 166.0 264.2 15,195.0 16,877.2 17,968.9 1.2 1.6 0.7 0.9 0.1 1.1 1.2 1.0 411.2 53.0 8.6 -1.3 79.9 127.6 5.9 770.3 446.9 65.5 113.9 5.6 84.7 103.4 27.5 902.6 460.6 54.6 260.9 63.0 94.0 104.9 43.2 974.0 -7.5% -10.4% 10.8% -35.5% -12.0% -18.7% -14.1% -9.9% 9% 24% 1221% 6% -19% 369% 17% 3% -17% 129% 1031% 11% 1% 57% 8%
6% 16% 11% -3% 8%
101.0 6.9 8.0 0.0 40.0 190.0 0.0 108.0
116.0 8.0 50.0 0.0 42.3 49.0 0.0 119.0
124.0 8.0 105.0 0.0 47.0 47.2 1.0 125.5
3.2% 1.8% 3.3% 0.0% 2.6% 4.5% 0.0% 1.9%
100 0 100 0 100 0 0 100
7.7 6.2 13.3 19.7 19.2 10.4 10.1 6.8
7.2 7.3 5.8 1.7 17.3 10.3 6.2 6.1
1.2 0.4 1.8 -3.3 0.8
0.72 0.59 1.09 1.85 1.80 0.85 0.82 0.55
0.74 0.74 0.55 0.18 1.77 0.97 0.59 0.57
5.5 5.4 8.9 16.0 13.3 6.6 6.7 5.6
4.7 5.1 6.9 12.7 11.9 4.7 5.5 4.9
2.6 2.9 3.7 2.5 2.5 1.3 2.2 2.5
38.4% 61.1% 33.3% 13.9% 13.7% 10.8% 24.3% 27.2%
0.4 1.5 0.2 0.9 0.9 1.2 0.3 0.2
21.6% 124.3% -10.8% -16.3% -17.9% -27.4% -8.6% 8.4%
Lyndon Fagan Lyndon Fagan Sam Berridge Sam Berridge Tom Sartor Lyndon Fagan Tom Sartor Lyndon Fagan
Gold & Precious Metals

NCM Newcrest Mining
Exchange rate (A$/US$)
25,480
Gold
Jun 11
33.30
42.33
Copper LME (US$/lb)
30.23
27%
Buy
-18%
Nickel LME (US$/lb) 8.79 9.89 10.87 10.92 10.41 11.00 11.95 12.98 8.50
-5%
908.0
1,721.4
1,939.3
1.4
118.7
225.0
253.4
4.5%
90%
13%
35%
18.0
45.0
51.0
1.4%
100
14.8
13.1
0.4
1.39
1.34
10.1
8.3
1.6
11.7%
0.2
3.7% Sam Berridge
Oil WTI (US$/oz) (US$/bbl) 1092 1223 1370 1637 1838 1750 1600 1525 1100 77.2 82.6 93.2 94.4 87.8 91.0 94.3 96.0 90.0
Aluminium Zinc LME LME (US$/lb) (US$/lb) 0.91 0.99 1.08 1.15 1.15 1.19 1.25 1.35 1.15 0.94 0.98 1.02 1.05 1.04 1.10 1.18 1.33 1.00
Coal coking steaming (US$/t) (US$/t) 146.0 190.5 247.3 287.5 301.3 305.0 290.0 270.0 180.0 76.3 90.0 108.3 120.0 118.8 116.3 112.5 107.5 100.0
Iron ore lump fines (US$/t) (US$/t) 86.4 219.9 279.3 219.9 281.0 219.9 252.9 219.9 151.5 73.7 118.1 154.1 162.9 161.8 153.2 145.4 137.9 84.8
FY10 CY10 FY11 CY11 FY12 CY12 FY13 CY13 LT (2015+)
0.88 0.92 0.99 1.04 1.06 1.08 1.10 1.08 0.75
3.03 3.42 3.93 4.25 4.33 4.50 4.65 4.86 3.00
Source: Company data, RBS forecasts, RBS Morgans forecasts. Share prices as at close of trading on 21 October 2011. Target prices, forecasts and recommendations for some companies featured in 'The Bulletin' may have been updated overnight. ** BHP, LGL, PDN & RIO price and market cap reported in AUD. Financial forecasts in USD. * Earnings Quality: Net Operating Cash Flow/(Net Profit + Depreciation & Amortisation)
117
RBS Ex-100 Earnings Forecasts

21 October 2011
ASX code Company name Market cap (A$m) Last year end Price (A$) Target FV (A$) Up/ price down (A$) Rec YTD -Abs. 12m YTD Rel.
NPAT pre abnormals (A$m) Earnings Quality * Actual EPS pre goodwill (c) EPS ANALYSIS EPS growth IBES 3m EPS (pre goodwill) revisions 12m fwd Fcst 1 Fcst 2 EPS CAGR 3 yr Actual DIVIDEND ANALYSIS Div yield DPS (c) Div frank (%) Fcst 1 PE (x) (pre goodwill) Fcst 1 Fcst 2 PEG VALUATION PE rel (pre goodwill) Fcst 1 Fcst 2 EV/ EV / P/ NTA EBIT (x) EBITDA (x) Fcst 1 Fcst 1 Fcst 1 B/SHEET ANALYSIS ROE Gearing (Tier 1 Analyst ND/EBITDA ratio for banks) Fcst 1 Fcst 1 Fcst 1
Actual
Fcst 1
Fcst 2
Actual
Fcst 1
Fcst 2
Fcst 1
Fcst 2
Fcst 1
Fcst 1
Chemicals
DLX NUF Duluxgroup Nufarm 963 1,165 Sep 10 Jul 11 2.62 4.45 3.13 5.05 3.13 5.05 19% 13% Buy Buy -5% -13% 8% -1% 71.5 86.1 79.1 101.9 80.9 118.5 1.5 1.0 19.5 32.9 21.5 38.9 22.0 45.3 -1.1% -9.4% 11% 18% 2% 16%
6% 15%
3.0 0.0
15.0 11.7
16.0 13.6
5.7% 2.6%
100 50
12.2 11.4
11.9 9.8
2.2 0.8
0.99 1.08
1.12 1.01
8.6 7.5
7.4 5.7
29.6 1.3
77.3% 6.4%
1.2 1.6
161.5% Julian Guido 27.4% Andrew Scott
Commercial Services & Supplies

CAB CPB CND CLQ COF CUS CLH DCG MIN PRG RUL SAI SLM SKE SPT TOX TPI TWO WLL Cabcharge Campbell Bros Clarius Group Clean TeQ Coffey Customers Collection Hse Decmil Group Mineral Resources Programmed Group Runge SAI Global Salmat Skilled Group Spotless Group Tox Free Transpacific Industries Talent2 Wellcom Group 530 3,024 44 3 91 145 73 267 1,911 236 48 943 422 418 524 219 634 167 87 Jun 11 Mar 11 Jun 11 Jun 10 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Mar 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 4.40 44.80 0.51 0.05 0.38 1.08 0.75 2.15 10.40 2.00 0.39 4.73 2.65 1.79 2.00 2.28 0.66 1.15 2.23 6.63 44.77 0.65 0.30 0.46 1.68 0.87 2.51 11.50 2.14 0.64 5.20 4.49 2.30 2.25 2.44 0.80 1.70 2.74 6.63 44.77 0.65 0.30 0.46 1.68 0.87 2.51 11.50 2.14 0.64 5.20 4.49 2.30 2.25 2.44 1.60 1.70 2.74 51% 0% 26% 492% 21% 56% 16% 17% 11% 7% 64% 10% 69% 28% 13% 7% 21% 47% 23% Buy Hold Hold Buy Hold Buy Hold Buy Hold Hold Buy Buy Buy Buy Hold Buy Hold Buy Buy -25% 13% -28% -44% -61% -41% 10% -19% -16% 16% -30% -3% -39% -2% -5% 7% -51% -24% 2% -12% 26% -15% -32% -48% -29% 23% -7% -3% 28% -18% 10% -27% 11% 8% 20% -39% -12% 15% 65.6 132.1 4.7 1.3 4.8 21.5 10.1 23.5 151.0 28.6 4.9 57.8 51.6 26.1 43.1 13.1 50.0 13.8 9.1 66.0 176.3 6.9 1.3 17.6 17.0 11.3 26.4 184.6 29.1 6.4 66.4 60.7 43.8 52.0 18.1 48.9 16.9 9.8 70.6 199.6 8.2 1.7 25.9 23.8 12.7 29.8 205.6 33.7 6.7 77.9 68.2 51.9 58.8 19.1 72.3 21.9 10.4 0.3 0.9 1.6 1.1 0.6 1.1 1.0 1.1 0.7 0.1 0.7 0.8 0.5 1.0 0.7 0.9 1.1 0.5 1.1 54.5 202.4 5.4 1.8 3.5 15.9 10.3 18.9 89.8 24.2 3.9 29.8 32.4 12.5 16.5 13.9 4.4 9.7 23.3 54.8 261.1 8.0 2.1 7.4 12.6 11.6 21.2 101.8 24.7 5.2 33.3 37.9 18.3 19.8 18.3 4.3 11.5 24.9 58.7 295.7 9.4 2.7 10.8 17.7 12.9 24.0 113.4 28.5 5.4 39.0 42.6 21.7 22.3 18.8 6.5 14.7 26.6 -2.0% 7.1% -24.1% -2.4% -14.5% 1.9% 1.2% -3.8% -9.2% 0.1% -8.2% 3.6% -2.3% -16.9% 0% 29% 48% 20% 107% -20% 12% 12% 13% 2% 31% 12% 17% 47% 20% 32% -2% 19% 7% 7% 13% 18% 29% 47% 40% 11% 13% 11% 16% 4% 17% 12% 18% 13% 3% 51% 27% 7%
4% 14% 23% 24% 50% 9% 13% 12% 6% 9% 12% 16% 11% 27% 13% 13% 16% 21% 6%
30.0 140.0 4.0 0.0 0.0 5.0 6.2 6.0 42.0 9.0 2.0 14.3 24.0 3.0 11.0 3.0 0.0 5.5 16.5
37.5 157.0 5.5 0.0 0.0 6.5 6.9 7.0 51.0 11.0 4.0 16.3 27.1 7.0 13.0 4.0 0.0 6.0 17.5
38.0 177.0 6.5 0.0 3.0 10.2 7.7 8.0 55.9 13.0 4.0 20.3 31.2 13.0 14.5 4.0 0.0 7.0 18.6
8.5% 3.5% 10.8% 0.0% 0.0% 6.1% 9.3% 3.3% 4.9% 5.5% 10.3% 3.4% 10.2% 3.9% 6.5% 1.8% 0.0% 5.2% 7.8%
100 50 100 0 100 0 100 0 0 100 100 100 100 100 40 100 100 50 100
8.0 17.2 6.4 5.0 5.2 8.5 6.4 10.1 10.2 8.1 7.5 14.2 7.0 9.8 10.1 12.4 15.2 10.0 8.9
7.5 15.1 5.4 3.9 3.5 6.1 5.8 9.0 9.2 7.0 7.2 12.1 6.2 8.3 8.9 12.1 10.1 7.9 8.4
1.8 1.2 0.3 0.2 0.1 1.0 0.5 0.8 1.6 0.9 0.6 0.9 0.6 0.4 0.8 1.0 1.0 0.5 1.5
0.76 1.61 0.60 0.17 0.49 0.80 0.61 0.95 0.96 0.76 0.71 1.34 0.78 0.95 0.95 1.17 1.43 0.94 0.84
0.77 1.55 0.55 0.16 0.36 0.62 0.59 0.92 0.94 0.72 0.74 1.24 0.75 0.86 0.91 1.24 1.03 0.81 0.86
8.8 12.4 3.7 -1.2 4.3 6.0 7.1 5.2 7.0 6.0 4.0 11.1 6.2 7.2 7.1 8.7 7.3 8.0 5.2
7.2 10.4 3.5 -0.8 3.5 3.7 2.5 4.7 5.7 5.1 3.1 9.9 4.9 5.9 4.1 5.9 4.3 5.3 4.6
2.1 7.7 2.0 1.3 3.5 10.3 0.9 3.2 2.7 2.0 2.8 7.4 2.4 8.4 3.7
20.8% 20.5% 7.7% 8.5% 11.7% 9.9% 11.5% 21.4% 27.0% 8.1% 13.3% 20.1% 18.0% 9.8% 11.3% 16.0% 3.1% 10.8% 18.0%
1.3 1.0 0.4 1.7 1.5 0.6 1.3 1.8 0.1 1.5 0.5 1.3 1.7 1.1 1.2 0.5 2.9 0.1 1.3
34.7% 36.5% -5.3% -29.1% 37.9% 16.9% 87.6% -56.7% -4.1% 27.9% -13.2% 39.1% 75.5% 22.0% 45.8% 16.1% 71.4% 1.9% -34.2%
Julian Guido Roger Leaning Matthew Nicholas Roger Leaning Roger Leaning Julian Guido Scott Murdoch Alexandra Clarke Todd Scott Julian Guido Roger Leaning Julian Guido Julian Guido Julian Guido Julian Guido Alexandra Clarke Roger Leaning Matthew Nicholas Josephine Little
Construction
ABC BKW CLO EAL MAH MND NWH Adel Brighton Brickworks Clough E&A Macmahon Monadelphous NRW Holdings 1,810 1,638 602 20 448 1,651 630 Dec 10 Jul 11 Jun 11 Jun 10 Jun 11 Jun 11 Jun 11 2.85 11.10 0.78 0.21 0.61 18.85 2.26 3.16 10.13 0.92 0.18 0.64 23.09 3.08 3.16 10.13 0.92 0.18 0.64 23.09 3.08 11% -9% 18% -15% 5% 22% 36% Buy Hold Buy Hold Hold Buy Buy -14% -1% 4% 5% 17% 3% 5% -1% 12% 17% 18% 30% 16% 17% 151.5 100.8 53.6 2.5 1.0 96.3 41.2 153.1 111.4 58.6 3.1 42.8 114.5 68.0 165.5 128.0 64.0 4.2 45.7 135.1 78.4 0.9 0.7 0.7 1.3 1.0 0.7 1.1 23.9 68.3 6.7 2.7 0.2 110.2 16.1 24.1 75.5 7.4 3.2 5.8 130.3 24.4 26.1 86.8 8.0 4.4 6.1 153.2 28.1 -2.9% -25.9% -2.9% 11.2% 2.4% 12.3% 1% 10% 9% 21% 2453% 18% 52% 8% 15% 9% 36% 7% 18% 15%
9% 8% 8% 23% 17% 24%
21.5 40.5 3.0 1.5 0.0 95.0 9.0
19.0 42.5 3.0 1.5 3.0 112.0 13.0
23.6 44.5 3.0 1.5 3.0 130.0 15.0
6.7% 3.8% 3.8% 7.1% 4.9% 5.9% 5.8%
100 100 0 0 100 100 0
11.8 14.7 10.6 6.5 10.6 14.5 9.3
10.9 12.8 9.7 4.8 9.9 12.3 8.0
1.3 1.8 1.4 0.3 0.9 0.4
0.97 1.38 1.00 0.53 1.00 1.36 0.87
1.03 1.31 0.99 0.45 1.02 1.26 0.82
10.5 23.1 7.9 6.4 6.7 9.4 6.4
8.2 17.2 7.5 5.3 3.6 8.3 4.1
2.3 1.1 1.9 1.4 7.8 2.2
16.2% 6.5% 18.2% 5.9% 12.6% 55.7% 23.7%
0.8 2.1 3.6 2.8 0.2 0.9 0.4
21.2% 13.2% -58.7% 41.7% 6.1% -74.6% 20.5%
Andrew Scott Alexandra Clarke Alexandra Clarke Alexandra Clarke Scott Murdoch Andrew Hodge Scott Murdoch
Consumer products
GUD MCP SYM GUD Holdings McPherson's Symex 520 168 49 Jun 11 Jun 11 Jun 11 7.52 2.32 0.36 9.00 3.17 0.53 9.00 3.17 0.53 20% 37% 47% Buy Hold Buy -25% -26% -31% -12% -14% -18% 49.0 28.0 10.0 49.7 28.5 12.3 55.3 29.5 12.8 1.0 1.1 0.2 71.7 39.0 7.3 71.6 39.7 6.5 79.5 41.1 6.8 -8.5% -9.2% 0% 2% -11% 11% 4% 4%
6% 3% -1%
64.0 26.0 2.5
64.0 26.0 3.0
70.0 27.0 3.4
8.5% 11.2% 8.3%
100 100 100
10.5 5.8 5.5
9.5 5.6 5.3
1.6 1.9 -4.4
0.99 0.55 0.52
0.97 0.58 0.54
7.7 4.6 4.7
6.3 4.1 4.2
5.5 5.4 2.6
18.9% 13.8% 11.0%
0.9 0.9 2.3
32.3% Matthew Nicholas 21.6% Josephine Little 52.5% Josephine Little
Diversified Financials
BTT EQT HGG IMF IFL MOC PTM TRU TSM SOL WHG BT Investment Mgt Equity Trustees Henderson Group IMF Aust IOOF Holdings Mortgage Choice Platinum Asset Mgt The Trust Company ThinkSmart WH Soul Pattinson & Co WHK Group 320 107 1,936 199 1,386 150 2,188 181 58 3,267 224 Sep 10 Jun 11 Dec 10 Jun 11 Jun 11 Jun 11 Jun 10 Feb 11 Dec 10 Jul 11 Jun 11 2.00 12.46 1.80 1.47 6.03 1.26 3.90 5.60 0.44 13.69 0.83 3.02 13.17 2.72 2.17 7.50 1.38 5.25 5.41 1.00 16.06 1.15 3.02 14.63 2.72 2.17 7.50 1.38 5.25 5.41 1.00 20.07 1.15 51% 6% 51% 48% 24% 10% 35% -3% 127% 17% 39% Buy Hold Buy Buy Buy Hold Hold Hold Buy Buy Buy -30% -21% -13% 1% -23% -5% -22% -11% -40% 9% -23% -17% -8% -1% 14% -10% 7% -9% 2% -27% 21% -10% 30.9 7.8 142.1 22.9 111.5 15.9 155.0 12.4 8.9 161.2 25.8 32.7 9.2 185.9 36.4 120.2 16.2 190.5 12.1 8.7 226.3 29.6 35.9 10.0 224.7 27.5 130.7 16.8 211.2 13.1 12.0 215.6 32.8 0.7 1.0 1.3 0.6 1.2 0.8 1.3 0.8 0.5 1.1 1.1 19.3 91.7 16.7 16.8 48.1 13.2 26.6 38.4 8.3 67.5 9.6 20.4 106.9 18.0 29.2 51.6 13.4 32.4 36.7 6.6 94.8 11.0 22.4 114.3 20.5 22.0 55.8 13.9 35.9 38.7 9.1 90.3 12.2 -16.7% -6.7% -10.1% 6.1% -7.7% 10.0% -6.6% -3.4% -7.1% -2.5% 6% 17% 8% 74% 7% 2% 22% -4% -20% 40% 14% 10% 7% 14% -25% 8% 4% 11% 5% 38% -5% 11%
8% 10% 12% 0% 7% 4% 13% 2% 17% 7% 10%
28.0 100.0 6.5 15.0 43.0 13.0 23.5 35.0 3.5 40.0 7.0
17.5 96.0 7.2 32.0 47.0 13.4 27.5 35.0 3.5 46.0 7.6
20.0 100.0 9.2 18.4 50.0 13.9 30.5 36.0 4.8 52.0 8.6
8.7% 7.7% 6.1% 21.8% 7.8% 10.6% 7.1% 6.3% 8.0% 3.4% 9.1%
100 100 0 100 0 100 100 100 0 100 100
9.8 11.7 9.9 5.0 11.7 9.4 12.0 15.3 6.6 14.4 7.6
8.9 10.9 8.5 6.7 10.8 9.0 10.9 14.5 4.8 15.2 6.9
1.2 1.1 0.8 -17.2 1.6 2.3 0.9 6.2 0.4 2.0 0.8
0.80 1.10 0.91 0.47 1.10 0.88 0.98 1.44 0.54 1.36 0.71
0.84 1.12 0.88 0.68 1.10 0.92 1.02 1.48 0.45 1.55 0.70
5.5 7.6 7.6 3.1 7.6 4.9 6.9 10.3 4.3 4.8 5.8
5.5 7.1 7.5 3.1 7.4 4.7 6.9 9.2 3.8 4.0 5.0
6.0 6.8 3.7 9.1 1.7 6.0 4.7 1.7 1.1 4.9
11.5% 16.5% 20.9% 37.1% 13.5% 17.9% 63.3% 10.9% 19.7% 7.9% 10.5%
1.4 0.4 0.0 0.8 1.1 1.5 1.4 0.1 0.2 8.2 0.8
-22.9% -11.1% -0.8% -37.7% -20.4% -40.6% -96.7% -2.7% -8.5% -53.4% 14.2%
Julian Guido Scott Murdoch Julian Guido Julian Guido Julian Guido Julian Guido Julian Guido Scott Murdoch Matthew Nicholas Roger Leaning Julian Guido
Consumer Services
ALL CTD DMP FWD FLT IVC JET NVT SGH WEB Aristocrat Corp Trave Domino's Pizza Fleetwood Flight Centre Invocare Jetset Navitas Slater & Gordon Webjet 1,176 136 446 675 1,779 751 338 1,456 276 172 Dec 10 Jun 11 Jun 11 Jun 11 Jun 11 Dec 10 Jun 11 Jun 11 Jun 11 Jun 11 2.16 1.90 6.52 11.79 17.80 6.91 0.77 3.88 1.81 2.29 2.60 2.50 7.00 13.56 25.10 7.60 1.16 4.12 2.50 2.50 2.60 2.50 7.00 15.05 25.10 7.60 1.16 4.12 2.50 2.50 20% 32% 7% 15% 41% 10% 51% 6% 38% 9% Buy Buy Buy Buy Buy Hold Buy Hold Buy Buy -28% 12% 4% -9% -28% -5% -14% 1% -10% -5% -15% 24% 17% 3% -15% 8% -2% 13% 3% 8% 54.4 8.6 21.4 52.1 170.7 34.1 25.6 76.0 27.9 11.3 56.6 12.0 25.0 58.2 188.0 40.4 35.5 88.0 37.3 12.6 94.6 14.8 27.7 64.0 204.0 46.7 38.5 103.8 41.2 14.0 1.8 1.3 1.2 0.8 0.7 1.0 1.6 0.8 0.7 1.3 10.2 14.0 31.3 90.0 169.6 33.6 6.6 21.3 18.3 14.5 10.5 16.9 36.6 100.6 186.8 38.9 8.1 23.4 23.6 17.0 17.4 20.7 40.4 109.7 202.7 43.1 8.8 27.6 25.5 19.5 -6.1% 5.7% 4.2% 3.3% 0.4% -2.0% -2.7% -5.1% 2.5% 3% 20% 17% 12% 10% 16% 22% 10% 29% 17% 66% 23% 11% 9% 9% 11% 9% 18% 8% 15%
28% 19% 14% 8% 9% 12% 12% 14% 16% 14%
5.0 5.0 21.9 73.0 84.0 28.3 3.0 20.7 5.5 11.0
5.4 8.4 25.6 86.0 93.4 31.3 3.8 23.5 7.5 12.4
8.7 10.3 28.3 93.0 101.4 36.0 4.4 27.6 8.6 13.7
2.5% 4.4% 3.9% 7.3% 5.2% 4.5% 4.9% 6.1% 4.1% 5.4%
0 100 100 100 100 100 100 100 0 100
20.6 11.3 17.8 11.7 9.5 17.8 9.5 16.5 7.7 13.4
12.4 9.2 16.1 10.7 8.8 16.0 8.8 14.0 7.1 11.7
0.7 0.6 1.3 1.4 1.1 1.5 0.8 1.2 0.5 0.9
1.68 1.06 1.68 1.10 0.90 1.45 0.90 1.56 0.72 1.26
1.17 0.94 1.65 1.10 0.90 1.51 0.90 1.44 0.73 1.20
15.4 7.4 12.2 8.0 5.8 13.4 6.0 11.9 5.5 8.8
11.0 6.8 9.4 6.8 4.9 11.5 5.1 10.7 5.2 8.5
8.9 38.0 6.8 4.5 3.6 32.9 14.4 1.8 6.5
26.7% 28.6% 22.9% 27.4% 23.9% 40.4% 8.0% 36.3% 17.8% 34.1%
1.8 0.5 0.4 0.0 0.8 2.6 0.2 0.7 0.7 2.2
102.8% -22.0% -14.3% -1.0% -30.8% 209.7% -3.4% 44.7% 20.6% -105.2%
Michael Nolan Belinda Moore Josephine Little Alexandra Clarke Belinda Moore Julian Guido Belinda Moore Julian Guido Julian Guido Belinda Moore
Source: Company data, RBS forecasts, RBS Morgans forecasts. * Share prices as at close of trading on 21 October 2011. Target prices, forecasts and recommendations for some companies featured in 'The Bulletin' may have been updated overnight. * Earnings Quality: Net Operating Cash Flow/(Net Profit + Depreciation & Amortisation)
118

21 October 2011
NPAT pre abnormals (A$m) Earnings Quality * Actual EPS pre goodwill (c) EPS ANALYSIS IBES 3m EPS growth EPS (pre goodwill) revisions 12m fwd Fcst 1 Fcst 2 EPS CAGR 3 yr Actual DIVIDEND ANALYSIS Div yield DPS (c) Div frank (%) Fcst 1 PE (x) (pre goodwill) Fcst 1 Fcst 2 PEG VALUATION PE rel (pre goodwill) Fcst 1 Fcst 2 EV/ EV / P/ NTA EBIT (x) EBITDA (x) Fcst 1 Fcst 1 Fcst 1 B/SHEET ANALYSIS ROE Gearing (Tier 1 Analyst ND/EBITDA ratio for banks) Fcst 1 Fcst 1 Fcst 1
Actual
Fcst 1
Fcst 2
Actual
Fcst 1
Fcst 2
Fcst 1
Fcst 2
Fcst 1
Fcst 1
Food Beverage & Tobacco

AAC ELD GNC MSF PAG RIC TGR WCB Aust Agricultural Co Elders GrainCorp MSF Sugar PrimeAg Australia Ridley Corp Tassal Group Warrnambool Cheese 435 121 1,573 218 296 363 237 214 Dec 10 Sep 10 Sep 10 Dec 10 Jun 11 Jun 11 Jun 11 Jun 11 1.39 0.27 7.93 3.15 1.11 1.18 1.62 3.97 1.55 0.31 9.25 4.06 1.25 1.33 1.30 4.05 2.07 0.31 9.25 4.06 1.57 1.33 1.30 4.05 12% 15% 17% 29% 13% 13% -20% 2% Hold Hold Buy Buy Hold Buy Hold Hold -2% -53% 20% -8% -17% -4% -5% 13% 11% -41% 33% 5% -4% 9% 8% 26% 0.9 3.0 80.2 6.9 5.9 29.3 21.6 18.5 7.2 3.6 167.0 -2.5 17.4 31.5 25.0 15.0 9.6 8.8 163.5 11.1 20.9 33.8 27.4 15.0 5.0 3.8 0.7 2.3 0.2 0.8 1.2 1.5 0.3 0.7 39.4 13.5 3.9 9.5 14.8 38.5 2.5 0.8 83.1 -3.6 6.8 10.2 17.1 27.9 3.1 2.0 82.5 16.1 7.9 11.0 18.6 27.9 2.4% -36.6% 1.5% 10.0% -12.5% -0.7% -2.1% -15.5% 627% 12% 111% -127% 73% 7% 16% -28% 23% 148% -1% 16% 7% 9% 0%
88% 19% 11% 24% 6% 11% -7%
0.0 0.0 30.0 6.5 1.0 7.5 2.0 15.0
0.0 0.0 41.5 5.9 2.7 7.8 6.0 11.2
0.0 0.0 41.2 8.0 3.1 8.0 7.0 11.1
0.0% 0.0% 5.2% 1.9% 2.4% 6.6% 3.7% 2.8%
0 0 100 100 100 25 100 100
56.1 34.1 9.5 16.4 11.5 9.5 14.2
45.4 13.7 9.6 19.6 14.1 10.7 8.7 14.2
0.4 0.5 0.7 1.8 0.9 -2.2
4.58 2.79 0.78 1.54 1.08 0.89 1.34
4.27 1.29 0.90 1.85 1.44 1.10 0.89 1.46
18.2 12.6 6.7 206.5 8.6 9.4 8.0 11.1
15.0 7.5 5.2 31.2 7.7 7.3 5.9 7.0
0.6 0.2 1.6 1.3 0.8 1.4 0.9 1.4
1.1% 0.4% 12.6% -1.5% 4.8% 10.7% 8.8% 9.7%
6.0 5.5 0.5 5.9 6.6 1.7 1.5 0.8
42.8% 44.7% 12.6% 28.3% -31.6% 36.3% 28.7% 17.9%
Belinda Moore Belinda Moore Belinda Moore Belinda Moore Belinda Moore Belinda Moore Matthew Nicholas Belinda Moore
Healthcare
ACR ACL API BTA BKL IPD MSB PXS QRX TIS Acrux Alchemia Aust Pharma Biota Blackmores ImpediMed Mesoblast Pharmaxis QRxPharma Tissue Therap 532 56 131 141 502 68 1,325 232 182 78 Jun 11 Jun 11 Aug 10 Jun 11 Jun 11 Jun 11 Jun 10 Jun 11 Jun 11 Jun 11 3.34 0.29 0.27 0.79 29.99 0.50 9.67 0.94 1.45 0.47 4.59 1.06 0.33 1.98 29.86 1.14 2.08 1.07 2.95 0.95 4.59 1.06 0.36 2.47 29.86 1.50 2.08 2.89 2.95 0.95 37% 265% 22% 150% 0% 128% -78% 14% 103% 103% Buy Buy Hold Buy Hold Buy Buy Hold Buy Buy -6% -54% -39% -20% 7% -38% 107% -68% 4% -34% 7% -41% -26% -7% 20% -26% 120% -56% 17% -21% 57.1 -13.4 22.6 -28.1 27.3 -14.8 -13.2 -45.8 -25.6 -5.3 5.5 -10.0 21.6 -9.3 30.4 -13.2 -14.5 -22.5 -22.5 -3.3 28.1 14.8 25.7 20.0 33.4 4.5 -1.6 -15.0 4.2 6.4 1.1 1.0 1.1 1.5 0.7 0.8 0.8 0.9 0.9 0.8 34.4 -7.0 5.3 -15.7 162.9 -9.5 -9.6 -20.0 -20.5 -3.4 3.3 -4.5 4.4 -5.2 181.8 -8.4 -9.4 -9.1 -15.6 -2.0 16.9 6.7 5.3 11.2 199.7 2.9 -1.0 -6.1 2.9 3.8 -70.6% -7.8% 3.7% -119.2% -90% 55% -16% 202% 12% 12% 2% 120% 31% 73% 415% 19% 10% 800% 50% 16% 51% 5% 4% 11% 32% -24% -9% -29% 39%
60.0 0.0 2.5 0.0 122.0 0.0 0.0 0.0 0.0 0.0
1.0 0.0 2.0 0.0 136.0 0.0 0.0 0.0 0.0 0.0
7.0 0.0 2.0 0.0 150.0 0.0 0.0 0.0 0.0 0.0
0.3% 0.0% 7.4% 0.0% 4.5% 0.0% 0.0% 0.0% 0.0% 0.0%
0 0 100 100 100 100 0 0 0 0
6.1 16.5 -
19.7 4.4 5.1 7.1 15.0 17.4 49.2 12.3
1.2 1.5 -
9.55 0.50 1.55 -
2.02 0.45 0.48 0.72 1.54 1.78 5.03 1.26
104.0 -5.2 6.2 -6.6 11.4 -4.7 -104.6 -9.2 -7.6 -16.1
65.1 -5.3 4.2 -10.9 10.4 -4.9 -104.7 -10.6 -7.6 -16.1
11.0 0.0% 153.1 -54.7% 0.4 3.8% 2.1 -12.9% 5.9 36.5% 13.7 -93.2% 55.2 -51.9% 3.7 -33.6% 20.1 -267.1% 5.9 -21.7%
5.6 n.a. 2.2 n.a. 0.3 n.a. n.a. n.a. n.a. n.a.
-84.0% -11.9% 26.7% -97.1% 14.8% -60.2% -88.9% -25.9% -86.8% -89.2%
Scott Power Scott Power Scott Power Scott Power Scott Power Scott Power Dr Derek Jellinek Scott Power Scott Power Scott Power
Infrastructure
AIX AIA.NZ LAU MQA SWL Aust Infrastructure Fund Auckland Int'l Airport Lindsay Macquarie Atlas Seymour Whyte 1,158 3,062 26 615 135 Jun 11 Jun 11 Jun 11 Dec 10 Jun 11 1.87 2.36 0.15 1.36 1.73 1.92 2.20 0.20 1.88 2.70 1.92 1.87 0.20 1.88 2.70 3% -7% 36% 38% 56% Hold Hold Buy Buy Buy -1% 8% -21% -11% -21% 12% 21% -8% 2% -9% 212.3 92.6 1.4 -281.7 12.2 160.6 106.2 3.2 -57.0 14.8 166.5 115.5 5.2 108.5 17.9 0.2 1.0 0.9 0.0 0.7 34.2 7.0 0.6 -62.3 15.6 25.9 8.0 1.5 -12.6 19.0 26.8 8.7 2.4 24.0 22.9 2.4% -0.2% -88.2% -10.7% -24% 15% 131% 394% 22% 4% 9% 62% 21%
-8% 11% 79% -57% 21%
10.0 8.7 0.7 0.0 8.0
10.5 9.5 1.0 0.0 11.0
11.0 10.5 1.6 7.0 11.0
5.6% 4.0% 6.4% 0.0% 6.4%
50 100 100 0 100
7.2 23.4 10.1 9.1
7.0 21.1 6.3 5.7 7.5
-0.8 2.1 0.1 0.4
0.68 2.20 0.95 0.85
0.71 2.16 0.64 0.53 0.77
6.2 15.6 10.4 -223.4 4.6
6.2 12.6 3.8 -248.1 4.3
0.6 1.3 0.7 3.0
8.9% 5.4% 6.2% 20.5% 36.1% -
0.3 3.3 2.5 n.a. 1.8
-3.2% 42.0% 94.5% -865.2% -89.8%
William Allott William Allott Alexandra Clarke William Allott Alexandra Clarke
IT
ASZ CRZ CSV DTL DWS IRE MLB NXT OKN OTH RKN SLX SMX TNE ASG Group Carsales CSG Ltd Data#3 DWS Adv Business Soln IRESS Melbourne IT NEXTDC Oakton Onthehouse Reckon Silex Systems SMS Mgt & Technology Technology One 140 1,138 324 190 175 938 114 225 164 31 354 388 367 336 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Dec 10 Dec 10 Jun 11 Jun 11 Jun 11 Dec 10 Jun 11 Jun 11 Sep 10 0.87 4.86 1.14 12.20 1.32 7.18 1.41 1.57 1.75 0.38 2.65 2.40 5.41 1.11 1.30 5.38 1.20 14.40 1.42 8.70 1.50 2.44 2.43 1.50 2.37 8.51 6.82 1.09 1.30 5.38 1.36 14.40 1.42 8.70 1.50 2.44 2.43 1.50 2.37 8.51 6.82 1.09 50% 11% 5% 18% 7% 21% 6% 55% 39% 295% -11% 255% 26% -2% Buy Buy Hold Buy Hold Hold Hold Buy Buy Buy Hold Buy Buy Hold -27% 3% -23% 0% -7% -18% -26% -10% -26% 13% -59% -19% 16% -14% 16% -11% 13% 6% -5% -13% 2% -14% 26% -46% -6% 28% 15.7 58.2 40.6 15.0 17.4 58.4 16.1 -1.7 16.8 -1.8 15.7 -31.5 29.8 17.8 18.7 67.1 41.8 16.5 19.1 63.0 13.2 -8.3 19.6 2.0 18.1 -15.1 35.5 20.5 21.7 76.0 45.3 17.6 20.7 75.2 15.4 0.3 23.4 3.8 21.0 -29.7 39.6 23.7 0.9 1.0 0.3 0.3 0.8 1.2 0.8 0.5 0.7 0.4 1.2 1.2 0.7 1.4 9.7 24.9 15.6 97.5 13.1 46.3 20.2 -1.7 18.0 -19.1 11.8 -19.5 44.3 5.9 10.7 28.5 14.7 107.4 14.4 48.6 16.4 -5.8 20.8 2.4 13.6 -9.4 52.3 6.8 12.0 32.0 15.8 114.4 15.6 57.0 18.9 0.2 24.8 4.6 15.8 -18.4 58.2 7.8 -2.3% 1.7% -8.1% -0.5% -1.9% -3.4% -15.7% -12.2% -1.5% -248.6% -6.1% -0.9% 11% 14% -6% 10% 10% 5% -19% -70% 16% 16% 108% 18% 14% 12% 12% 8% 7% 9% 17% 16% 19% 93% 16% -49% 11% 15%
9% 12% 4% 7% 8% 10% -2% 83% 16% -29% 13% 31% 13% 15%
7.5 19.9 6.0 77.0 12.0 41.5 15.0 0.0 8.5 0.0 8.0 0.0 30.0 5.7
8.0 22.8 5.6 85.0 11.0 39.0 11.0 0.0 16.0 0.6 8.5 0.0 35.5 4.8
9.0 25.6 6.1 90.0 12.0 45.5 13.0 0.0 19.5 1.2 9.5 0.0 39.5 5.5
9.2% 4.7% 4.9% 7.0% 8.3% 5.4% 7.8% 0.0% 9.1% 1.6% 3.2% 0.0% 6.6% 4.3%
100 23 100 100 100 100 100 0 100 0 90 100 100 100
8.1 17.0 7.8 11.4 9.2 14.8 8.6 8.4 15.9 19.5 10.3 16.3
7.2 15.2 7.2 10.7 8.4 12.6 7.5 7.1 8.2 16.8 9.3 14.1
0.9 1.4 2.2 1.7 1.1 1.4 -4.9 0.5 -0.5 1.4 0.8 1.1
0.76 1.60 0.73 1.07 0.86 1.21 0.70 0.79 1.49 1.59 0.97 1.33
0.74 1.55 0.74 1.09 0.86 1.18 0.70 73.55 0.72 0.84 1.58 0.95 1.33
6.0 11.5 7.9 5.2 6.0 9.9 7.6 -17.8 5.6 8.0 13.7 -15.9 7.1 11.5
4.7 11.2 6.0 5.0 5.9 9.3 4.8 -25.7 5.1 3.2 10.3 -28.0 6.9 9.4
23.5 138.3 6.3 5.0 12.4 1.6 5.3 11.8 41.6 3.2 8.5 6.3
16.8% 56.2% 13.5% 51.4% 32.0% 46.4% 14.2% -6.6% 18.0% 3.2% 34.9% -10.2% 32.0% 30.9%
0.9 0.6 1.9 2.7 0.5 0.8 1.0 n.a. 0.5 0.6 0.3 n.a. 0.5 1.1
29.1% -41.3% 45.8% -196.1% -21.1% -53.0% 32.5% -7.5% -13.8% -8.2% -16.2% -42.4% -20.8% -51.2%
Nick Harris Ashley Wallace Nick Harris Nick Harris Julian Guido Julian Guido Nick Harris Nick Harris Julian Guido Belinda Moore Julian Guido Scott Power Julian Guido Nick Harris
Insurance
AUB Austbrokers 333 Jun 11 6.00 6.46 6.46 8% Buy 17% 30% 23.9 26.8 29.5 1.2 43.6 48.4 53.1 0.7% 11% 10%
8%
25.5
30.0
32.0
5.0%
12.4
11.3
1.6
1.34
1.31
15.6
13.8
3.9
16.1% -
3.3
-37.5% Julian Guido
Media
APN AUN CMJ SXL PRT REA SGN TEN APN Austar United Comms Consolidated Media Southern Cross Media Prime Media REA Group STW Group Ten Network 525 1,538 1,405 716 242 1,613 325 862 Dec 10 Dec 10 Jun 11 Jun 11 Jun 11 Jun 11 Dec 10 Aug 10 0.85 1.21 2.50 1.01 0.66 12.37 0.91 0.82 1.37 1.37 2.68 1.50 0.72 11.25 1.44 0.95 1.53 1.20 2.98 1.79 0.80 11.77 1.44 1.06 61% 13% 7% 49% 9% -9% 58% 16% Buy Buy Buy Buy Hold Hold Buy Hold -56% 27% -20% -47% 2% 0% -14% -42% -43% 40% -7% -35% 14% 13% -1% -29% 103.1 54.1 94.8 68.6 27.2 68.7 38.7 96.9 83.1 84.4 92.7 98.9 28.8 80.2 40.6 78.1 96.4 101.6 96.6 110.3 29.2 95.0 43.1 80.6 1.2 1.0 1.3 0.6 0.9 1.0 2.0 1.0 17.2 4.2 16.6 14.8 7.4 53.1 10.8 9.3 13.5 6.5 16.5 14.0 7.9 61.1 11.4 7.5 15.6 7.8 17.2 15.6 8.0 71.3 12.3 7.7 -13.8% -8.1% -1.2% -3.7% -2.3% -2.1% -3.0% -16.4% -21% 55% -1% -6% 6% 15% 6% -19% 15% 20% 4% 11% 1% 17% 8% 3%
0% 34% 5% 7% 3% 15% 6% 4%
12.0 0.0 16.5 10.0 4.5 26.0 6.5 11.0
8.1 0.0 16.5 9.1 5.5 30.5 7.4 5.0
9.3 0.0 16.5 10.9 5.6 42.8 8.6 5.8
9.6% 0.0% 6.6% 9.0% 8.4% 2.5% 8.2% 6.1%
30 0 0 100 100 100 100 100
6.3 18.7 15.2 7.2 8.4 20.3 8.0 11.0
5.5 15.5 14.5 6.5 8.3 17.4 7.4 10.7
-44.0 0.6 3.2 1.1 3.3 1.4 1.3 2.9
0.51 1.53 1.43 0.68 0.79 1.90 0.65 0.90
0.51 1.46 1.49 0.66 0.85 1.78 0.70 1.01
6.2 14.5 -236.5 6.7 7.1 13.2 6.5 9.1
6.1 7.9 7.0 5.8 5.9 11.8 6.0 7.7
4.3 10.2 344.7 -
9.2% -40.3% 28.3% 6.5% 18.3% 37.4% 11.1% 8.7%
2.9 1.9 n.a. 2.7 2.0 1.4 1.1 2.4
59.3% -280.9% -25.3% 39.1% 75.8% -70.4% 20.1% 46.8%
Fraser McLeish Fraser McLeish Fraser McLeish Ashley Wallace Ashley Wallace Ashley Wallace Matthew Nicholas Fraser McLeish
119

21 October 2011
Actual
Fcst 1
Fcst 2
Actual
Fcst 1
Fcst 2
Fcst 1
Fcst 2
Fcst 1
Fcst 1
Other Capital Goods

AJL ALS AAX ASB ASL BOL BKN CDD EGN EHL GWA HST HIL LDW NFK RFX RQL SDM WTP AJ Lucas Alesco Ausenco Austal Ausdrill BOOM Logistics Bradken Cardno Engenco Emeco GWA Group Hastie Group Hills Ludowici Norfolk Group Redflow Resource Equip Sedgman Watpac 89 130 307 423 847 121 1,206 558 118 631 675 144 274 100 181 60 85 402 220 Jun 11 May 11 Dec 10 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Dec 10 Mar 11 Jun 11 Jun 11 Jun 11 Jun 11 1.35 1.38 2.50 2.25 2.81 0.26 7.45 5.16 0.09 1.00 2.24 0.10 1.11 3.78 1.14 0.72 0.40 1.91 1.20 2.28 1.81 3.97 3.75 3.80 0.49 9.85 7.07 0.15 1.23 2.16 0.12 1.19 4.92 1.65 2.04 0.99 1.93 1.96 2.28 1.81 6.08 3.75 3.80 0.49 9.85 7.07 0.15 1.23 2.16 0.12 1.70 4.92 1.65 2.04 1.28 1.93 1.96 69% 31% 59% 67% 35% 87% 32% 37% 72% 23% -4% 20% 7% 30% 45% 183% 147% 1% 63% Hold Hold Buy Buy Buy Buy Buy Buy Buy Buy Hold Hold Hold Buy Buy Buy Buy Hold Buy -44% -49% -19% -36% -9% -32% -17% -7% -40% -7% -27% -88% -41% -23% -10% -58% -31% -16% -34% -32% -36% -6% -23% 3% -19% -5% 6% -27% 5% -14% -76% -28% -10% 2% -45% -18% -4% -21% -8.5 15.6 0.8 40.5 78.5 5.4 90.1 58.8 7.2 56.3 63.4 18.7 24.7 11.6 21.1 -7.3 12.2 28.9 16.8 6.2 14.7 22.9 49.7 96.7 17.4 120.3 67.7 18.0 68.7 56.6 23.6 32.7 13.5 24.4 -10.8 13.4 36.7 28.3 10.4 18.9 35.5 50.2 116.0 21.6 143.9 70.3 21.7 78.2 60.4 31.8 36.6 16.7 27.9 3.4 14.4 37.9 35.0 1.4 1.2 1.8 3.3 0.7 0.9 0.2 1.0 1.5 1.2 1.1 1.8 0.3 0.5 1.1 0.9 0.9 0.6 1.3 -12.5 16.5 0.7 21.5 29.0 1.2 63.5 55.4 0.6 8.9 21.0 7.4 9.9 44.7 13.3 -8.8 5.6 13.8 9.2 9.0 15.5 18.6 26.4 32.1 3.7 72.3 62.6 1.4 10.9 18.8 1.7 13.4 46.0 15.4 -13.0 5.7 17.5 15.4 15.2 20.0 28.9 26.7 38.5 4.6 84.0 64.5 1.7 12.4 20.0 2.3 15.3 57.0 17.5 4.1 6.1 18.1 18.9 -22.9% -48.0% -5.6% -14.5% 2.8% 16.4% 0.9% 0.0% -1.4% -17.7% -51.1% -7.5% -1.0% 12.2% -4.3% -6% 2719% 23% 11% 219% 14% 13% 152% 22% -11% -77% 35% 3% 16% -32% 2% 27% 67% 68% 29% 55% 1% 20% 24% 16% 3% 20% 14% 7% 35% 14% 24% 14% 8% 3% 23%
17% 14% 12% 13% 62% 17% 7% 52% 14% 1% -27% 23% 13% 14% 9% 5% 11% 31%
0.0 14.0 0.0 6.0 12.0 0.0 39.5 34.0 0.0 10.0 18.0 0.0 10.0 20.0 2.0 0.0 0.0 7.0 6.0
0.0 9.0 9.3 7.0 13.0 0.0 45.0 36.0 0.0 6.0 18.0 0.0 11.0 23.0 4.0 0.0 0.0 8.0 10.0
0.0 13.0 14.4 8.0 14.5 0.0 52.5 38.5 0.0 6.5 18.0 0.3 13.0 29.0 6.0 0.0 1.0 8.5 12.0
0.0% 6.5% 3.7% 3.1% 4.6% 0.0% 6.0% 7.0% 0.0% 6.0% 8.0% 0.0% 10.0% 6.1% 3.5% 0.0% 0.0% 4.2% 8.3%
100 100 75 100 100 100 100 60 0 100 100 100 100 100 100 100 0 100 100
15.0 8.9 13.4 8.5 8.8 7.0 10.3 8.2 7.3 9.2 11.9 6.1 8.2 8.2 7.4 7.0 10.9 7.8
8.9 6.9 8.7 8.4 7.3 5.6 8.9 8.0 6.0 8.1 11.2 4.5 7.2 6.6 6.5 17.7 6.5 10.6 6.4
0.9 0.6 0.7 0.7 0.1 0.6 1.1 0.1 0.6 8.5 -0.2 0.4 0.6 0.5 1.5 1.0 0.3
1.41 0.84 1.10 0.80 0.86 0.65 0.97 0.78 0.62 0.86 1.12 0.57 0.77 0.67 0.70 0.66 1.10 0.73
0.91 0.71 0.81 0.86 0.76 0.57 0.91 0.82 0.56 0.83 1.14 0.46 0.74 0.62 0.67 1.81 0.67 1.15 0.65
8.3 6.8 8.6 5.4 6.4 6.8 8.0 6.4 4.3 7.9 8.9 5.2 7.0 6.3 4.2 -4.8 5.2 7.5 6.3
4.4 4.6 6.3 4.4 3.9 3.6 6.5 5.7 3.2 3.8 7.4 4.1 5.1 5.0 3.4 -5.7 4.1 5.5 4.2
1.0 1.4 4.2 1.3 1.3 0.5 2.2 0.9 1.4 11.3 1.9 0.8 1.5 3.2 5.8 1.2 2.9 0.8
3.0% 3.2% 9.5% 15.7% 13.7% 5.7% 16.6% 18.1% 9.6% 11.1% 12.8% 6.9% 8.5% 13.9% 24.7% -61.9% 15.1% 21.5% 9.1%
2.4 1.6 0.1 0.8 0.4 1.8 1.7 0.7 0.4 1.4 1.6 1.8 1.5 1.4 0.5 n.a. 0.4 0.7 1.0
49.6% 16.3% -1.0% -20.0% 11.9% 40.3% 56.2% 19.5% 7.5% 56.0% 41.7% 29.4% 27.7% 36.2% -22.9% -35.1% 9.7% -27.1% 21.6%
Alexandra Clarke Julian Guido Roger Leaning Julian Guido Matthew Nicholas Matthew Nicholas Matthew Nicholas Roger Leaning Alexandra Clarke Matthew Nicholas Julian Guido Julian Guido Matthew Nicholas Roger Leaning Julian Guido Scott Power Alexandra Clarke Roger Leaning Scott Murdoch
Property
AAD CWP CMW DVN FKP PPC SDG Ardent Leisure Cedar Woods Cromwell Devine FKP Property Peet Sunland Group 340 216 642 137 610 360 193 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 1.07 3.50 0.67 0.22 0.51 1.14 0.89 1.54 5.24 0.76 0.28 0.88 2.00 0.70 1.54 5.24 0.76 0.28 0.88 2.00 0.70 44% 50% 14% 27% 73% 76% -21% Buy Buy Buy Buy Buy Buy Hold 6% 0% -12% -21% -41% -43% 19% 19% 13% 1% -9% -28% -30% 31% 39.4 28.1 65.3 20.2 121.0 44.0 17.9 43.2 34.6 71.5 21.0 125.4 39.6 21.3 47.2 38.4 74.0 23.5 134.9 44.4 22.1 1.0 1.4 1.0 3.6 0.4 1.3 2.1 12.5 45.8 7.1 3.2 10.3 14.5 7.8 13.6 55.2 7.4 3.3 10.6 12.5 10.0 14.5 60.8 7.6 3.6 11.3 14.0 10.9 -10.9% 3.2% -3.7% -9.6% -6.3% -12.2% -3.9% 8% 20% 4% 3% 3% -14% 29% 7% 10% 3% 10% 7% 12% 8%
8% 15% 6% 10% 6% 1% 15%
11.5 23.0 7.0 2.0 3.0 8.5 0.0
12.2 28.0 7.0 2.1 3.3 7.5 0.0
13.1 30.0 7.1 2.3 3.4 8.5 3.0
11.4% 8.0% 10.5% 9.9% 6.4% 6.6% 0.0%
0 100 18 100 70 100 100
7.9 6.3 9.0 6.6 4.9 9.1 8.9
7.4 5.8 8.7 6.0 4.5 8.2 8.2
1.0 0.4 1.6 0.7 0.8 7.9 0.6
0.74 0.60 0.85 0.62 0.46 0.86 0.84
0.75 0.59 0.89 0.61 0.46 0.83 0.84
8.5 5.3 11.7 6.2 7.2 9.1 7.1
5.5 5.2 11.6 6.1 7.1 8.8 6.5
1.1 1.5 0.9 0.4 0.5 1.3 0.5
10.0% 24.9% 10.1% 6.0% 11.3% 14.8% 6.1%
1.8 1.0 6.4 2.8 4.0 3.7 1.1
37.4% 34.4% 109.2% 32.6% 49.1% 87.2% 11.5%
Josephine Little Scott Murdoch Fiona Buchanan Scott Murdoch Josephine Little Matthew Nicholas Fiona Buchanan
Retail
APE ARP AHE KMD ORL PBG PMV TRS RFG RHL SUL TGA WTF AP Eagers ARB Corp Automotive Holdings Kathmandu OrotonGroup Pacific Brands Premier Inv Reject Shop Retail Food Ruralco Super Retail Thorn Group Wotif.com 375 570 511 353 314 577 770 262 260 174 713 231 756 Dec 10 Jun 11 Jun 11 Jul 11 Jul 11 Jun 11 Jul 11 Jun 11 Jun 11 Sep 10 Jun 11 Mar 11 Jun 11 11.90 7.87 1.97 1.76 7.70 0.62 4.97 10.08 2.40 3.16 5.32 1.58 3.58 15.00 8.65 2.23 2.20 8.87 0.92 5.58 12.70 2.65 3.80 7.40 2.15 4.18 15.00 8.65 2.22 2.20 8.86 0.92 5.58 12.70 2.83 3.80 7.40 2.15 4.18 26% 10% 13% 25% 15% 48% 12% 26% 10% 20% 39% 36% 17% Buy Hold Hold Buy Buy Buy Hold Hold Hold Buy Buy Buy Hold -5% 7% -20% 29% -10% -37% -20% -27% -17% 14% -13% -20% -28% 8% 20% -7% 42% 2% -24% -7% -14% -5% 27% 0% -7% -15% 32.6 37.9 52.4 30.0 24.8 103.4 61.1 16.1 28.0 13.0 55.6 23.0 51.0 39.3 42.0 59.7 35.3 26.8 86.5 61.1 23.7 30.4 15.1 89.8 26.8 56.0 39.6 46.1 69.5 39.0 29.9 104.3 71.3 29.1 32.7 17.0 114.9 30.4 61.7 0.8 0.9 0.9 0.9 0.7 0.8 1.0 0.7 0.9 1.5 0.5 0.6 1.5 108.7 52.2 22.7 14.7 60.8 11.1 39.4 61.4 26.1 23.5 43.1 17.6 23.9 124.5 58.0 23.0 17.6 65.7 9.3 39.4 89.6 27.9 27.5 51.4 18.3 26.3 125.4 63.6 26.8 19.5 73.4 11.2 46.0 109.4 29.5 30.9 58.8 20.7 29.0 3.4% 5.0% -7.9% 6.2% 5.0% -10.6% -10.7% -7.1% -4.5% -7.5% -3.2% -9.4% -7.6% 15% 11% 1% 20% 8% -16% 0% 46% 7% 17% 19% 4% 10% 1% 10% 17% 11% 12% 20% 17% 22% 6% 12% 14% 13% 10%
7% 10% 8% 12% 9% 2% 8% 25% 5% 12% 16% 10% 10%
64.0 23.0 17.0 10.0 50.0 6.2 36.0 31.0 14.5 16.0 29.0 8.5 22.0
78.0 26.5 17.0 11.3 54.0 6.1 35.5 68.0 16.7 18.0 31.0 9.2 24.0
80.0 29.5 19.0 12.7 60.0 7.4 36.5 83.0 18.0 20.0 35.0 10.4 26.4
6.6% 3.4% 8.6% 5.0% 7.0% 9.8% 7.1% 6.7% 7.0% 5.7% 5.8% 5.8% 6.7%
100 100 100 0 0 100 0 100 100 100 100 100 100
9.6 13.6 8.6 10.3 11.7 6.7 12.6 11.3 8.6 11.5 10.3 8.6 13.6
9.5 12.4 7.3 9.1 10.5 5.5 10.8 9.2 8.1 10.2 9.1 7.6 12.4
1.3 1.4 1.0 0.8 1.3 3.1 1.6 0.5 1.6 0.9 0.7 0.9 1.4
0.78 1.28 0.80 0.97 1.10 0.63 1.19 1.06 0.81 0.94 0.97 0.81 1.28
0.89 1.27 0.75 0.94 1.07 0.57 1.11 0.94 0.83 0.96 0.93 0.78 1.26
7.0 9.2 8.1 7.2 8.1 4.9 7.3 8.1 6.4 6.3 7.4 5.6 7.7
6.2 8.3 6.6 6.4 6.7 4.4 5.8 6.1 6.3 5.4 6.2 5.1 7.1
1.4 4.0 1.8 14.5 10.5 4.4 2.2 3.9 2.1 23.6 2.3 136.2
10.7% 29.9% 13.0% 16.6% 82.7% 7.2% 4.9% 39.1% 18.2% 10.0% 18.5% 22.8% 60.8%
4.3 0.7 3.1 0.5 0.1 1.2 2.0 0.8 1.1 1.0 2.2 0.1 1.8
108.0% -28.6% 95.3% 13.6% 18.0% 16.8% -16.4% 61.9% 32.3% 23.0% 59.1% -3.0% -155.6%
Josephine Little Matthew Nicholas Josephine Little Josephine Little Josephine Little Julian Guido Julian Guido Julian Guido Scott Murdoch Belinda Moore Josephine Little Scott Murdoch Belinda Moore
Telecommunication Services
AMM HTA IIN MAQ
SGT TEL.NZ
TPM
Amcom Hutchison Telecom (Aus iiNet Macq Telecom SingTel Telecom Corp TPG Telecom
194 814 395 172 50,302 4,885 1,058
Jun 11 Dec 10 Jun 11 Jun 11 Mar 11 Jun 11 Jul 11
0.81 0.06 2.59 8.20 3.16 2.55 1.36
0.97 0.13 3.20 13.51 3.16 2.45 1.64
0.97 0.13 3.38 15.01 2.48 1.90 1.64
20% 117% 24% 65% 0% -4% 20%
Buy Buy Buy Buy Hold Hold Buy
14% -40% -11% -8% 4% 18% -17%
27% -27% 2% 5% 16% 30% -4%
21.6 41.5 38.0 17.7 3,024.8 296.6 78.2
16.3 -90.6 44.4 18.6 2,925.7 363.8 111.9
18.9 28.0 49.2 22.5 3,196.6 383.9 127.1
0.8 0.0 1.2 1.2 1.0 1.0 0.8
9.0 0.3 25.0 84.5 19.0 15.5 10.1
6.8 -0.7 29.8 89.2 18.4 18.9 14.3
7.8 0.2 33.8 107.6 20.0 19.9 16.1
-32.0% -117.2% -7.9% -7.9% -3.4% 5.6% -2.2%
-25% -318% 19% 6% -3% 22% 42%
16% 14% 21% 9% 6% 13%
-2% 37% 15% 9% 5% 13% 20%
4.8 0.0 12.0 22.0 18.0 4.5
3.5 0.0 15.0 24.0 21.0 7.0
4.1 0.0 17.0 28.0 23.0 8.0
4.3% 0.0% 5.8% 2.9% 5.1% 8.2% 5.2%
0 0 0 100 0 100 100
12.0 8.7 9.2 13.5 10.7 9.5
10.4 50.9 7.7 7.6 12.6 10.0 8.4
-7.6 0.6 1.0 2.8 0.8 0.5
1.13 0.82 0.86 1.26 1.01 0.89
1.06 2.74 0.78 0.78 1.28 1.02 0.86
7.9 -622.9 6.6 5.6 10.3 9.0 7.0
5.7 -622.9 4.0 3.3 7.5 4.1 4.7
2.1 1.0 2.0 3.4 4.1 17.6
11.6% -6.4% 18.8% 22.0% 15.2% 19.9% 20.4%
0.2 n.a. 0.7 0.7 0.9 1.3 0.7
-4.8% -0.3% 34.3% -32.0% 17.8% 101.9% 29.8%
Alan Stuart Alan Stuart Alan Stuart Nick Harris Ian Martin Alan Stuart Nick Harris
Transportation
MRM RCR REX VBA Mermaid Marine Aust RCR Tomlinson Regional Express Virgin Blue 605 182 104 784 Jun 11 Jun 11 Jun 11 Jun 11 3.08 1.38 0.94 0.35 3.58 2.13 1.26 0.41 3.58 2.13 1.58 0.45 16% 54% 35% 19% Buy Buy Buy Buy 2% -6% -15% -19% 15% 7% -2% -6% 43.2 19.5 17.4 -48.1 52.1 21.2 21.7 64.5 56.3 25.8 24.0 114.9 1.3 0.4 1.2 1.4 20.8 14.8 15.7 -2.2 23.5 16.0 19.7 2.9 25.2 19.5 21.9 5.2 0.5% -5.1% 12.3% -5.2% 13% 8% 26% 7% 22% 11% 79%
10% 14% 16% 50%
9.0 4.0 7.1 0.0
10.0 5.0 7.6 0.0
11.0 6.0 8.6 0.0
3.2% 3.6% 8.0% 0.0%
0 100 100 0
13.1 8.6 4.8 12.2
12.2 7.1 4.3 6.8
1.3 0.6 0.3 0.2
1.23 0.81 0.45 1.15
1.25 0.72 0.44 0.70
8.8 6.1 3.2 11.4
6.9 4.1 2.2 4.4
2.3 1.3 0.6 0.9
18.2% 9.8% 12.9% 6.7%
1.0 0.1 0.1 2.5
32.9% 1.0% -1.8% 100.8%
Alexandra Clarke Alexandra Clarke Michael Newbold, CFA Mark Williams
Utilities
CIF ENV EPW GDY HDF SPN Challenger Infrastructure Envestra ERM Power Geodynamics Hastings Diversified SP AusNet 346 923 251 63 838 2,753 Jun 11 Jun 11 Jun 11 Jun 10 Dec 10 Mar 11 1.10 0.64 1.55 0.22 1.61 0.99 1.35 0.80 1.90 1.48 1.95 1.00 1.35 0.80 2.32 1.74 1.95 1.15 23% 25% 23% 571% 21% 1% Buy Buy Buy Buy Buy Hold -8% 23% -22% -42% -5% 14% 4% 36% -9% -29% 8% 27% -0.8 47.2 2.0 -14.8 35.6 252.9 11.0 63.0 31.5 -50.9 39.7 244.5 22.3 69.7 36.7 -52.8 26.8 251.2 1.6 1.4 6.6 0.4 1.6 0.9 -0.3 3.3 1.5 -5.1 7.1 9.0 3.5 4.1 19.4 -13.8 7.7 8.6 7.0 4.3 22.6 -11.9 5.1 8.7 -60.0% 8.4% -13.6% 28.6% -0.1% 25% 1224% -63% 8% -4% 102% 4% 17% 16% -33% 1%
13% -19% 0%
14.0 5.8 3.5 0.0 12.0 8.0
10.0 5.9 7.7 0.0 10.0 8.0
10.0 6.1 8.1 0.0 10.0 8.0
9.1% 9.2% 5.0% 0.0% 6.2% 8.1%
0 0 0 0 0 0
31.5 15.6 8.0 21.0 11.4
15.6 15.0 6.8 31.5 11.3
1.2 -1.1 -83.2
2.97 1.46 0.75 1.71 1.07
1.59 1.54 0.70 2.96 1.16
15.3 10.8 5.7 -0.2 23.8 11.6
9.5 8.9 4.9 -0.6 18.1 8.0
19.5 1.5 0.3 1.5 10.5
3.6% 10.5% 19.2% -18.1% 7.1% 41.1%
7.3 6.1 2.0 n.a. 9.6 5.0
268.8% 299.1% 105.0% -18.4% 169.9% 158.5%
William Allott William Allott Jason Mabee, CFA Roger Leaning William Allott William Allott
120

21 October 2011
Actual
Fcst 1
Fcst 2
Actual
Fcst 1
Fcst 2
Fcst 1
Fcst 2
Fcst 1
Fcst 1
Aluminium & Steel

GBG Gindalbie Metals 681 Jun 11 0.55 0.85 0.95 55% Buy -59% -47% -5.3 13.4 93.5 0.5 -0.6 1.1 7.5 -5.8% 598%
-
0.0
0.0
0.0
0.0%
100
50.8
7.3
4.78
0.75
37.8
30.0
0.9
2.0%
10.6
47.8% Todd Scott
Energy
AZT ESG ERA GCL HZN IFN LNC MAD NCR NHC NXS SMR SXY WHC Aston Eastern Star Energy Resource Gloucester Coa Horizon Oil Infigen Energy Linc Energy Maverick Drilling NuCoal New Hope Corp Nexus Energy Stanmore Coal Senex Energy Whitehaven Coal 2,080 823 1,056 1,374 232 213 1,007 84 220 4,923 239 102 341 2,828 Jun 11 Jun 11 Dec 10 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Jul 11 Jun 11 Jun 11 Jun 11 Jun 11 10.17 0.83 2.04 6.77 0.20 0.28 2.00 0.22 0.34 5.93 0.18 0.77 0.45 5.72 12.06 0.77 1.91 10.23 0.33 0.80 3.75 0.36 0.78 5.87 0.12 2.03 0.63 7.00 12.06 1.24 1.91 10.23 0.33 0.80 3.00 0.89 0.78 5.87 0.60 2.03 0.63 6.23 19% -7% -6% 51% 66% 186% 88% 64% 128% -1% -33% 164% 40% 22% Buy Hold Sell Buy Buy Buy Buy Buy Buy Buy Hold Buy Buy Buy 26% 2% -82% -44% -31% -48% -25% 0% -44% 22% -59% -45% 10% -15% 39% 15% -69% -32% -18% -35% -12% 13% -32% 35% -46% -32% 22% -2% -16.7 -4.5 52.8 54.6 16.4 -26.0 -204.0 1.7 -4.7 133.4 26.1 -2.0 10.2 73.3 -14.1 1.1 31.2 68.4 23.0 -42.7 81.0 14.0 -5.7 209.4 -18.7 -4.3 31.2 173.3 -41.0 9.5 76.8 89.2 40.3 -24.4 186.4 25.6 -6.7 194.7 -2.8 -5.6 35.9 243.9 1.0 15.5 0.5 0.9 1.6 0.6 0.4 0.1 1.0 0.4 0.4 1.0 0.4 0.7 -8.1 -0.4 27.7 26.9 1.4 -3.4 -41.1 0.6 -0.7 16.1 2.0 -1.5 1.4 14.8 -6.9 0.1 6.0 33.3 1.9 -5.6 16.1 3.7 -0.9 25.2 -1.4 -3.3 4.1 34.4 -20.0 0.9 14.8 43.4 3.4 -3.2 37.0 6.9 -1.0 23.4 -0.2 -4.3 4.7 48.4 -45.7% -47.6% -26.5% -57.8% -8.0% -473.9% 16.3% -6.5% 18% -78% 24% 34% -39% 518% -18% 57% -172% -54% 205% 132% -66% 757% 146% 30% 76% 75% 130% 83% -15% -7% 575% -22% 15% 41%
61% -71% 49% 81% -11% 12% -19% 39% 54%
0.0 0.0 8.0 0.0 0.0 1.0 0.0 0.0 0.0 25.3 0.0 0.0 0.0 7.4
0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.0 0.0 0.0 0.0 18.0
0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 11.0 0.0 0.0 0.0 24.0
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2.0% 0.0% 0.0% 0.0% 3.1%
0 0 100 0 0 0 100 0 0 100 0 0 0 100
33.9 20.3 10.2 12.4 5.8 23.5 10.9 16.6
89.8 13.8 15.6 5.6 5.4 3.1 25.3 9.5 11.8
-0.5 0.4 0.1 -1.1 2.0 0.3 0.3
72.32 2.77 1.91 0.96 1.17 0.54 2.21 1.03 1.56
9.18 1.29 1.59 0.58 0.55 0.31 2.59 0.97 1.21
-253.0 -407.5 5.9 11.1 9.5 28.2 -0.2 4.5 -38.6 16.7 -54.3 -10.7 11.1 10.9
-253.0 -2,620.2 3.5 8.4 6.5 6.8 -0.1 4.0 -38.6 13.7 6.2 -10.7 9.0 9.0
4.5 3.2 0.9 1.3 1.4 0.8 1.8 2.6 10.6 2.2 0.4 1.8 2.4 2.6
-3.1% 0.4% 2.6% 6.5% 14.9% -6.9% 10.4% 49.8% -24.3% 9.0% -3.0% -9.7% 24.5% 15.8%
n.a. n.a. 7.0 0.1 1.1 5.4 8.3 0.2 n.a. 6.6 1.8 n.a. 0.3 0.2
47.7% 8.0% -49.5% 1.6% 26.9% 144.6% -98.4% 12.4% 2.4% -67.4% 15.6% -48.0% -7.2% -5.6%
Tom Sartor Chris Brown Lyndon Fagan Tom Sartor Chris Brown William Allott Jason Mabee, CFA Roger Leaning Tom Sartor Tom Sartor Chris Brown Tom Sartor Roger Leaning Tom Sartor
Diversified Metals & Mining

ALK AQA AGO GRR GRY IRD IGO IMD MDL OMH Alkane Resources Aquila Atlas Iron Grange Resources Gryphon Minerals Iron Road Independence Gp Imdex Mineral Deposits OM Holdings 296 1,939 2,523 502 459 88 950 395 467 302 Dec 10 Jun 11 Jun 11 Dec 10 Jun 11 Jun 11 Jun 11 Jun 11 Jun 11 Dec 10 1.10 5.18 3.05 0.44 1.46 0.62 4.81 1.98 5.60 0.60 2.30 5.98 4.43 0.70 2.36 0.77 6.86 2.60 8.00 0.50 2.30 5.98 4.43 0.70 2.36 0.77 6.86 2.60 9.40 0.50 109% 15% 45% 59% 62% 24% 43% 31% 43% -17% Buy Hold Buy Buy Buy Buy Buy Buy Buy Sell 10% -47% 3% -41% -19% -16% -39% 11% 4% -57% 23% -35% 16% -29% -6% -4% -27% 23% 16% -44% 7.8 -63.5 168.6 33.9 -2.9 -17.5 30.3 31.0 39.0 47.2 -5.4 -41.0 222.9 82.8 -7.0 -17.2 46.3 41.5 19.3 4.4 -9.9 -156.0 243.1 95.8 6.2 -17.1 61.7 48.5 21.2 16.3 1.0 1.4 1.1 1.8 1.0 0.9 1.0 0.8 0.4 0.4 2.9 -17.0 20.4 3.0 -0.9 -13.6 18.7 15.6 46.7 9.4 -2.0 -10.9 26.9 7.2 -2.2 -12.2 22.8 20.4 23.1 0.9 -3.7 -41.7 29.4 8.3 2.0 -12.1 30.4 23.8 25.4 3.2 228.3% -17.0% -26.1% -34.2% 3.7% -43.8% -169% 55% 32% 143% -59% 11% 22% 30% -51% -91% -45% -74% 9% 16% 1% 33% 16% 10% 268%
24% 31% 65% 17% 8% -17%
0.0 0.0 3.0 0.0 0.0 0.0 7.0 4.5 0.0 2.8
0.0 0.0 6.0 3.6 0.0 0.0 5.0 5.5 0.0 1.0
0.0 0.0 6.0 2.1 0.0 0.0 0.0 6.5 0.0 0.8
0.0% 0.0% 2.0% 8.3% 0.0% 0.0% 1.0% 2.8% 0.0% 1.7%
0 0 0 0 0 0 0 100 0 0
11.3 6.1 21.1 9.7 23.3 68.2
10.4 5.2 74.2 15.8 8.3 20.6 18.5
0.5 0.2 0.3 0.6 2.8 -3.9
1.06 0.50 1.98 0.98 2.19 5.58
1.06 0.49 7.59 1.62 0.90 2.11 1.74
-33.3 109.6 6.8 2.0 -84.1 -6.1 14.5 6.9 10.4 35.9
-33.3 83.7 6.0 1.6 -85.7 -6.1 10.5 6.0 9.2 16.7
5.0 -10.3% 7.0 -12.7% 1.3 11.9% 0.6 12.4% 3.4 -6.5% 18.8 ####### 1.6 6.4% 3.9 27.7% 1.2 5.4% 1.3 1.6%
n.a. 1.7 1.4 1.3 n.a. n.a. 1.2 0.3 4.1 4.3
-32.7% 14.9% -23.9% -28.7% -22.3% 218.3% -15.1% 15.2% -37.0% 43.3%
Sam Berridge Sam Berridge Lyndon Fagan Todd Scott James Wilson Todd Scott Sam Berridge Matthew Nicholas Chris Brown Todd Scott
Gold & Precious Metals

CAH IAU IGR KCN KGL MML OGC PRU RRL SAR Catalpa Intrepid Mines Integra Mining Kingsgate Kentor Gold Medusa Mining OceanaGold Perseus Mining Regis Resources Saracen Minera 280 513 405 991 97 1,280 576 1,277 1,258 456 Jun 11 Dec 10 Jun 11 Jun 11 Dec 10 Jun 11 Dec 10 Jun 11 Jun 11 Jun 11 1.58 0.99 0.48 7.32 0.09 6.79 2.14 3.00 2.92 0.74 1.75 1.62 0.80 9.06 0.22 7.90 3.00 3.64 2.96 1.07 1.75 2.70 0.80 9.06 0.24 7.90 3.00 3.16 2.57 1.07 11% 63% 67% 24% 145% 16% 40% 21% 1% 44% Hold Buy Buy Buy Buy Buy Buy Hold Hold Buy -20% -51% -32% -33% -50% 5% -41% -11% 22% -12% -7% -38% -20% -20% -37% 18% -29% 1% 34% 1% 29.6 5.3 41.1 32.0 0.1 112.5 32.4 -30.0 37.2 47.7 26.3 -5.9 47.0 206.7 -2.0 121.8 64.0 126.6 75.2 66.2 32.8 -9.9 37.4 205.7 16.2 110.6 72.1 113.3 215.4 73.8 1.0 0.1 0.4 0.4 1.0 0.8 0.5 0.6 1.0 0.7 16.7 1.0 4.9 23.6 0.0 59.9 12.4 -7.1 8.6 9.2 14.8 -1.1 5.6 152.7 -0.3 64.8 24.4 29.7 17.5 12.1 18.4 -1.9 4.4 152.0 2.8 58.8 27.5 26.6 50.0 13.0 29.2% -11% - -209% 31.4% 14% 6.9% 547% -17.9% -4070% 10.2% 8% -6.3% 97% 42.2% 32.8% 102% 60.6% 32% 25% -41% -20% 0% -9% 13% -10% 186% 8%
9% -18% 81% 9% 10% 87% 86% 16%
0.0 0.0 0.0 15.0 0.0 10.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 35.0 0.0 10.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 59.0 0.0 10.0 0.0 0.0 0.0 0.0
0.0% 0.0% 0.0% 4.8% 0.0% 1.4% 0.0% 0.0% 0.0% 0.0%
0 0 0 0 0 0 0 0 0 0
10.7 8.6 4.8 10.1 8.6 10.1 16.7 6.1
8.6 10.8 4.8 3.7 10.8 7.4 11.3 5.8 5.7
1.1 -0.5 0.1 1.1 0.8 0.1 0.2 0.4
1.00 0.81 0.45 0.95 0.70 0.95 1.57 0.58
0.88 1.11 0.49 0.30 1.10 0.69 1.15 0.60 0.58
5.9 -42.0 4.8 3.6 -41.9 9.3 5.4 7.6 16.3 4.0
3.8 -67.8 3.8 3.1 -41.9 8.2 3.1 6.8 14.7 3.8
1.4 2.8 1.9 1.3 1.9 3.4 3.2 3.5 10.1 2.1
14.5% -3.2% 24.9% 30.1% -5.9% 39.1% 11.1% 43.5% 56.9% 41.7%
1.0 n.a. 0.9 0.4 n.a. 0.7 0.0 0.6 0.2 0.9
-29.3% -83.9% -36.5% -15.2% -31.7% -27.9% 1.4% -29.0% 12.9% -43.2%
Chris Brown Chris Brown Chris Brown Sam Berridge Chris Brown Phillip Chippindale Phillip Chippindale Sam Berridge Sam Berridge James Wilson
Miscellaneous Metals & Mining

DML FND HSK MBN MGX PSH TXN Discovery Finders Resources Heemskirk Mirabela Nicke Mount Gibson Iron Penrice Soda Texon
Exchange rate (A$/US$)
594 105 16 639 1,561 13 160
Jun 11 Dec 10 Sep 10 Dec 10 Jun 11 Jun 11 Dec 10
1.36 0.38 0.10 1.30 1.45 0.14 0.66
1.30 0.67 0.16 2.03 1.85 0.13 1.33

Copper LME (US$/lb)
1.73 0.67 0.16 2.25 1.85 0.13 1.33
-4% 77% 63% 56% 28% -4% 102%
Hold Buy Hold Buy Buy Sell Buy
-4% -3% -58% -43% -32% -62% -3%

Nickel LME (US$/lb) 8.79 9.89 10.87 10.92 10.41 11.00 11.95 12.98 8.50
8% 10% -46% -30% -19% -49% 10%
-2.5 -7.4 -5.4 -51.7 233.8 -26.1 2.1
-26.0 -7.9 -3.4 -29.2 390.1 0.5 9.6
96.8 59.3 5.0 30.8 378.9 1.8 18.9
3.9 1.0 2.6 7.1 0.8 0.3 1.8
-0.6 -2.6 -3.5 -10.5 21.7 -28.6 1.2
-5.9 -2.7 -2.2 -6.0 36.2 0.6 3.7
21.8 20.4 3.2 6.3 35.2 2.0 7.2
-9.4% -48.4% -15.5% -
-90% -3% 59% 77% 67% 213%
-3% 231% 97%
6% 11% 6% -53% 79%
0.0 0.0 0.0 0.0 4.0 0.0 0.0
0.0 0.0 0.0 0.0 4.0 0.0 0.0
0.0 0.0 1.0 0.0 4.0 0.0 0.0
0.0% 0.0% 0.0% 0.0% 2.8% 0.0% 0.0%
0 0 100 0 0 0 0
4.0 24.1 18.0
6.2 1.8 3.3 19.6 4.1 7.3 9.1
0.6 -0.5 0.2
0.38 2.27 1.47
0.64 -31.8 0.17 -17.7 0.31 28.8 1.85 -3,701.5 0.42 1.8 0.74 8.6 0.86 9.1
-31.8 -17.7 5.7 18.9 1.7 4.5 6.9
3.4 1.3 0.5 1.0 1.0 0.2 2.8
-13.6% -8.7% -11.9% -4.8% 28.8% 0.8% 20.3% -
n.a. n.a. 2.5 6.0 1.0 3.9 2.0
-35.2% -9.1% 39.1% 46.6% -37.6% 110.7% -59.0%
Chris Brown Chris Brown Chris Brown Tom Sartor Lyndon Fagan Alexandra Clarke Chris Brown
Gold Oil WTI (US$/oz) (US$/bbl) 1092 1223 1370 1637 1838 1750 1600 1525 1100 77.2 82.6 93.2 94.4 87.8 91.0 94.3 96.0 90.0
Zinc Aluminium LME LME (US$/lb) (US$/lb) 0.91 0.99 1.08 1.15 1.15 1.19 1.25 1.35 1.15 0.94 0.98 1.02 1.05 1.04 1.10 1.18 1.33 1.00
Coal coking steaming (US$/t) (US$/t) 146.0 190.5 247.3 287.5 301.3 305.0 290.0 270.0 180.0 76.3 90.0 108.3 120.0 118.8 116.3 112.5 107.5 100.0
Iron ore lump fines (US$/t) (US$/t) 86.4 138.5 176.0 138.5 177.0 138.5 159.3 138.5 95.4 73.7 118.1 154.1 162.9 161.8 153.2 145.4 137.9 84.8
FY10 CY10 FY11 CY11 FY12 CY12 FY13 CY13 LT (2015+)
0.88 0.92 0.99 1.04 1.06 1.08 1.10 1.08 0.75
3.03 3.42 3.93 4.25 4.33 4.50 4.65 4.86 3.00
Source: Company data, RBS forecasts, RBS Morgans forecasts. * Share prices as at close of trading on 21 October 2011. Target prices, forecasts and recommendations for some companies featured in 'The Bulletin' may have been updated overnight. ** BHP, LGL, PDN & RIO price and market cap reported in AUD. Financial forecasts in USD. * Earnings Quality: Net Operating Cash Flow/(Net Profit + Depreciation & Amortisation)
121
S&P/ASX 200 - Sector Aggregations (RBS)

Prices updated: 20 October 2011
PE (x) Sector 200 CONS DISCRET 200 ENERGY 200 HEALTHCARE 200 INFO TECHNOL 200 MATERIALS 200 INDUSTRIALS 200 PROPERTY 200 CONS STAP 200 TELECOMS 200 UTILITIES 200 FIN EX PROP S&P/ASX 200 2009 14.6 25.2 16.9 16.6 21.4 25.4 8.1 19.2 11.8 16.2 13.5 16.3 2010 13.5 24.9 15.1 14.6 15.2 19.9 10.2 17.6 11.6 15.4 11.4 13.9 2011 12.7 23.0 15.1 14.4 10.2 20.8 11.7 16.0 12.7 14.3 10.6 12.1 2012 11.3 18.0 14.9 13.6 8.3 13.9 10.8 14.2 12.2 14.6 9.8 10.6 2013 10.2 16.9 13.5 12.1 7.6 11.9 10.2 12.7 11.5 14.1 9.2 9.7 2009 -24.2 -21.1 35.9 4.5 -36.9 -60.6 -22.2 -0.4 0.5 18.8 -17.5 -22.6 EPS growth (%)* 2010 7.3 3.1 11.9 13.0 43.5 37.2 -19.7 9.2 2.2 3.9 17.8 17.9 2011 5.6 9.1 -5.0 1.9 54.7 -4.3 -12.7 9.6 -9.1 8.0 7.6 16.0 PCF (x) 2012 3.6 2.9 3.4 4.4 2.8 4.7 6.6 5.6 6.8 6.8 7.3 5.1 2013 3.9 3.2 3.7 5.0 3.1 5.4 6.9 6.1 7.0 7.1 7.7 5.5 2009 11.8 14.5 14.0 13.8 7.9 9.4 9.8 11.9 6.6 10.2 na 9.2 2010 9.2 14.7 11.2 11.6 6.7 7.2 11.1 10.6 6.2 9.4 na 7.9 2011 9.0 16.3 11.5 13.8 4.4 8.0 12.8 10.7 6.5 8.5 na 6.6 ROE (%) 2012 1.4 1.7 2.4 3.8 1.8 1.5 1.0 2.0 2.4 1.3 1.4 1.7 2013 1.3 1.6 2.2 3.4 1.5 1.4 0.9 1.9 2.3 1.3 1.4 1.5 2009 10.1 10.3 17.9 36.4 17.7 7.2 8.0 12.7 22.4 9.9 12.6 13.6 2010 11.5 8.1 16.8 35.3 21.7 9.1 8.6 12.4 21.9 9.4 14.5 15.4 2011 11.5 8.1 16.4 31.1 26.3 7.4 8.9 13.2 19.1 9.7 14.9 16.7 ROA (%) 2013 15.1 22.9 12.4 20.6 3.7 33.4 34.2 22.1 28.7 51.2 na 17.5 2009 6.2 5.1 10.5 29.8 9.5 3.9 5.0 7.9 11.3 6.8 3.6 7.6 2010 6.9 4.7 10.6 32.1 12.8 4.9 5.5 7.8 11.3 5.7 3.9 8.9 2011 7.0 4.8 10.7 32.8 15.9 4.2 5.1 8.0 10.3 5.9 4.6 9.9 2012 7.4 5.6 10.6 33.3 16.1 5.5 5.6 8.4 10.5 5.7 4.4 10.5 2013 7.7 5.2 10.9 32.8 14.9 6.1 5.8 8.9 10.7 5.8 4.7 10.3 2012 12.4 9.7 16.4 29.2 25.6 10.8 9.1 14.3 19.9 9.3 15.1 17.4 2013 12.8 9.8 17.0 29.3 22.6 12.1 8.9 15.4 20.1 9.5 15.3 17.0 2012 8.2 11.5 12.5 11.8 4.0 7.0 12.2 9.2 6.3 8.4 na 6.1 2013 7.7 10.8 11.2 10.8 3.8 5.9 11.2 9.1 6.2 8.2 na 5.7 2012 11.2 27.4 1.1 6.1 22.8 48.1 8.5 12.3 4.7 -1.0 8.1 14.8 2013 9.9 6.2 10.7 12.2 9.6 17.4 6.0 11.8 5.4 3.8 6.7 8.6
Dividend yield (%) Sector 200 CONS DISCRET 200 ENERGY 200 HEALTHCARE 200 INFO TECHNOL 200 MATERIALS 200 INDUSTRIALS 200 PROPERTY 200 CONS STAP 200 TELECOMS 200 UTILITIES 200 FIN EX PROP S&P/ASX 200 2009 2.7 3.0 2.7 3.2 1.7 3.9 12.7 3.8 6.2 7.5 5.4 4.0 2010 3.3 2.5 3.2 3.9 2.2 3.7 7.9 4.5 6.5 7.0 6.2 4.4 2011 3.3 2.5 3.1 4.1 2.4 3.6 6.3 5.0 6.7 6.8 6.8 4.6 PB (x) Sector 200 CONS DISCRET 200 ENERGY 200 HEALTHCARE 200 INFO TECHNOL 200 MATERIALS 200 INDUSTRIALS 200 PROPERTY 200 CONS STAP 200 TELECOMS 200 UTILITIES 200 FIN EX PROP S&P/ASX 200 2009 1.6 2.0 2.6 5.6 3.1 1.8 0.7 2.2 2.7 1.4 1.7 2.1 2010 1.5 2.0 2.5 4.8 2.8 1.5 1.1 2.1 2.4 1.4 1.6 2.0 2011 1.4 1.8 2.5 4.2 2.2 1.5 1.0 2.1 2.4 1.3 1.5 1.8
Gearing - net debt/(net debt+equity) (%) Sector 200 CONS DISCRET 200 ENERGY 200 HEALTHCARE 200 INFO TECHNOL 200 MATERIALS 200 INDUSTRIALS 200 PROPERTY 200 CONS STAP 200 TELECOMS 200 UTILITIES 200 FIN EX PROP S&P/ASX 200 2009 27.1 7.6 12.6 37.1 21.3 41.0 40.0 23.4 41.7 53.0 na 28.6 2010 20.9 10.4 18.1 29.1 9.0 31.2 37.5 22.7 37.0 51.4 na 21.9 2011 19.8 14.5 18.1 25.2 10.3 31.9 38.2 22.2 35.4 49.6 na 21.6 EV/EBIT (x) Sector 200 CONS DISCRET 200 ENERGY 200 HEALTHCARE 200 INFO TECHNOL 200 MATERIALS 200 INDUSTRIALS 200 PROPERTY 200 CONS STAP 200 TELECOMS 200 UTILITIES 200 FIN EX PROP S&P/ASX 200 2009 10.5 19.5 13.0 15.6 14.1 16.5 13.2 12.3 9.9 13.3 12.6 13.2 2010 9.5 19.8 12.7 12.7 9.6 14.1 12.8 11.8 9.4 12.6 9.1 10.8 2011 9.0 16.0 12.8 11.0 7.0 15.1 17.1 10.9 9.9 12.5 7.8 9.1 2012 8.0 12.4 12.5 9.2 5.5 11.0 14.6 10.0 9.4 11.6 8.0 7.5 2013 7.8 12.2 11.2 8.0 4.8 9.5 13.5 9.0 8.8 11.2 7.3 6.7 2009 8.4 13.2 10.9 14.6 10.8 9.0 13.2 9.8 6.3 10.4 11.7 9.7 2012 21.0 19.0 17.1 28.3 12.1 33.8 35.8 22.3 32.1 50.7 na 21.9
EV/EBITDA (x) 2010 7.2 13.5 10.6 12.1 7.7 7.9 12.8 9.3 6.0 9.9 8.6 8.1 2011 6.7 11.7 10.6 10.5 5.9 8.1 17.1 8.7 6.1 9.7 7.4 7.0 2012 6.5 9.3 10.2 8.8 4.8 6.6 14.6 8.0 5.9 9.0 7.3 6.0 2013 6.3 9.1 9.2 7.7 4.1 5.9 13.5 7.2 5.6 8.8 6.7 5.4
Source: Company data, RBS forecasts * When comparing to consensus (IBES), RBS forecasts include BHP and RIO, but only a limited number of property stocks
123
S&P/ASX 200 - Sector Aggregations (IBES)

PE (x) Sector 200 CONS DISCRET 200 ENERGY 200 HEALTHCARE 200 INFO TECHNOL 200 MATERIALS 200 INDUSTRIALS 200 PROPERTY 200 CONS STAP 200 TELECOMS 200 UTILITIES 200 FIN EX PROP S&P/ASX 200 2009 10.2 21.6 6.5 15.1 21.1 165.6 6.8 19.0 10.0 17.2 13.9 15.2 2010 9.8 22.9 17.8 13.7 16.4 22.8 9.9 17.1 10.3 16.9 11.9 14.0 2011 9.8 20.3 17.9 14.1 10.4 21.6 11.5 15.7 12.2 17.0 10.5 11.9 EV/EBIT (x) Sector 200 CONS DISCRET 200 ENERGY 200 HEALTHCARE 200 INFO TECHNOL 200 MATERIALS 200 INDUSTRIALS 200 PROPERTY 200 CONS STAP 200 TELECOMS 200 UTILITIES 200 FIN EX PROP S&P/ASX 200 2009 8.6 19.0 13.2 11.7 11.9 37.3 13.3 11.6 17.7 13.5 0.0 13.1 2010 8.3 16.7 12.9 11.1 7.7 19.6 13.3 11.2 17.1 13.6 0.0 9.8 2011 10.7 15.1 13.1 11.6 5.5 16.9 12.0 10.8 17.9 12.7 0.0 7.8 2012 7.9 11.3 14.4 7.4 4.8 15.2 12.2 9.6 16.9 10.6 0.0 6.5 2013 8.5 10.2 12.1 6.5 4.3 12.4 12.0 8.9 16.4 10.0 0.0 6.0 2009 6.9 12.5 11.5 10.6 9.2 10.6 13.3 9.3 10.5 10.7 0.0 9.8 2012 9.9 17.0 16.9 13.8 8.7 16.6 11.5 14.1 11.1 15.8 10.1 10.7 2013 10.5 14.7 14.8 12.0 8.0 13.4 11.0 13.0 10.7 14.7 9.5 9.9 2009 -18.3 -17.6 103.9 0.2 -33.0 -96.3 -35.1 -3.3 11.5 12.3 -9.8 -18.0 EPS growth (%) 2010 3.7 -3.7 -64.6 10.8 31.1 497.6 -17.0 11.1 -3.2 1.9 17.0 8.7 2011 0.4 12.6 -0.7 -2.8 56.7 5.6 -13.6 8.5 -15.9 -0.5 13.2 18.0 2012 -1.0 19.5 6.1 1.8 20.0 30.2 -0.3 11.8 10.4 7.4 4.2 10.8 2013 -5.3 15.4 13.8 14.7 9.3 23.7 4.9 8.0 3.2 7.6 6.5 8.0
EV/EBITDA (x) 2010 6.7 11.4 11.3 9.7 6.3 8.7 13.3 8.9 10.2 11.0 0.0 7.7 2011 8.2 10.6 11.5 9.8 4.7 8.5 11.8 8.6 10.1 11.8 0.0 6.3 2012 6.5 8.1 12.4 7.2 4.1 7.6 12.1 7.6 9.8 8.7 0.0 5.3 2013 6.8 7.3 10.6 6.3 3.6 6.8 11.9 7.1 9.7 8.2 0.0 4.8
Dividend yield (%) Sector 200 CONS DISCRET 200 ENERGY 200 HEALTHCARE 200 INFO TECHNOL 200 MATERIALS 200 INDUSTRIALS 200 PROPERTY 200 CONS STAP 200 TELECOMS 200 UTILITIES 200 FIN EX PROP S&P/ASX 200 2009 4.7 3.0 1.9 2.9 1.9 4.8 13.0 3.9 8.6 4.7 5.2 4.2 2010 8.0 2.7 2.1 3.7 2.1 4.9 4.0 4.3 8.6 5.0 6.1 4.4 2011 7.3 2.2 2.2 3.7 2.6 4.4 6.4 2.9 8.7 5.2 6.7 4.7 ROA (%) Sector 200 CONS DISCRET 200 ENERGY 200 HEALTHCARE 200 INFO TECHNOL 200 MATERIALS 200 INDUSTRIALS 200 PROPERTY 200 CONS STAP 200 TELECOMS 200 UTILITIES 200 FIN EX PROP S&P/ASX 200
Source: IBES
Gross dividend yield (%) 2012 5.7 2.5 2.5 3.9 1.4 4.1 5.5 5.3 0.1 5.4 7.1 4.2 2013 5.8 2.2 3.0 5.4 3.3 4.4 6.7 5.1 0.0 5.4 7.5 4.9 2009 6.5 4.0 2.1 3.6 2.5 5.5 13.0 5.2 12.3 5.8 7.3 5.6 2010 8.4 3.7 2.3 4.5 2.8 5.3 4.0 6.1 12.3 6.3 8.6 5.9 2011 8.0 3.0 2.4 4.5 3.5 4.6 6.4 4.1 12.4 6.4 9.5 6.3 ROE (%) 2012 11.5 8.8 17.9 17.8 22.8 5.6 2.1 12.6 15.2 4.9 1.5 10.8 2013 10.8 9.5 18.9 18.9 20.7 6.4 2.1 13.3 15.4 5.1 1.5 10.3 2009 26.6 11.2 23.8 34.8 23.4 3.3 8.1 18.6 32.6 8.3 14.2 18.1 2010 24.2 10.0 19.1 32.8 24.6 4.5 4.5 18.2 30.5 7.4 16.6 18.3 2011 17.0 9.2 24.3 25.4 34.1 6.5 4.8 18.0 26.4 6.9 16.6 20.6 2012 19.1 10.6 19.9 23.8 30.8 6.7 2.7 19.4 28.5 5.4 16.5 19.8 2013 16.7 11.1 20.7 24.1 25.6 8.0 2.7 20.1 29.3 5.5 16.5 18.6 2012 7.9 3.4 2.7 4.7 1.8 4.3 5.5 7.6 0.2 6.7 10.0 5.7 2013 8.3 3.1 3.7 7.2 4.0 6.8 6.7 7.2 0.0 6.9 10.7 6.6
2009 13.3 9.6 20.4 19.1 16.7 3.9 5.1 12.6 16.5 6.7 1.6 9.6
2010 13.8 5.6 19.8 18.1 17.5 3.5 2.1 11.7 16.3 6.8 1.8 9.1
2011 8.0 6.7 16.8 11.8 18.6 3.6 3.0 8.3 8.5 4.3 1.3 8.4
124
Sector Aggregations (RBS)

PE (x) Sector Energy Energy Aluminium & Steel Chemicals Div Metals & Mining Forestry products Gold, Precious Metals Packaging & Paper Materials Construction Other Capital Goods Services & Supplies Transportation Industrials Consumer Producers Consumer Services Media Consumer Discretionary Food Bev & Tobacco Retail Consumer Staples Healthcare Healthcare Banks Diversified Financials Insurance Financials ex Property Mgmnt & Development Property Property & Development IT Information Technology Telecommunications Telecommunications Utilities Utilities INDUSTRIAL ex Banks INDUSTRIAL SECTOR RESOURCE SECTOR S&P/ASX 100 SMALL ORDINARIES SMALL INDUSTRIALS SMALL RESOURCES MARKET AVERAGE
PE rel 2012 18.3 18.3 8.1 10.8 7.5 0.0 13.4 13.1 8.3 11.4 10.4 12.4 18.7 13.7 9.2 11.2 11.8 11.3 13.4 13.6 14.3 15.8 15.8 9.8 10.4 10.0 9.8 10.0 6.7 10.8 13.4 13.4 12.2 12.2 15.3 15.3 12.1 11.2 9.4 10.4 12.5 11.8 19.5 10.6 2013 17.1 17.1 7.7 10.2 6.8 0.0 12.0 11.6 7.6 9.6 9.1 10.5 15.5 11.6 8.4 12.0 10.1 10.3 12.5 12.0 12.7 13.6 13.6 9.3 9.4 8.8 9.2 9.3 6.1 10.2 12.1 12.1 11.5 11.5 14.4 14.4 10.9 10.3 8.6 9.6 11.2 10.7 16.0 9.8 2011 1.92 1.92 0.90 1.04 0.72 0.00 2.24 1.23 0.83 1.54 1.61 1.17 2.20 1.64 0.75 0.92 1.18 1.04 1.15 1.24 1.31 1.34 1.34 0.85 0.90 1.03 0.87 0.87 0.57 0.96 1.20 1.20 1.06 1.06 1.25 1.25 1.14 1.03 0.94 0.97 1.21 1.06 7.16 1.00 2012 1.72 1.72 0.76 1.02 0.70 0.00 1.26 1.23 0.78 1.07 0.98 1.16 1.75 1.28 0.86 1.05 1.11 1.06 1.26 1.28 1.34 1.49 1.49 0.92 0.98 0.94 0.92 0.94 0.63 1.01 1.26 1.26 1.15 1.15 1.44 1.44 1.13 1.06 0.88 0.98 1.18 1.11 1.83 1.00 2009 -14.9 -14.9 -75.6 -29.6 -35.0 0.0 -19.3 0.4 -37.0 -22.6 -21.2 -14.1 -100.0 -57.7 -20.0 -16.4 -31.0 -23.4 -20.0 -1.0 -4.3 41.2 41.2 -14.7 -36.5 -4.2 -17.5 -26.7 -42.0 -22.2 4.3 4.3 2.9 2.9 -7.1 -7.1 -21.4 -19.5 -30.8 -23.1 -20.8 -20.5 -32.1 -22.1 2010 5.3 5.3 100.0 1.8 47.2 0.0 100.0 -18.2 44.5 19.2 16.8 -8.8 -100.0 28.2 -0.5 -3.9 14.7 6.8 39.6 8.2 12.3 10.1 10.1 23.9 2.5 -4.6 17.8 -19.1 -37.9 -19.7 15.4 15.4 2.8 2.8 -31.8 -31.8 5.7 11.7 40.0 19.3 2.8 0.2 100.0 17.1
EPS growth (%) 2011 7.7 7.7 91.5 5.7 65.4 0.0 -8.0 32.1 57.1 -30.8 -41.2 7.7 54.0 -4.4 -7.8 0.1 13.8 6.1 10.0 7.3 9.7 -6.9 -6.9 9.6 -3.2 -2.4 7.6 -5.6 -31.6 -12.7 -0.1 -0.1 -10.3 -10.3 40.5 40.5 3.1 5.5 52.6 17.3 12.7 10.8 80.5 16.3 2012 28.1 28.1 37.1 17.2 18.0 5.1 100.0 15.4 22.7 64.0 88.8 14.4 43.9 45.4 0.0 0.2 20.4 11.2 4.4 11.2 12.4 4.4 4.4 6.3 5.7 26.8 8.2 5.9 3.1 8.5 8.8 8.8 6.3 6.3 0.8 0.8 15.6 12.0 23.3 14.5 18.4 9.9 100.0 15.1 2013 6.7 6.7 4.7 6.6 9.1 5.9 11.9 12.4 9.4 18.9 14.5 18.5 19.9 17.3 9.8 -6.8 16.2 10.1 6.3 13.0 12.0 16.7 16.7 5.2 9.7 12.9 6.7 8.0 10.3 6.0 10.4 10.4 6.6 6.6 6.7 6.7 11.0 8.9 9.2 8.4 11.6 10.5 21.4 8.8 2009 3.7 3.7 1.2 3.0 1.6 0.0 0.4 4.8 1.7 3.2 3.6 3.7 4.3 3.9 8.7 5.6 1.2 2.7 4.0 3.9 3.8 2.7 2.7 5.2 5.3 6.3 5.4 11.3 13.6 12.7 3.3 3.3 6.1 6.1 8.0 8.0 4.5 4.7 2.0 4.0 3.8 4.2 0.9 4.0
Dividend yield (%) 2010 2.5 2.5 1.7 3.0 2.1 0.0 0.7 4.2 2.1 4.5 5.6 3.6 2.7 3.7 8.4 5.8 1.7 3.3 4.7 4.6 4.4 3.2 3.2 6.2 6.0 6.4 6.2 7.3 4.5 7.9 4.1 4.1 6.4 6.4 7.1 7.1 4.7 5.1 2.1 4.4 3.9 4.5 0.4 4.3 2011 2.6 2.6 2.6 3.3 2.4 0.0 0.5 5.0 2.4 3.8 4.2 3.6 3.3 3.6 7.9 5.7 1.8 3.4 4.9 5.2 4.9 3.0 3.0 6.8 6.3 6.9 6.8 6.1 9.1 6.3 4.3 4.3 6.6 6.6 6.8 6.8 4.8 5.5 2.2 4.6 4.3 5.0 0.3 4.6 2012 2.8 2.8 2.7 3.8 2.8 0.0 1.3 5.1 2.8 5.0 5.6 4.7 4.2 4.7 8.2 5.9 2.2 3.7 5.1 5.7 5.5 3.3 3.3 7.2 6.7 8.0 7.3 6.5 9.7 6.6 4.7 4.7 6.7 6.7 6.8 6.8 5.3 5.9 2.6 5.1 4.6 5.4 0.5 5.0 2013 3.1 3.1 3.6 4.3 3.0 0.0 1.5 5.7 3.1 5.6 6.3 5.4 4.9 5.4 8.8 5.5 2.6 4.0 5.4 6.3 6.0 3.7 3.7 7.6 7.0 8.6 7.7 7.0 10.7 6.9 5.3 5.3 6.9 6.9 7.0 7.0 5.8 6.4 2.9 5.5 5.1 5.8 0.6 5.4
2009 25.9 25.9 46.9 14.5 20.5 0.0 49.5 16.3 21.7 16.3 14.6 14.0 -379.9 23.0 8.3 11.1 19.0 14.7 21.6 17.7 19.8 17.4 17.4 14.2 11.2 12.0 13.5 8.2 2.9 8.1 16.9 16.9 11.9 11.9 16.0 16.0 15.2 14.9 22.7 16.3 16.4 14.9 128.6 16.3
2010 25.2 25.2 20.8 13.4 14.6 0.0 25.2 20.0 15.5 13.1 11.7 15.5 41.0 19.2 8.4 11.4 16.5 13.6 15.4 16.2 17.6 15.9 15.9 11.5 10.7 12.5 11.4 10.1 4.7 10.2 14.6 14.6 11.6 11.6 21.6 21.6 14.5 13.3 16.8 13.8 16.5 14.4 93.0 14.1
2011 23.5 23.5 11.0 12.7 8.8 0.0 27.4 15.1 10.2 18.8 19.7 14.3 26.9 20.0 9.2 11.3 14.4 12.8 14.1 15.1 16.1 16.4 16.4 10.4 11.0 12.7 10.6 10.6 6.9 11.7 14.6 14.6 13.0 13.0 15.3 15.3 14.0 12.6 11.5 11.9 14.8 13.0 87.6 12.2
125
Sector Aggregations (RBS)

EV/EBIT (x) Sector Energy Energy Aluminium & Steel Chemicals Div Metals & Mining Forestry products Gold, Precious Metals Packaging & Paper Materials Construction Other Capital Goods Services & Supplies Transportation Industrials Consumer Producers Consumer Services Media Consumer Discretionary Food Bev & Tobacco Retail Consumer Staples Healthcare Healthcare Banks Diversified Financials Insurance Financials ex Property Mgmnt & Development Property Property & Development IT Information Technology Telecommunications Telecommunications Utilities Utilities INDUSTRIAL ex Banks INDUSTRIAL SECTOR RESOURCE SECTOR S&P/ASX 100 SMALL ORDINARIES SMALL INDUSTRIALS SMALL RESOURCES MARKET AVERAGE
EV/EBITDA (x) 2012 12.5 12.5 6.4 8.3 5.0 10.1 9.6 10.4 5.5 8.7 7.1 9.4 14.8 10.8 7.6 8.8 8.4 8.1 9.4 9.6 10.0 12.9 12.9 na 5.9 15.6 7.8 12.6 6.2 14.6 9.1 9.1 9.4 9.4 11.8 11.8 9.8 na 5.9 7.3 9.5 9.2 12.3 7.5 2013 12.2 12.2 5.9 7.4 4.3 8.7 8.1 9.4 4.8 7.3 6.2 8.1 12.5 9.3 7.0 9.4 7.4 7.7 8.8 8.5 9.0 11.2 11.2 na 5.8 12.4 7.2 11.5 5.6 13.5 8.2 8.2 8.9 8.9 11.3 11.3 8.9 na 5.2 6.5 8.4 8.1 10.9 6.8 2010 13.7 13.7 9.6 7.9 7.1 0.0 18.4 9.9 7.7 6.6 5.5 8.4 9.8 7.9 6.1 7.6 7.6 7.3 9.2 8.7 9.4 10.9 10.9 na 8.1 16.8 8.6 11.8 4.9 12.8 10.0 10.0 6.0 6.0 9.8 9.8 8.1 na 8.3 8.0 8.6 7.8 34.9 8.1 2011 12.0 12.0 6.5 7.6 5.3 0.0 14.2 8.0 5.9 7.9 6.7 7.6 9.3 8.1 6.8 6.9 7.0 6.8 8.0 8.3 8.7 11.1 11.1 na 5.4 14.7 7.3 13.8 6.5 17.1 9.2 9.2 6.2 6.2 9.5 9.5 7.8 na 6.3 6.9 8.1 7.4 25.3 7.0 2012 9.4 9.4 5.5 6.8 4.4 0.0 7.8 7.3 4.8 5.6 4.6 6.5 8.1 6.6 6.2 6.9 6.5 6.5 7.3 7.7 8.0 10.5 10.5 na 5.3 13.8 7.1 12.2 6.1 14.6 7.6 7.6 5.9 5.9 8.9 8.9 7.1 na 5.1 5.9 6.9 6.7 9.1 6.0 2013 9.1 9.1 5.0 6.2 3.7 0.0 6.6 6.8 4.1 5.0 4.1 5.7 7.2 5.9 5.8 7.4 5.8 6.3 6.9 6.9 7.2 9.2 9.2 na 5.2 11.2 6.6 11.2 5.5 13.5 7.0 7.0 5.6 5.6 8.6 8.6 6.6 na 4.4 5.3 6.2 6.0 8.1 5.4 2011 1.8 1.8 1.3 1.7 2.5 0.0 2.0 2.3 2.2 1.8 1.7 2.0 1.2 1.5 1.2 1.7 1.4 1.4 1.8 1.9 2.0 2.4 2.4 1.6 1.1 1.2 1.5 1.0 0.4 1.0 3.3 3.3 2.4 2.4 1.3 1.3 1.6 1.6 2.3 1.8 1.8 1.7 2.1 1.8
P/BV (x) 2012 1.7 1.7 1.1 1.7 1.9 0.0 1.8 2.2 1.8 1.6 1.6 1.9 1.2 1.4 1.2 1.6 1.3 1.4 1.7 1.8 1.9 2.4 2.4 1.5 1.1 1.2 1.4 0.9 0.4 1.0 3.0 3.0 2.3 2.3 1.3 1.3 1.5 1.5 1.9 1.6 1.7 1.7 1.9 1.6 2013 1.6 1.6 1.0 1.6 1.5 0.0 1.5 2.1 1.5 1.5 1.4 1.8 1.2 1.4 1.1 1.5 1.2 1.3 1.6 1.8 1.9 2.2 2.2 1.4 1.0 1.2 1.4 0.9 0.4 0.9 2.8 2.8 2.2 2.2 1.3 1.3 1.4 1.4 1.6 1.5 1.6 1.5 1.9 1.5 2011 8.0 8.0 12.3 13.8 31.8 0.0 10.3 14.7 26.2 9.5 8.2 15.1 4.6 7.6 13.6 13.7 10.3 11.5 12.7 12.9 12.7 14.7 14.7 16.4 10.1 10.3 14.9 9.7 5.9 8.9 24.2 24.2 18.2 18.2 8.7 8.7 11.7 13.1 24.7 17.0 12.3 13.5 2.8 16.5
ROE (%) 2012 9.6 9.6 15.2 15.9 29.8 2.8 14.0 17.5 25.5 14.6 15.6 16.3 6.4 10.9 13.1 14.7 11.5 12.4 13.3 13.9 13.9 15.3 15.3 16.4 10.3 12.3 15.1 9.7 6.0 9.1 23.5 23.5 19.2 19.2 8.6 8.6 13.0 14.0 24.1 17.7 13.8 14.4 10.0 17.3 2013 9.8 9.8 13.9 16.2 25.3 3.3 13.7 18.6 22.5 16.0 16.5 17.9 7.5 12.2 13.9 13.1 12.4 12.9 13.3 15.1 14.9 16.6 16.6 16.2 10.9 13.5 15.3 9.7 6.5 8.9 23.8 23.8 19.6 19.6 9.0 9.0 13.6 14.4 21.5 17.2 14.6 15.0 11.8 16.9 2011 4.8 4.8 9.5 9.6 18.7 0.0 8.4 6.8 15.9 5.1 4.7 8.3 3.1 4.3 8.3 8.7 6.3 7.1 7.8 7.9 7.7 9.5 9.5 0.0 7.1 7.6 4.6 4.9 4.6 5.1 13.3 13.3 9.9 9.9 5.2 5.2 6.9 6.9 14.8 10.3 7.3 7.7 1.7 9.8
ROA (%) 2012 5.6 5.6 11.1 10.6 18.3 0.0 11.3 7.7 16.0 7.4 8.0 8.6 3.7 5.6 7.7 8.9 6.9 7.4 8.1 8.2 8.1 9.7 9.7 0.0 6.4 7.7 4.4 5.2 4.7 5.6 13.9 13.9 10.3 10.3 5.2 5.2 7.5 7.5 14.8 10.8 8.1 8.2 7.4 10.4 2013 5.2 5.2 10.2 11.2 16.6 0.0 11.1 8.3 14.8 8.3 8.8 9.5 4.2 6.2 8.2 8.5 7.4 7.8 8.3 8.9 8.7 10.6 10.6 0.0 6.0 7.9 4.7 5.5 5.0 5.8 14.1 14.1 10.6 10.6 5.4 5.4 7.9 7.9 13.5 10.6 8.5 8.6 7.5 10.2
2010 20.2 20.2 13.8 9.8 8.7 0.0 24.0 16.1 9.6 10.5 8.7 12.6 20.6 13.8 7.2 9.6 10.8 9.6 11.6 10.9 11.9 13.1 13.1 na 9.2 18.7 9.2 11.9 5.0 12.8 11.8 11.8 9.5 9.5 12.9 12.9 11.4 na 10.3 10.6 12.3 11.0 74.6 10.8
2011 16.4 16.4 8.1 9.3 6.2 0.0 20.0 12.3 7.0 14.6 12.9 11.3 18.3 14.6 8.3 8.8 9.9 9.1 10.2 10.4 11.0 13.5 13.5 na 5.9 16.1 7.8 14.1 6.6 17.1 11.1 11.1 10.0 10.0 12.7 12.7 11.1 na 7.5 8.8 11.5 10.4 57.6 9.1
126
Absolute performance to 21 Oct 11

Stock/sector Price last 21/10/11 11,042.4 $2.85 $1.36 $7.15 $2.72 $3.05 $35.70 $0.83 $3.45 $4.25 $0.55 $0.27 $15.13 $3.28 $4.81 $5.70 $0.40 $7.32 $1.10 $16.22 $0.87 $0.76 $1.45 $0.26 $33.30 $4.45 $0.60 $1.24 $24.10 $0.09 $0.18 $62.57 $13.38 $2.05 $0.44 $5.28 4Q 2011 +1.9 +8.0 -8.4 +3.2 -8.4 +7.0 +1.9 +13.7 -1.4 -3.8 +14.6 +80.0 +20.9 +0.3 +11.3 -0.9 -1.3 +1.9 +0.5 +1.9 -0.6 +8.6 +8.2 -23.9 -2.3 +4.0 +0.8 -0.4 +2.6 +17.8 +9.4 +1.2 +7.9 0.0 +1.2 +22.2 % return over ... 3Q 2Q 2011 2011 -19.3 -14.6 -29.9 -3.8 -36.8 -23.6 -20.0 -39.4 -20.5 -30.4 -40.9 -44.4 -25.4 -15.3 -23.3 -1.9 -29.8 -10.3 -44.9 +45.4 +17.4 -23.2 -27.2 -56.2 -9.6 -4.7 -35.3 -33.0 -12.8 -54.4 -59.0 -25.5 -29.7 +4.9 +26.5 -26.8 -5.5 -4.0 -14.2 +2.0 -12.8 0.0 -5.9 -39.0 -12.0 -0.9 -26.4 -56.5 +26.2 -10.9 -14.6 -3.9 -7.3 -7.9 -12.0 -5.6 -2.6 -34.2 -7.5 -23.1 -5.3 -13.2 -34.3 -24.2 +2.2 -54.9 -33.9 -2.1 +0.8 -10.3 -26.9 -12.7 Stock/sector 1Q 2011 +0.9 -1.7 -0.8 +4.6 +0.7 +26.4 +2.9 -12.2 +3.5 -2.0 -18.3 -0.8 +45.5 +9.3 -17.1 -10.0 -24.1 -20.1 +9.2 -9.4 -19.5 -27.1 -6.1 -22.0 -1.5 +0.6 -0.4 -5.8 +5.9 -13.4 -7.1 -0.8 -18.8 +6.9 -19.1 +13.2 CY 2010 +10.2 +20.0 +34.8 +8.3 -27.2 +56.1 +4.9 -27.7 -16.6 +47.3 +31.1 -33.5 +155.3 +11.5 +65.4 -20.2 -22.9 +18.1 +274.5 +13.8 +32.2 +5.9 +28.5 -49.0 +14.5 -50.7 -27.9 -22.7 +0.5 -35.9 -37.8 +14.1 -2.8 +15.3 +271.0 +19.4 Consumer Disc APN News & Media Aristocrat Leisure Austar United Billabong Consolidated Media Crown David Jones Fairfax Media Flight Centre Fleetwood Corp GUD Holdings Harvey Norman InvoCare JB Hi-Fi News Corp Pacific Brands Seven Network STW Communications Tabcorp Holdings Tatts Group Ten Network Holdings Wotifcom Holdings Price last 21/10/11 1220.1 $0.85 $2.16 $1.21 $3.54 $2.50 $7.85 $3.16 $0.88 $17.80 $11.79 $7.52 $2.21 $6.91 $14.25 $16.61 $0.62 $7.74 $0.91 $2.84 $2.35 $0.83 $3.58 4Q 2011 +3.3 +1.2 +2.9 +4.3 +6.6 +4.2 -1.5 +4.6 +6.1 +4.7 +4.1 +5.5 +2.3 +0.1 -6.3 +1.9 -7.5 -2.6 +1.1 +10.1 +5.4 -6.8 -9.8 % return over ... 3Q 2Q 2011 2011 -14.2 -36.1 -13.2 -13.8 -44.8 -8.0 -10.8 -25.6 -15.8 -21.4 0.0 -21.6 -13.3 -10.3 -11.0 -2.0 -3.6 -17.4 -12.2 -21.6 -7.1 -16.5 -15.4 -8.2 -15.4 -25.5 +2.3 -20.4 -7.4 +9.6 -14.5 -24.0 -3.0 -6.4 -5.0 -17.0 +8.6 -15.2 -6.8 -17.8 +7.1 -15.3 -24.6 +2.6 -18.8 -14.1 1Q 2011 -0.1 -19.6 +8.7 +37.7 -7.4 -9.6 -1.2 +6.5 -7.9 -10.1 -6.8 -4.0 +2.0 -2.7 +12.5 +11.3 -13.8 +2.2 +14.2 +5.3 -9.3 -7.8 +9.6 CY 2010 -8.3 -16.6 -25.6 -32.7 -25.6 +2.0 +2.6 -17.4 -19.5 +34.5 +62.6 +10.9 -30.3 +18.2 -20.8 -10.4 -13.3 +27.4 +41.3 +2.3 +10.8 -10.4 -28.3
Materials Adelaide Brighton Alumina Ltd Amcor Aquarius Platinum Atlas Iron Limited BHP Billiton BlueScope Steel Boral Fortescue Metals Gindalbie Metals Ltd Gunns Iluka Resources Incitec Pivot Independence Group James Hardie Indust Kagara Ltd Kingsgate Consolid. Lynas Corporation Macarthur Coal Minara Resources Mincor Resources Mount Gibson Iron Murchison Metals Newcrest Mining Nufarm OM Holdings Limited OneSteel Orica PaperlinX Platinum Australia Rio Tinto Sims Group St Barbara Limited Sundance Resources Western Areas NL
Cons Staples Coca-Cola Amatil Foster's Group Goodman Fielder Metcash Wesfarmers Woolworths
7,455.6 $12.01 $5.30 $0.53 $4.15 $31.00 $24.06
-1.4 +0.7 +0.4 +10.4 +1.0 -1.9 -3.2
-4.2 +4.5 +2.5 -51.3 -1.0 -0.8 -10.4
+2.1 -2.7 +23.4 -13.8 -0.2 +0.2 +3.2
+0.2 +8.1 +0.7 -8.6 +1.2 -0.7 -0.3
-1.2 -5.8 +3.3 -17.5 -8.1 +2.3 -3.7
Health Care Ansell Cochlear CSL Ltd Ramsay Health Care ResMed Inc Sigma Pharma Sonic Hlthcare
7,861.3 $13.60 $57.98 $30.00 $18.85 $2.95 $0.69 $10.85
+3.4 +4.1 +25.0 +1.1 -0.8 +0.3 +6.2 -4.8
-11.1 -7.8 -35.6 -10.2 +4.5 +2.4 +22.6 -11.4
-3.8 +4.7 -13.2 -7.5 -4.8 -1.4 +56.6 +7.4
-0.5 +6.6 +3.2 -1.5 +7.2 -16.6 +22.5 +3.3
+2.1 +16.0 +16.4 +11.7 +63.5 +17.7 -59.6 -24.5
Inform Tech Computershare DWS Advanced GBST Iress Oakton SMS Mgmt & Tech Technology One
476.9 $7.29 $1.32 $0.94 $7.18 $1.75 $5.41 $1.11
-0.9 -2.4 +9.1 -3.1 +2.6 -0.6 0.0 +3.3
-14.0 -15.8 -8.3 +21.3 -22.3 -15.8 -14.1 +4.9
-4.8 -4.2 -8.7 -20.0 -3.6 -9.1 -2.6 +6.3
-8.8 -14.1 +2.4 +7.5 +7.5 -3.4 -2.9 0.0
-4.2 -5.9 -7.8 -3.6 +1.6 -24.7 +18.7 +18.2
Source: RBS, IRESS
127
Absolute performance to 21 Oct 11

Stock/sector Price last 21/10/11 3,271.5 $1.35 $1.38 $1.48 $2.50 $1.87 $2.98 $0.26 $7.45 $6.64 $4.40 $0.55 $2.46 $2.90 $1.00 $2.24 $0.11 $1.11 $20.56 $0.61 $3.30 $18.85 $0.60 $1.49 $5.83 $2.00 $4.61 $2.14 $0.66 $5.42 $12.13 $0.36 $31.00 4Q 2011 +4.0 0.0 +1.5 +2.1 +12.1 +2.8 +13.7 +15.6 +12.9 +2.6 +0.9 0.0 +5.6 +1.0 +2.0 +12.0 +11.7 +9.4 +10.1 +1.7 +2.2 +8.3 -9.1 +5.3 +9.6 +11.1 +4.5 +12.9 +6.5 0.0 +6.0 +10.9 -1.9 % return over ... 3Q 2Q 2011 2011 -11.0 0.0 -49.1 -11.6 -21.8 -5.5 -34.3 -25.0 -17.1 -10.4 -15.3 +18.5 -19.7 -22.4 -13.3 -27.3 -32.9 -15.5 -10.4 +7.1 -3.3 -5.4 +6.5 -23.4 -17.4 -23.0 -9.1 -43.4 -23.9 +3.6 -17.6 +14.3 -0.8 -6.1 -25.4 -14.7 -5.7 -14.9 +0.3 -14.7 -22.1 +1.4 +2.0 -6.7 +1.1 -11.6 -2.4 -7.0 -16.9 -84.9 -21.9 -27.7 -0.9 +9.9 -14.0 -15.6 -15.6 -4.7 +20.1 -18.2 0.0 -27.2 -2.6 -11.5 -11.1 +0.2 Stock/sector 1Q 2011 +0.8 -25.2 +19.4 +9.1 +8.8 +1.9 +2.6 0.0 -12.9 -0.6 -5.5 +7.1 -34.9 -14.5 +17.4 +7.8 -3.1 -18.0 -4.2 +7.6 +1.7 +16.9 -21.0 -14.2 +2.0 -7.6 +3.5 -0.3 -17.6 +4.9 +8.7 -26.7 -0.7 CY 2010 -6.7 -41.7 -43.6 -12.4 -32.5 +5.6 +28.5 -7.2 +32.1 +5.0 -2.8 -2.3 -6.9 -50.9 +36.7 -3.8 -49.6 -8.6 -19.2 -14.6 +2.8 +27.8 +20.0 -15.1 -3.9 -28.8 -34.4 -18.8 +0.4 -7.1 +1.0 -27.1 +2.3 Finan ex Prop Aust Educ Trust AMP Ltd ANZ Banking Aust Secur Exch Bank of Qld Bendigo Bank Comm Bank Challenger Fin Cromwell Corp Equity Trustees FKP Property IAG IOOF Holdings Lend Lease Corp Macquarie Bank NAB Oaks Hotels Perpetual QBE Insurance Suncorp Sunland Group Treasury Group Trinity Group Trust Company Westfield Group Westpac WH Soul Patt WHK Group Energy Aust Wwide Expl Caltex Aquila Res Beach Carnarvon Eastnstar Extract Karoon Linc Enrgy Molopo Nexus Energy Resource Gloucester Coal Horizon Oil New Hope Corp Oil Search Origin Energy Paladin Roc Oil Santos Woodside WorleyParsons Price last 21/10/11 4,615.3 $0.87 $4.05 $21.21 $30.16 $8.18 $9.22 $47.55 $4.45 $0.67 $12.46 $0.52 $3.08 $6.03 $7.51 $22.53 $24.32 $21.93 $13.77 $8.25 $0.89 $3.41 $0.22 $5.60 $7.55 $21.50 $13.69 $0.84 13,193.4 $1.15 $13.21 $5.18 $1.11 $0.13 $0.83 $7.95 $3.75 $2.00 $0.72 $0.18 $2.04 $6.77 $0.21 $5.93 $5.88 $14.05 $1.55 $0.33 $12.12 $33.38 $27.80 4Q 2011 +6.0 0.0 +2.5 +8.7 -0.6 +13.8 +8.6 +4.4 +4.7 -0.7 +7.4 +14.4 +2.0 +10.8 +6.7 -1.5 +8.7 +5.2 +6.9 +3.4 +16.3 +6.6 +10.3 +5.7 -2.6 +5.7 +7.0 +1.8 +5.7 +10.6 +22.0 +4.0 +1.4 -10.3 +7.1 +4.2 +31.6 +4.2 +1.4 +28.6 -30.1 +0.3 +10.8 +10.0 +3.9 +4.9 +27.6 +4.8 +6.6 +2.8 +5.7 % return over ... 3Q 2Q 2011 2011 -12.7 +8.1 -19.2 -11.3 -0.4 -12.0 -4.2 -12.9 -13.1 -2.9 -16.5 -35.7 -11.2 -17.6 -21.5 -26.8 -12.7 0.0 -16.4 -25.3 -2.0 +24.4 -19.2 +8.3 -3.6 -10.5 -8.6 -2.3 -10.9 -17.3 -18.8 -7.9 -30.5 +19.1 -17.1 +28.1 -3.5 -45.5 -33.1 -6.6 -57.6 -28.8 -20.5 -44.8 +3.3 -14.9 -15.1 -51.8 -3.1 -16.0 -20.8 -6.9 -5.1 -0.6 -9.9 -7.6 -11.5 -17.6 -7.0 -0.2 -0.8 -2.1 -11.5 -17.6 -5.3 -9.0 -1.1 -14.6 -0.9 +43.1 -14.3 -2.4 -4.0 -11.5 -13.9 +38.5 -10.9 -7.3 -8.5 +3.6 -4.2 -11.1 -26.5 -24.6 -23.2 -5.7 -48.5 -19.9 +0.1 -27.0 -1.7 -15.1 -28.2 -48.4 -21.7 -9.5 +4.8 -6.6 -2.7 -30.2 -19.0 -12.9 -12.4 -8.8 1Q 2011 +3.8 -6.2 +2.6 +2.0 -8.7 -4.5 -4.2 +3.2 +4.9 -7.2 -0.6 -0.6 -7.5 -7.1 +5.1 -1.1 +9.1 +18.0 -6.8 -2.6 -1.5 -7.3 -8.0 +23.8 -2.1 -2.5 +9.5 +0.4 -11.1 +5.3 -2.0 +8.6 -5.2 +12.1 -28.4 -6.2 -16.0 -2.6 +10.2 -15.6 +7.9 -28.6 -10.9 +25.4 +2.7 +1.1 +0.2 -26.8 -3.7 +18.3 +10.0 +15.9 CY 2010 -9.7 +81.4 -21.9 +2.1 +7.8 -9.7 +1.1 -7.4 +11.1 +4.1 -12.2 +8.2 -3.7 +28.5 -13.0 -23.5 -13.5 -25.6 -15.9 -29.1 -0.9 -9.1 -6.5 -22.2 -2.8 -2.2 -12.2 -6.3 +0.9 -0.0 -36.8 +54.5 -2.5 -6.0 -22.8 -2.4 +13.0 -30.7 +75.4 -19.0 +41.3 -53.4 +35.7 -19.2 +6.0 +14.8 -1.0 +17.9 -38.8 -6.7 -9.8 -8.0
Industrials AJ Lucas Group Alesco Corporation Asciano Group Ausenco Limited Aust Infrastructure Boart Longyear BOOM Logistics Bradken Brambles Cabcharge ConnectEast CSR Ltd Downer EDI Emeco Holdings GWA Intl Hastie Group Limited Hills Industries Leighton Macmahon Hldgs Macq Airports Monadelphous Grp PMP Qantas Airways SEEK Spotless Group Toll Holdings Transfield Svcs Transpacific Transurban United Group Virgin Blue Holdings Wesfarmers
Infra & Utilities AGL Energy APA Group DUET
Energy Wld
Envestra Hastings Diversified SP AusNet Spark Infra
4,353.1 $14.61 $4.23 $1.65 $0.50 $0.65 $1.61 $0.99 $1.21
+2.0 +2.2 +4.4 +1.9 -2.9 -3.0 +4.2 +5.3 -2.8
-2.7 -2.4 -0.5 -3.9 +3.0 -3.6 -2.2 -1.1 -3.5
+3.2 +2.4 -3.3 +1.5 +3.1 +15.0 -1.3 +7.4 +15.2
-3.7 -6.0 +4.0 -0.6 -14.9 +14.3 -5.3 +1.1 -1.3
+2.0 +8.3 +15.7 -6.4 +44.3 +2.9 +53.6 -4.9 -18.1
Telecoms Amcom Hutchison Telecom iiNet Singapore Tel. Telecom NZ Telstra Corporation TPG Telecom
1,074.0 $0.81 $0.06 $2.59 $2.45 $1.97 $3.14 $1.36
+1.0 +4.5 +3.4 +18.8 -2.0 -3.9 +1.3 -4.6
+7.1 -30.2 -14.7 -16.5 +11.2 +9.8 +7.3 -15.7
+3.1 +10.4 -26.9 -1.5 +3.5 +27.0 +2.5 +0.9
+0.4 +1.5 -6.1 -8.6 -1.7 -9.8 +1.1 +2.5
-18.4 +17.9 -17.5 +55.9 -4.9 -18.8 -18.7 -2.1
S&P / ASX 100 S&P / ASX 200 S&P / ASX 300

Source: RBS, IRESS
3,378.1 4,141.9 4,138.5
+3.2 +3.3 +3.3
-13.1 -13.0 -13.1
-4.5 -4.8 -5.0
+2.3 +2.0 +1.9
-3.4 -2.6 -2.2
128
Recommendation structure
Absolute performance, short term (trading) recommendation: A Trading Buy recommendation implies upside of 5% or more and a Trading Sell indicates downside of 5% or more. The trading recommendation time horizon is 0-60 days. For Australian coverage, a Trading Buy recommendation implies upside of 5% or more from the suggested entry price range, and a Trading Sell recommendation implies downside of 5% or more from the suggested entry price range. The trading recommendation time horizon is 0-60 days. Absolute performance, long term (fundamental) recommendation: The recommendation is based on implied upside/downside for the stock from the target price. A Buy/Sell implies upside/downside of 10% or more and a Hold less than 10%. For UK Small/Mid-Cap Analysis a Buy/Sell implies upside/downside of 10% or more, an Add/Reduce 5-10% and a Hold less than 5%. For UK-based Investment Funds research the recommendation structure is not based on upside/downside to the target price. Rather it is the subjective view of the analyst based on an assessment of the resources and track record of the fund management company. For listed property trusts (LPT) or real estate investment trusts (REIT) the recommendation is based upon the target price plus the dividend yield, ie total return. Performance parameters and horizon: Given the volatility of share prices and our pre-disposition not to change recommendations frequently, these performance parameters should be interpreted flexibly. Performance in this context only reflects capital appreciation and the horizon is 12 months. Sector relative to market: The sector view relative to the market is the responsibility of the strategy team. Overweight/Underweight implies upside/downside of 10% or more and Neutral implies less than 10% upside/downside. Target price: The target price is the level the stock should currently trade at if the market were to accept the analyst's view of the stock and if the necessary catalysts were in place to effect this change in perception within the performance horizon. In this way, therefore, the target price abstracts from the need to take a view on the market or sector. If it is felt that the catalysts are not fully in place to effect a re-rating of the stock to its warranted value, the target price will differ from 'fair' value.
Distribution of recommendations
The tables below show the distribution of recommendations (both long term and trading). The first column displays the distribution of recommendations globally and the second column shows the distribution for the region. Numbers in brackets show the percentage for each category where there is an investment banking relationship. These numbers include recommendations produced by third parties with which RBS has joint ventures or strategic alliances.
Long term recommendations (as at 21 Oct 2011)

Global total (IB%) Buy Hold Sell Total (IB%)
Source: RBS
Trading recommendations (as at 21 Oct 2011)

Global total (IB%) Trading Buy Trading Sell Total (IB%)
Source: RBS
Asia Pacific total (IB%) 564 (3) 226 (4) 50 (0) 840 (3)
Asia Pacific total (IB%) 0 (0) 1 (0) 1 (0)
864 (11) 420 (7) 89 (6) 1373 (9)
0 (0) 1 (0) 1 (0)
Regulatory disclosures
Subject companies: ASC.AX, WPL.AX, PRY.AX, RMD.AX An analyst or a member of any analyst's household who participated in the preparation of this report has a shareholding/financial interest in this company.: MQA.AX RBS trades or may trade as principal in the debt securities that are the subject of the research report.: OSH.AX, TEL.NZ This publication is intended for informational purposes only and the opinions set forth herein should not be viewed as an offer or solicitation to buy, sell or otherwise trade futures and/or options. Past performance is not necessarily indicative of future results. The risk of loss associated with futures and options trading can be substantial. Any recipient of this document wanting additional information or to effect any transaction in futures markets in the US should contact the registered futures commission merchant, RBS Securities Inc., located at 600 Washington Boulevard, Stamford, CT, USA. Telephone: +1 203 897 2700.: OSH.AX, STO.AX RBS was a lead manager of a public offering of securities for this company in the previous 12 months.: AIO.AX RBS Equity Capital Markets (Australia) Limited is Underwriter and Joint Lead Manager to Downer EDI Limited for their Accelerated Renounceable Entitlement Offer: DOW.AX RBS Morgans Corporate Limited is a participating broker to the public offer of ANZ CPS3 by Australian and New Zealand Banking Group Limited and may receive fees in this regard. : ANZ.AX This publication is intended for informational purposes only and the opinions set forth herein should not be viewed as an offer or solicitation to buy, sell or otherwise trade futures and/or options. Past performance is not necessarily indicative of future results. The risk of loss associated with futures and options trading can be substantial. Any recipient of this document wanting additional information or to effect any transaction in futures markets in the US should contact the registered futures commission merchant, RBS Securities Inc., located at 600 Washington Boulevard, Stamford, CT, USA. Telephone: +1 203 897 2700.: ORG.AX, OSH.AX, RIO.AX RBS trades or may trade as principal in the debt securities that are the subject of the research report.: OSH.AX RBS has been appointed as Lead Arranger for a debt financing transaction by Linc Energy Limited: LNC.AX This publication is intended for informational purposes only and the opinions set forth herein should not be viewed as an offer or solicitation to buy, sell or otherwise trade futures and/or options. Past performance is not necessarily indicative of future results. The risk of loss associated with futures and options trading can be substantial. Any recipient of this document wanting additional information or to effect any transaction in futures markets in the US should contact the registered futures commission merchant, RBS Securities Inc., located at 600 Washington Boulevard, Stamford, CT, USA. Telephone: +1 203 897 2700.: IAU.AX RBS Morgans Corporate Limited was the Lead Manager and Underwriter to the Intrepid Mines Limited share placement in November 2010 and received fees in this regard.: IAU.AX This publication is intended for informational purposes only and the opinions set forth herein should not be viewed as an offer or solicitation to buy, sell or otherwise trade futures and/or options. Past performance is not necessarily indicative of future results. The risk of loss associated with futures and options trading can be substantial. Any recipient of this document wanting additional information or to effect any transaction in futures markets in the US should contact the registered futures commission merchant, RBS Securities Inc., located at 600 Washington Boulevard, Stamford, CT, USA. Telephone: +1 203 897 2700.: WPL.AX
Daily Bulletin | Disclosures Appendix | 24 October 2011
Global disclaimer
Copyright 2011 The Royal Bank of Scotland plc and affiliated companies ("RBS"). All rights reserved. This Material was prepared by the legal entity named on the cover or inside cover page. It is provided for informational purposes only and does not constitute an offer to sell or a solicitation to buy any security or other financial instrument. While based on information believed to be reliable, no guarantee is given that it is accurate or complete. While we endeavour to update on a reasonable basis the information and opinions contained herein, there may be regulatory, compliance or other reasons that prevent us from doing so. The opinions, forecasts, assumptions, estimates, derived valuations and target price(s) contained in this Material are as of the date indicated and are subject to change at any time without prior notice. The investments referred to may not be suitable for the specific investment objectives, financial situation or individual needs of recipients and should not be relied upon in substitution for the exercise of independent judgement. The stated price of any securities mentioned herein is as of the date indicated and is not a representation that any transaction can be effected at this price. Neither RBS nor other persons shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in this Material. This Material is for the use of intended recipients only and the contents may not be reproduced, redistributed, or copied in whole or in part for any purpose without RBS' prior express consent. 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Any U.S. recipient of these Materials that wishes further information regarding, or to effect any transaction in, any of the securities discussed in this Material, should contact and place orders solely through a registered representative of RBS Securities Inc., 600 Washington Boulevard, Stamford, CT, USA. Telephone: +1 203 897 2700. RBS Securities Inc. is an affiliated broker-dealer registered with the U.S. Securities and Exchange Commission under the Exchange Act, and a member of the Securities Investor Protection Corporation (SIPC) and the Financial Industry Regulatory Authority (FINRA). - Material means all research information contained in any form including but not limited to hard copy, electronic form, presentations, e-mail, SMS or WAP. _______________________________________________________________________________________________________________________________________ The research analyst or analysts responsible for the content of this research report certify that: (1) the views expressed and attributed to the research analyst or analysts in the research report accurately reflect their personal opinion(s) about the subject securities and issuers and/or other subject matter as appropriate; and, (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views contained in this research report. On a general basis, the efficacy of recommendations is a factor in the performance appraisals of analysts. _______________________________________________________________________________________________________________________________________ For a discussion of the valuation methodologies used to derive our price targets and the risks that could impede their achievement, please refer to our latest published research on those stocks at research.rbsm.com. Disclosures regarding companies covered by us can be found on our research website. Please use research.rbsm.com for Equity Research and http://strategy.rbsm.com/disclosures for FICC Research. Our policy on managing research conflicts of interest can be found at https://research.rbsm.com/Disclosure/Disclosure.AspX?MI=2. Should you require additional information please contact the relevant research team or the author(s) of this Material.
Daily Bulletin | Disclosures Appendix | 24 October 2011
RBS Equities (Australia)

Randolf Clinton, Head of Equities +61 2 8259 5247
RESEARCH
Michael Morrison, Head of Research DATABASE & QUANT Thiva Nagaratnam, CFA Stuart Nielsen Eben van Wyk, CFA STRATEGY, ECONOMICS & ESG Dr Alva DeVoy Daniel Blake Jonathon Brycki Kieran Davies FINANCIALS, INSURANCE Andrew Lyons John Buonaccorsi Richard Coles Ashley Dalziell Michael Leonard MEDIA & TELCOS Fraser McLeish Ian Martin Alan Stuart Ashley Wallace GAMING, FOOD & BEVERAGE Michael Nolan Alexander Beer RETAILING Daniel Broeren Chris Cable HEALTHCARE Dr Derek Jellinek Elliott Crane +61 2 8259 5832 +61 2 8259 5373 +61 2 8259 5849 +61 2 8259 5492 +61 2 8259 5831 +61 2 8259 5016 +61 2 8259 6831 +61 2 8259 5171 +61 2 8259 6086 +61 2 8259 5660 +61 2 8259 5728 +61 2 8259 5039 +61 2 8259 5767 +61 2 8259 5543 +61 3 9612 1585 +61 2 8259 5834 +61 2 8259 6356 +61 3 9612 1316 +61 2 8259 6834 +61 2 8259 5381 +61 2 8259 6722 +61 2 8259 5848 +61 2 8259 6729 ENERGY, UTILITIES & INFRASTRUCTURE Jason Mabee, CFA William Allott Philipp Kin Michael Newbold, CFA TRANSPORT Mark Williams Michael Newbold, CFA RESOURCES, STEEL & COMMODITIES Lyndon Fagan Sam Berridge Todd Scott Tom Sartor Phillip Chippindale Warren Edney Nick Moore MID/SMALL CAPS Julian Guido Matthew Nicholas Brewin Kwong Michael McNair SMALL CAPS RBS MORGANS Roger Leaning Chris Brown Fiona Buchanan Nick Harris Josephine Little Belinda Moore Scott Power Tom Sartor James Wilson +61 2 8259 5380 +61 2 8259 5348 +61 2 8259 6080 +61 2 8259 5663
+61 2 8259 6921 +61 2 8259 5663
+61 2 8259 5870 +61 2 8259 5955 +61 2 8259 5865 +61 7 3334 4503 +61 2 8259 6859 +61 3 9612 1557 +44 207 678 0555
+61 2 8259 5838 +61 2 8259 6168 +61 2 8259 6891 +61 2 8259 2089
BASICS (Agriculture, Builders, Chemicals, Developers, Paper, Property) Andrew Hodge +61 2 8259 6608 Andrew Scott +61 2 8259 5847 Belinda Moore +61 7 3334 4532 Niraj Shah, CFA +61 2 8259 5836 Tony Sherlock +61 2 8259 5548
+61 7 3334 4554 +61 7 3334 4885 +61 7 3334 4879 +61 7 3334 4557 +61 7 3334 4505 +61 7 3334 4532 +61 7 3334 4884 +61 7 3334 4503 +61 8 6462 1974
DISTRIBUTION
Nick Caughey, Head of Sales SYDNEY Research Sales Nick Caughey Sandy Isherwood Scott Ramsay James Ledgerwood Specialist Sales Michael McNair (Small Caps) Richard Hitchens (Quant) Corporate Broking/Access Georgina Wells Sales Trading Justin Gallagher Tony James Tom Sullivan William Tietjens Program Trading Jason Milliss Facilitation Rod Killick Peter Pennisi Derivative Sales Richard Brasher Robert Gibson Alan Issers +61 2 8259 2028 Hedge Fund Sales Aaron Lagerlow Ankon Rahman Andrew Watson +61 2 8259 2082 +61 2 8259 2088 +61 2 8259 2076
+61 2 8259 2028 +61 2 8259 6897 +61 2 8259 2087 +61 2 8259 6825
+61 2 8259 2089 +61 2 8259 6030
MELBOURNE Research Sales James I Smith Andrew Chirnside Sales Trading Mark Hendel David Harris Marianna Saliba
+61 3 9612 1360 +61 3 9612 1353
+61 2 8259 6896
+61 3 9612 1356 +61 3 9612 1454 +61 3 9612 1362
+61 2 8259 2062 +61 2 8259 2030 +61 2 8259 5170 +61 2 8259 6820
LONDON David Schiller Pamela Tironi
+44 20 7678 5475 +44 20 7678 6573
+61 2 8259 5357
+61 2 8259 2026 +61 2 8259 2038
NEW YORK Stuart Nutting Sanjay Magotra Tom Roberts
+1 203 897 4803 +1 203 897 1520 +1 203 897 1539
+61 2 8259 2005 +61 2 8259 2003 +61 2 8259 6829
ASIA Mark Skocic Daniel Baker Woon Millen (Regional)
+61 3 9612 1355 +852 3988 7814 +61 2 8259 5260
E-MAIL ADDRESSES
firstname.surname@rbs.com
ONLINE RESEARCH
http://research.rbsm.com

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Dr Derek Jellinek (+61 2 8259 5848)

Julian Guido (+61 2 8259 5838)

Where Bendigo Syd Bris

Time 2.00pm 1.30pm 2.30pm

Andrew Orchard (+852 3988 7191)

John Rachmat (+65 6518 7996)

Philip Tulk (+852 3988 7189)

1H = interim, 2H = final; SP = special Source: IRESS

* Extract. For further details please refer to our website (http://research.rbsm.com/Research).

RBS Equities (Australia) Limited

Important disclosures can be found in the Disclosures Appendix.

IN BRIEF STRATEGY & ECONOMICS

Weekly topical thoughts

Kieran Davies (+61 2 8259 5171)

Primary Healthcare (A$3.15) Hold TP% A$3.20

Dr Derek Jellinek (+61 2 8259 5848)

Australia Small/Mid Caps

Julian Guido (+61 2 8259 5838)

Andrew Orchard (+852 3988 7191)

Andrew Orchard (+852 3988 7191)

Philip Tulk (+852 3988 7189)

Global Action Pack

* Extract. For further details please refer to our website (http://research.rbsm.com/Research).

Daily Bulletin | 24 October 2011

Produced by: RBS Equities (Australia) Limited

M id-cap resources alpha

Source: IRESS, RBS

Table 2 : Capital Goods

Australia Strategy | Analysis | 21 October 2011

Table 6 : Food & Beverages

Table 7 : Health care

Australia Strategy | Analysis | 21 October 2011

Table 9 : Insurance/Diversified Financials

Table 10 : Materials Resources (large-cap)

Table 11 : Materials Resources (mid-cap)

Table 12 : Materials Steel

Australia Strategy | Analysis | 21 October 2011

Table 13 : Basic Materials

Australia Strategy | Analysis | 21 October 2011

Table 18 : Small Caps defensive pair

Table 19 : Small Caps cyclical pair

Australia Strategy | Analysis | 21 October 2011

Australia Strategy | Analysis | 21 October 2011 7

Table 20 : RBS earnings forecasts

0 100 0 100 100 0 45 0 100 32 100 0 0 100 0 0 60

Small cap Long

14.3 39.5 9.0 2.0

16.3 45.0 11.0 6.0

20.3 52.5 13.0 7.0

3.5% 6.1% 5.5% 3.8%

100 100 100 100

14.1 10.2 8.1 9.4

12.0 8.8 7.0 8.6

0.9 0.6 0.9 0.9

1.33 0.96 0.76 0.88

1.23 0.90 0.72 0.88

11.0 8.0 6.0 8.0

9.8 6.5 5.1 5.8

2.2 2.0 0.9

20.1% 16.6% 8.1% 8.8%