05 Novt 2007 Bulletin

Monday, 05 November 2007

Topic Page Number

Overnight Summary 2

US Equities 3

US Bonds 3

Commodities 3

International Markets 4

US Economic Action 4

Australian Market Summary 5

Australian Equity Market Movers (Sector) 5

Australian Equity 5 Best / Worst Stocks 5

Australian Companies Ex-Dividend 6

Australian Equity Snapshots 7

Summary of Daily Research Reports 8

ST GEORGE BANK LIMITED

SHARE PRICE AS AT 02 November 2007

Last Sale $36.76

Changes -$0.34

Total Volume 1,760,215

Web Address: www.stgeorge.privatebank.com.au

www.banksa.privatebank.com.au

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Daily Bulletin 05 November 2007

Overnight Markets

US stocks managed to stage a late bounce to end modestlyhigher in volatile trade, as investors weigh up good economicreports on the day with more bad news from the financial sector.

Australian Market Summary

Following the plunge on international markets overnight, theAustralian share market fell sharply in early trading and tradedsideways for the rest of day. The benchmark All Ordinaries indexclosed on Friday down 131 points.

Flashnotes

Multiplex Group (MXG) - Compulsory acquisition noticeGUD Holdings (GUD) - Open briefing and FY08 guidance updateAnsell (ANN) - Open briefing and 1Q08 updateMacquarie Bank (MBL) - MBL suspension from official quotationDowner EDI Limited (DOW) - Flat FY08 outlookBank of Qld. (BOQ) - Mackay PBS Board maintains support formerger proposal with BOQGUD Holdings (GUD) - Outlook statement at AGM reaffirmsprevious FY08 guidancePublishing & Broadcasting (PBL) - Macau venture raisesUS$581MColes Group (CGJ) - Wesfarmers' plans for CGJ's debt facilitiesWesfarmers Ltd (WES) - Plans for Coles' Debt FacilitiesPMP Ltd (PMP) - FY08 guidance reaffirmed as ACCC approvesacquisition of Times PrintersPlatinum Asset Management (PTM) - Cautious outlook and1Q08 result at AGMAustal (ASB) - US Navy cancels second LCSTelecom NZ (TEL) - 1Q08 ResultsAGL Energy (AGK) - Alinta to acquire 100% of AlintaAGLBabcock and Brown Power (BBP) - Alinta to acquire 100% ofAlintaAGLING Office Fund (IOF) - Successful completion of institutionalplacement

Foreign EquitiesIndex/Security Close Chg %ChgDow Jones (US) 13,870 +302.4 +2.2S&P 500 1,541 +32.5 +2.2NASDAQ 2,817 +22.6 +0.8FTSE 100 (UK) 6,706 +119.9 +1.8DAX 30 (Germany) 8,010 +128.8 +1.6CAC 40 (France) 5,836 +105.3 +1.8Nikkei (Japan) 16,698 -172.3 -1.0

Figures as at 05/11/2007 8:30 AM AEST

Australian Market SummaryIndex/Security Close Chg %ChgAll Ordinaries 6,727 -126.8 -1.9ASX 200 6,697 -132.1 -1.9ASX Small Ords 4,098 -78.3 -1.9Industrials 7,348 -134.8 -1.8Fin.-x-Prop Trusts 7,735 -111.6 -1.4Materials 15,613 -535.0 -3.3Cons. Staple 8,661 -162.3 -1.8Telecom Serv. 1,701 +27.3 +1.610y Bond Yield 6.30 +0.13 +2.1

Figures as at 02/11/2007 4:30 PM AEST

CommoditiesIndex/Security Close Chg %Chg UnitsBase MetalsCRB Index 349.4 +0.24 +0.1Aluminium 2,475 -15.8 -0.6 USD/tCopper 7,862 +356.0 +4.7 USD/tLead 3,672 +76.0 +2.1 USD/tNickel 31,275 -795.0 -2.5 USD/tTin 16,690 +365.0 +2.2 USD/tZinc 2,887 +156.5 +5.7 USD/tPrecious MetalsGold 792 +3.7 +0.5 USD/OzSilver 14.5 +0.4 +2.8 USD/OzEnergyOil (West Texas) 93.5 +0.0 +0.0 USD/Bar

Figures as at 05/11/2007 8:30 AM AEST

CurrenciesIndex/Security Close Chg %Chg UnitsAUD / USD 0.921 +0.009 +1.0 $USAUD / Euro 0.639 +0.006 +1.0 $AAUD / STG 0.439 -0.010 -2.3 GBPAUD / Yen 105 -3.1 -2.9 YenUSD / Yen 115 -0.8 -0.7 YenEuro / USD 1.44 -0.01 -0.4 $US

Figures as at 02/11/2007 4:30 PM AEST

Private Bank Daily Bulletin

Daily Research Reports

Austal (ASB) - Warning shot fired across bow, but ASB still afloatAGL Energy (AGK) - AlintaAGL sale - a short term gain, but a long term lossResMed (RMD) - 1Q08 Result: US sales and margins suffer from competitor discountingAnsell (ANN) - Buoyant 1Q08 though weighed down by weaker US dollarMirabela Nickel Limited (MBN) - 1Q08: Updated commodity and currency assumptions increase valuation by 26%PMP Ltd (PMP) - FY08 guidance reaffirmed; ACCC clears acquisition of Times PrintersPlatinum Asset Management (PTM) - Earnings downgrade following AGM guidanceOrigin Energy (ORG) - 1Q08 Production reportArc Energy (ARQ) - 1Q08 production reportPublishing & Broadcasting (PBL) - Macau JV raises US$581MASX Limited (ASX) - Volume growth prompts earnings upgradeDowner EDI Limited (DOW) - Solid 1Q08 result, but outlook bleakING Office Fund (IOF) - Successful completion of institutional placement

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US EquitiesUS stocks managed to stage a late bounce to end modestly higher in volatile trade, as investors weigh up good economicreports on the day with more bad news from the financial sector.

Nonfarm payrolls gained sharply in October from the previous month, and were more than double what economists wereexpecting. Meanwhile, factory orders for September also surprised on the upside. Stocks gained in early trade on these positiveeconomic numbers, but dipped into the red for most of the day on a news report that Merrill Lynch had entered into deals withhedge funds to delay reporting losses on sub-prime investments.

Merrill Lynch denied the allegations, but this did not stop its shares from plunging over 13%. Adding to the pressure was abroker report which downgraded Merrill Lynch and predicted that the company would be hit by an additional US$4B inwritedowns in the 4Q.

It was similar fears that sparked a panic sell-off in Citigroup’s shares the day before and investors are bracing themselves formore dramatic writedowns from major financial institutions in the coming quarters. Citigroup lost another 2% on Friday, whileGoldman Sachs tumbled 4.4% and JPMorgan Chase dropped 2.6%.

In related news, Citigroup held an emergency meeting this weekend and its CEO is expected to resign. The CEO of MerrillLynch was the first high profile executive casualty of the sub-prime meltdown.

Elsewhere, Chevron reported a 26% drop in quarterly earnings due to shrinking refiner margins. The loss was greater thananticipated and its shares dipped 0.63% despite higher oil prices.

On the positive side, media conglomerate Viacom jumped 2.8% after it delivered better than expected earnings. Technologystocks like Microsoft, Intel, and Google continued to enjoy strong support.

Over the week, the Dow Jones Industrial Average and the S&P 500 were down 1.5% and 1.7%, respectively. However, theNASDAQ is up 0.2%.

US BondsUS Treasury prices gained for the second day as jittery equity investors sought the safety of government bonds.

The yields on two- and five-year notes dropped to 3.68% (-0.08) and 3.95% (-0.06) respectively. The 30-year note is yielding4.62% (-0.02).

US EQUITIES US BONDS

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CommoditiesCrude oil prices jumped to new record highs due to renewed optimism about the health of the US economy after solid gains inpayrolls.

Also supporting the over US$2/barrel price jump was news of refinery problems in Europe and a forecast for the first cold fronthitting the Northeast of the US, the world’s largest consumer of heating oil.

Gold was another to hit fresh records, ending at the session high, on inflation worries and the weaker US dollar.

Copper bounced with gold and oil as traders cheered the strong jobs and factory orders reports. Copper had been sold offrecently on fears that the weakening economy would reduce demand for the red metal.

Copper could be heading higher early this week. Over the weekend, mining unions in Peru said they would resume plans tostrike on Monday. The Peruvian government had help broker a wage deal between unions Southern Copper last week, whichalso included some changes to the labour laws. However, the unions are complaining that the necessary legislations are takingtoo long to be passed. A spokesman for the Federation of Unions said 30 of the 74 unions would strike.

COPPER & NICKEL OIL

GOLD

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International MarketsEuropean stocks lost more ground for the second day as bank stocks were sold off on the same sub-prime related fears that aregripping the US financial sector.

Investment banks have been downgrading each other over worries that the coming months will reveal more sub-prime relatedlosses as banks are struggling to quantify the extent of the credit market fallout.

Belgian bank Fortis plummeted 8.3% after UBS cut its rating from a “buy” to “sell” and said that Fortis is less transparent aboutits sub-prime exposure than its peers.

UBS was also hit by a downgrade from Merrill Lynch after the US broker predicted UBS would have to write off a further US$8Bin losses. UBS tumbled 8.5%. Meanwhile, Dexia slipped 6.1% on persistent worries about its sub-prime exposure; Barclaysdived 6% on speculation of funding worries and a possible drop in profit guidance; and Credit Suisse lost another 4.6% a dayafter posting a disappointing 3Q result.

Other casualties of the day included mining stocks, due to falling copper prices, and British Airways which cut its full yearrevenue due to the weak US dollar.

Bucking the trend was Austrian Bank Raiffeisen International, which gained almost 3% on speculation that it would profit fromthe current turmoil by expanding into Eastern Europe.

Another gainer was Dutch mapping software developer Tele Atlas, which surged 22% on speculation of a bidding war betweenTomTom and Garmin.

Amongst the major European indices, the FTSE 100 suffered the biggest drop with a 0.84% loss. The DAX and CAC fell 0.40%and 0.18%, respectively.

The US dollar hit record lows against the euro as worries about the turmoil in the financial sector offset the positive US jobsdata.

In early AEST trade, the British pound gained 0.39% to US$2.0889 as the Bank of England is expected to hold interest rates at5.75% at its meeting on Thursday, while the Australian dollar bounced back above 92 US cents due to the widely expected0.25% interest rate hike announcement on Wednesday.

FTSE EURO TOP 100 $US/$A VS EUR/$A

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Australian Stock Prices OvernightIn New York, News Corp fell by US$0.11 to US$22.33, equivalent to A$24.24, A$0.50 below its last close on the ASX.

ResMed rose by US$1.73 to US$41.90, equivalent to A$4.55, A$0.05 below its last close on the ASX.

In London, Rio Tinto fell 41.0 pence to £43.65, A$0.93 lower in Australian currency terms.

BHP-Billiton fell 26.0 pence to £17.55, A$0.59 lower in Australian currency terms.

Henderson Group Plc fell 9.0 pence to £1.72, A$0.20 lower in Australian currency terms.

US Economic ActionDespite the sub-prime and credit market shake-up, the US economy appears to be holding its ground after NonFarm Payrollsfor October expanded by 166K jobs. This is more than double expectations of 80K and well above the previous month’s readingof 96K.

Meanwhile, the Unemployment Rate held steady at 4.7%, exactly in line with expectations.

Factory Orders was another bright light after a series of poor US manufacturing data. Factory Orders expanded 0.2% versus aforecast drop of -0.4%.

� ISM Services (for October, released Tue AEST, F/cast: 54.0, Prior: 54.8)

� Productivity – preliminary (for 3Q, released Thur AEST, F/cast: 3.1%, Prior: 2.6%)

� Wholesale Inventories (for September, released Thur AEST, F/cast: 0.1%, Prior: 0.1%)

� Crude Inventories (for week of 02 November, released Thur AEST, Prior: -3894K)

� Consumer Credit (for September, released Thur AEST, F/cast: US$8.5B, Prior: US$12.2B)

� Initial Claims (for week of 03 November, released Fri AEST, Prior: 327K)

� Export Prices – excluding agriculture (for October, released Sat AEST, Prior: 0.0%)

� Import Prices – excluding oil (for October, released Sat AEST, Prior: -0.2%)

� Trade Balance (for September, released Sat AEST, F/cast: -US$58.5B, Prior: -US$57.6B)

� Michigan Consumer Sentiment – preliminary (for November, released Sat AEST, F/cast: 80.0, Prior: 80.9)

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Australian Market Summary: As at 02 November 2007

OverviewAUSTRALIAN EQUITIES MARKET: Following the plunge on international markets overnight, the Australian share market fellsharply in early trading and traded sideways for the rest of day. The benchmark All Ordinaries index closed on Friday down 131points.

The S&P/ASX 200 dropped 137 points, with Materials and Energy leading the way down. The main laggards in the Materialssector included BHP Billiton (-$2.00), Rio Tinto (-$4.05) and Newcrest Mining (-$0.75). Within the Energy sector, Santos (-$0.56), WorleyParsons (-$1.51), Paladin Resources (-$0.37) and Origin Energy (-$0.23) came under selling pressure. In theFinancial sector, Westpac Bank ($-0.62), National Australia Bank (-$0.59), Macquarie Bank (-$3.28) and ANZ Banking Group (-$0.44) all posted losses. Within the Consumer Staples, losses were led by Woolworths (-$0.94) and Coles Group (-$0.21).Other notable moves of the day belonged to Brambles (-$0.30), CSL (-$1.25), Downer EDI (-$0.85) and Sonic Healthcare (-$0.24).

In company news, Resmed (+$0.09) recorded 1Q08 sales of US$186M, up 14% on pcp. US sales (excluding discontinuingbusiness) grew 11%, while Rest of World sales grew 19%, aided by a weak US$. Telecom Corporation of New Zealand (-$0.08)released its 1Q08 results today. Reported earnings from continuing operations of $225M were flat on pcp, but up 29.3%following adjustments for abnormal items and the removal of Yellow Pages Earnings from 1Q07. Platinum Asset Management(+$0.06) announced that normalised NPAT for 1Q08 was $58.7M up 4% on pcp. PTM will not be offering earnings guidance orforecasts but hoped the FY08 result would parallel the FY07 results and had a cautious outlook due to highly volatile markets.The ordinary fully paid shares of Macquarie Bank will be suspended from quotation from the close of business, Friday 2 Nov2007 following the lodgement of Federal Court orders approving MBL’s schemes of arrangement with the Australian Securitiesand Investments Commission (the “Restructure”). The replacement Macquarie Group Limited (ASX code: MGL) shares arescheduled to commence trading (on a deferred settlement basis) on the ASX from 5 Nov 2007.

AUSTRALIAN BOND MARKET: The Australian Treasury bonds increased 1-2 basis points on the short end of the curve anddecreased 1-3 basis points on the long end over Friday trading.

AUSTRALIAN DOLLAR: The Australian Dollar opened lower against the US currency, losing further ground throughout the dayto finish the week trading at around US$0.917.

AUSTRALIAN ECONOMIC STATISTICS: NO MAJOR AUSTRALIAN ECONOMIC STATS WERE RELEASED IN FRIDAYTRADING. The next major economic release of note is the October AiG Performance of Service Index due on Monday, 11November.

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Market Movers

SECTOR PERFORMANCE

5 BEST / WORST STOCKS

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Companies Ex-Dividend

Ex Date Sub Type Security Div Amt(cents) Franking

16-Nov-07 Half Yearly Result Luminus Systems Limited (LSL) 0.016 10015-Nov-07 Special Event Canada Land Limited (CDL) 0.58 015-Nov-07 Final Year Result CP1 Limited (CPK) 6 33.3315-Nov-07 Final Year Result Village Roadshow Limited (VRL) 9 100

13-Nov-07 First Quarter Result ANZ Stapled Exchangeable Preferred Security (StEPS)(ANZPA) 198.62

12-Nov-07 Final Year Result Brickworks Limited (BKW) 26 100

12-Nov-07 Final Year Result Brickworks Preferred Adjustable Variable ExchangeableResettable Shares (PAVERS) (BKWPA) 329 100

12-Nov-07 Final Year Result Coles Group Limited (CGJ) 25 10012-Nov-07 Final Year Result Collection House Limited (CLH) 2 10012-Nov-07 Special Event Crusade Global Trust No. 1 of 2006 - Class A-3 Notes (CTJ)12-Nov-07 Final Year Result Desane Group Holdings Limited (DGH) 3 012-Nov-07 Final Year Result eservglobal Limited (ESV) 2 012-Nov-07 Final Year Result Joyce Corporation Limited (JYC) 3 012-Nov-07 Final Year Result Money3 Corporation Limited (MNY) 3 10012-Nov-07 Final Year Result TFS Corporation Limited (TFC) 2.5 10012-Nov-07 Final Year Result Waterco Limited (WAT) 2 10009-Nov-07 Final Year Result Adelaide Bank Perpetual Floating Rate Notes (ADBHB)09-Nov-07 Final Year Result Bank of Queensland Limited (BOQ) 37 10009-Nov-07 Final Year Result Macquarie Radio Network Limited (MRN) 3.5 009-Nov-07 Final Year Result Metroland Australia Limited (MTD) 0.5 100

09-Nov-07 Special Event Seven Network Transferable Extendable Listed Yield Shares(TELYS3) (SEVPC) 314.46 100

09-Nov-07 Final Year Result Suncorp Unsecured Perpetual Floating Rate Capital Note(SUNHB) 194.08

08-Nov-07 Final Year Result Australia & New Zealand Banking Group Limited (ANZ) 74 10008-Nov-07 Final Year Result CPT Global Limited (CGO) 4.5 10008-Nov-07 Final Year Result Envestra Limited (ENV) 5.7 008-Nov-07 Final Year Result Wesfarmers Limited (WES) 140 10007-Nov-07 Final Year Result Westpac Banking Corporation (WBC) 68 10006-Nov-07 Final Year Result Orica Step-Up Preference Securities (ORIPB)05-Nov-07 Final Year Result API Fund (APR) 1.3667 005-Nov-07 Half Yearly Result Trust Company Limited (TRU) 24 10005-Nov-07 Half Yearly Result Whitefield Limited (WHF) 8 100

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Flashnotes

As at 8:00 am on 30 Oct 07 Brookfield Australia held over 90% relevant interest in MXG. In accordance with section 661B(1)(c)of the Corporations Act 2001, the takeover bid for MGX now moves to compulsory acquisition.

Management reaffirmed previous guidance for EBIT to grow in FY08 by 10%-15% (before restructuring costs). Managementstated the company has experienced a strong 1Q08 with all businesses trading above both budget and last year. WaterProducts is benefiting from recent cost reductions, while Consumer Products is performing well driven by Sunbeam.Management noted an improvement in financials in New Zealand. Additionally, management also stated the prospects fordividend growth remain positive.

ANN reconfirmed its FY08 EPS guidance of US$0.56 to US$0.60. Management noted good sales growth in all three regions.Concerns about the US outlook were noted for Occupational, though Europe remains strong. There has been some marginimprovement in Professional, but not to the extent management was expecting. Consumer is seeing growth from acquisitionsand organically. Management also noted the expected negative impact of translating US dollar earnings into AUD, given theweaker US dollar.

The ordinary fully paid shares of Macquarie Bank Ltd (MBL) will be suspended from quotation from the close of business, Friday2 Nov 2007 following the lodgement of Federal Court orders approving MBL’s schemes of arrangement with the AustralianSecurities and Investments Commission (the “Restructure”). The replacement Macquarie Group Limited (ASX code: MQG)shares are scheduled to commence trading (on a deferred settlement basis) on the ASX from 5 Nov 2007.

DOW advised at its AGM that it expects FY08 EBIT to be $280M, which is flat on the prior year. Some of the same problemcontracts from last year are anticipated to negatively impact the company. This overshadows a solid 1Q08 result with EBIT up16% on the pcp.

Multiplex Group (MXG) - Compulsory acquisition notice 02-Nov-07 17:30

GUD Holdings (GUD) - Open briefing and FY08 guidance update 02-Nov-07 15:05

Ansell (ANN) - Open briefing and 1Q08 update 02-Nov-07 14:32

Macquarie Bank (MBL) - MBL suspension from official quotation 02-Nov-07 14:21

Downer EDI Limited (DOW) - Flat FY08 outlook 02-Nov-07 12:03

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Following the receipt of an alternative merger proposal from Wide Bay Australia (WBB), the directors of Mackay PermanentBuilding Society (MPB) advised that they continue to recommend MPB shareholders vote in favour of the merger proposal withBOQ, in the absence of superior proposal.

In the outlook statement at today's AGM, management reaffirmed previous guidance for EBIT to grow in FY08 by 10% to 15%(before restructuring costs). Management stated the company has experienced a strong first quarter with every business tradingabove both budget and last year. Additionally, management also stated the prospects for dividend growth are also positive.

PBL's vehicle for its Macau casinos, Melco PBL Entertainment (Macau) (MPEL), has raised equity via a follow-on public offeringat US$15.50 per ADS, compromising 37.5M ADS representing 112.5M shares in MPEL. Gross proceeds from the equityoffering totalled US$581M. As a result of the follow-on offering, PBL's interest in MPEL will decline from 41.39% to 37.86%, andwill be further diluted to 37.39% if the underwriters exercise an option for an additional 5.625M ADS representing 16.9M shares.

Wesfarmers has announced its plans regarding CGJ's debt facilities (including its 2012 Notes) should the Scheme ofArrangement proceed. The proposal, among other things, involves CGJ's financiers receiving the same benefit of the sameguarantees that are given by Wesfarmers to its current financiers. If the proposal gains approval, the CGJ 2012 Notes willremain in place until maturity. These details will be conveyed to all Austraclear Holders of the Notes today, Friday 2 November.

WES announced its plans regarding Coles’ debt facilities (including its 2012 Notes) should the Scheme of Arrangementproceed. The proposal, among other things, involves Coles' financiers receiving the same benefit of the same guarantees thatare given by WES to its current financiers. If the proposal gains approval, the Coles 2012 Notes will remain in place untilmaturity. These details will be conveyed to all Austraclear Holders of the Notes today, Friday 2 November.

PMP today reaffirmed its guidance that FY08 EBIT would be similar to that in FY07. PMP expects 1H08 earnings to be between$45M and $48M. Softer earnings in the first half would be offset by a stronger second half on a comparable basis. Capex,excluding final payments for the press upgrade at Moorebank, is expected to be $35M in FY08, with net debt of $220M andfinance costs of $20M. Meanwhile, the ACCC has approved PMP's acquisition of Times Printers (Australia), which will cost circa$80M.

Bank of Qld. (BOQ) - Mackay PBS Board maintains support for merger proposal with BOQ 02-Nov-07 11:56

GUD Holdings (GUD) - Outlook statement at AGM reaffirms previous FY08 guidance 02-Nov-07 11:48

Publishing & Broadcasting (PBL) - Macau venture raises US$581M 02-Nov-07 11:35

Coles Group (CGJ) - Wesfarmers' plans for CGJ's debt facilities 02-Nov-07 11:34

Wesfarmers Ltd (WES) - Plans for Coles' Debt Facilities 02-Nov-07 11:27

PMP Ltd (PMP) - FY08 guidance reaffirmed as ACCC approves acquisition of Times Printers 02-Nov-07 11:20

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PTM announced that normalised NPAT for 1Q08 is $58.7M up 4% on pcp. PTM will not be offering earnings guidance orforecasts but hoped the FY08 result would parallel the FY07 results and had a cautious outlook due to highly volatile markets.Costs are tracking predictably; the unknown factors are investment performance, funds flow and FUM. PTM had no comment onthe broker consensus of diluted FY08 EPS of 33 cents (up 8% on pcp), other than to say, perhaps it is more optimistic than theiroutlook.

The US Navy has cancelled the second Littoral Combat Ship (LCS) being built by ASB. The company said the cancellation wasbecause of the Navy being unable to reach an agreement on a fixed price contract with the prime contractor, General Dynamics(GD). The first LCS is not impacted by the decision, with construction of the vessel now 70% complete and scheduled for launchin 2H08. ASB said the US Navy was assisting it in identifying short-term contracts so that it can fully utilise its workforce.

TEL has released its 1Q08 results today, reported earnings from continuing operations of $225M was flat on pcp, but up 29.3%following adjustments for abnormal's items and the removal of Yellow Pages Earnings from 1Q07. Revenues were relatively flatwith the reduction in interest expense and income tax being the key drivers in delivering adjusted earnings growth. New Zealandoperations disappointed with revenue declines across the board, while Australian operations improved margins slightly.

AGK advised it will sell its 33% interest in AlintaAGL to Alinta for $522M. AGK stated that the price offered by Alinta exceeds thevaluation placed on the investment by AGK and will result in a pre-tax profit of $125M on the investment. It is anticipated thatthe transaction will be finalised by the end of December 2007. Per AGK, the sale is expected to be immediately EPS accretive,and there is no change to AGK’s revised 2008 earnings guidance of $330M-$360M.

BBP announced that AGK advised it does not intend to exercise its option to acquire the 67% interest in AlintaAGL held byAlinta. Accordingly, Alinta will acquire AGK’s 33% interest in AlintaAGL at a pro-rata price of $522M. It is anticipated that thetransaction will be finalised by the end of December 2007.

IOF has successfully raised $70M from an institutional placement. Approximately 41M ordinary units were issued at a price of$1.72 per unit, being a 4.4% discount to yesterday's closing price of $1.80. The proceeds will be used to partially fund theacquisition of Bastion Tower in Brussels, which was announced yesterday. The placement units will be allotted on 9 November2007 and will rank equally with existing IOF units for the December 2007 quarter distribution.

Platinum Asset Management (PTM) - Cautious outlook and 1Q08 result at AGM 02-Nov-07 11:13

Austal (ASB) - US Navy cancels second LCS 02-Nov-07 10:24

Telecom NZ (TEL) - 1Q08 Results 02-Nov-07 10:14

AGL Energy (AGK) - Alinta to acquire 100% of AlintaAGL 02-Nov-07 09:59

Babcock and Brown Power (BBP) - Alinta to acquire 100% of AlintaAGL 02-Nov-07 09:53

ING Office Fund (IOF) - Successful completion of institutional placement 02-Nov-07 09:29

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Daily Research Reports

The US Navy has cancelled the second Littoral Combat Ship (LCS) being built by ASB. The company said the cancellation wasbecause of the Navy being unable to reach an agreement on a fixed price contract with the prime contractor, General Dynamics(GD). The first LCS is not impacted by the decision, with construction of the vessel now 70% complete and scheduled for launchin 2H08. ASB said the US Navy was assisting it in identifying short-term contracts so that it can fully utilise its workforce.

AGK advised it will sell its 33% interest in AlintaAGL to Alinta for $522M. AGK stated that the price offered by Alinta exceeds thevaluation placed on the investment by AGK and will result in a pre-tax profit of $125M on the investment. It is anticipated thatthe transaction will be finalised by the end of December 2007. Per AGK, the sale is expected to be immediately EPS accretive,and there is no change to AGK’s revised 2008 earnings guidance of $330M-$360M.

RMD's reported 1Q08 sales of US$186M, 14% up on pcp. Sales in the US suffered from continued discounting by major RMDcompetitor Respironics, which also caused a squeeze on gross margins. Operating costs increased. Adjusted NPAT ofUS$25.3M, down 3% on pcp, and EPS of US3.21 cents per Australian CDI, down 4% on pcp. As usual, no dividend wasdeclared. At current prices, RMD appears fairly valued. We therefore retain our HOLD recommendations on 12 month and longterm investment horizons.

ANN reconfirmed its FY08 EPS guidance of US$0.56 to US$0.60. Management noted good sales growth in all three regions.Concerns about the US outlook were noted for Occupational, though Europe remains strong. There has been some marginimprovement in Professional, but not to the extent management was expecting. Consumer is seeing growth from acquisitionsand organically. Management also noted the expected negative impact of translating US dollar earnings into AUD, given theweaker US dollar.

Austal (ASB) - Warning shot fired across bow, but ASB still afloat

AGL Energy (AGK) - AlintaAGL sale - a short term gain, but a long term loss

ResMed (RMD) - 1Q08 Result: US sales and margins suffer from competitor discounting

Ansell (ANN) - Buoyant 1Q08 though weighed down by weaker US dollar

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After the release of the BFS in 4Q07, MBN had been waiting on an environmental licence, which has now been awarded. Thecompany’s board approved construction and site works commenced in October. MBN still believes that commissioning of theplant remains on target for 1Q10. What has been of particular interest during the quarter is tremendous exploration success atthe Southern Deeps, Santa Rita and Peri Peri projects, suggesting that overall resources may get significantly larger yet.

PMP today reaffirmed its guidance that FY08 EBIT would be similar to that in FY07. PMP expects 1H08 earnings to be between$45M and $48M. Softer earnings in the first half would be offset by a stronger second half on a comparable basis. Capex,excluding final payments for the press upgrade at Moorebank, is expected to be $35M in FY08, with net debt of $220M andfinance costs of $20M. Meanwhile, the ACCC has approved PMP's acquisition of Times Printers (Australia), which will cost circa$80M.

PTM announced that normalised NPAT for 1Q08 is $58.7M, up 4% on the pcp, and that costs are tracking predictably. Theunknown factors are investment performance, funds flow and funds under management (FUM). PTM intends to anticipatepaying out 80% to 90% of NPAT, with future dividends expected to be fully franked. PTM will not be offering earnings guidanceor forecasts, but hoped the FY08 result would parallel the FY07 results and had a cautious outlook due to highly volatilemarkets.

ORG released its 1Q08 production report for its oil and gas exploration and production subsidiaries. Sales revenue was$129.6M, up 6% on the pp and 11% on the pcp. Total production was 24.2PJe, up 9% on the pp and 10% on the pcp. Coalseam gas (CSG) production was 7.6PJ, up 24% on the pp. Oil production of 254kbbl was 22% lower than that of the pp. TheOtway Gas Project commenced production in September. Work continues on the Kupe gas project, which is expected to be inproduction in 1H FY09.

Mirabela Nickel Limited (MBN) - 1Q08: Updated commodity and currency assumptions increase valuation by 26%

PMP Ltd (PMP) - FY08 guidance reaffirmed; ACCC clears acquisition of Times Printers

Platinum Asset Management (PTM) - Earnings downgrade following AGM guidance

Origin Energy (ORG) - 1Q08 Production report

Page 15


Total revenue for 1Q08 was $50M, an increase of 64% on pp and an increase of 73% on pcp. Production for 1Q08 was808,753boe, an increase of 62% on the pp and an increase of 56% on the pcp. The inclusion of the assets from the Wandooacquisition has significantly boosted production and revenue. ARQ has announced a proposed merger with Anzon through ascheme of arrangement. ARQ's Canning basin acreage has been expanded through a farm-in to leases EP338 and EP448.

PBL's vehicle for its Macau casinos, Melco PBL Entertainment (Macau) (MPEL), has raised equity via a follow-on public offeringat US$15.50 per ADS, compromising 37.5M ADS representing 112.5M shares in MPEL. Gross proceeds from the equityoffering totalled US$581M. As a result of the follow-on offering, PBL's interest in MPEL will decline from 41.39% to 37.86% andwill be further diluted to 37.39% if underwriters exercise an option for an additional 5.625M ADS, representing 16.9M shares.

ASX announced its 1Q FY08 volumes, which were up strongly on the prior corresponding period in the following areas: capitalformation (listings and capital raisings), corporate actions, trade execution (equities and derivatives) and depository holdings.ASX outlined areas of opportunity, with the most immediate being the launch of the exchange-traded Contracts for Difference(CFD) market, which is scheduled for early November 2007.

DOW advised at its AGM that it expects FY08 EBIT to be $280M, which is flat on the prior year. Some of the problemsexperienced in its mining division in FY07 are anticipated to negatively impact the company in FY08 as well. This overshadowsa solid 1Q08 result, with EBIT up 16% on the pcp.

IOF has successfully raised $70M from an institutional placement. Approximately 41M ordinary units were issued at a price of$1.72 per unit, being a 4.4% discount to yesterday's closing price of $1.80. The proceeds will be used to partially fund theacquisition of Bastion Tower in Brussels, which was announced yesterday. The placement units will be allotted on 9 November2007 and will rank equally with existing IOF units for the December 2007 quarter distribution.

Arc Energy (ARQ) - 1Q08 production report

Publishing & Broadcasting (PBL) - Macau JV raises US$581M

ASX Limited (ASX) - Volume growth prompts earnings upgrade

Downer EDI Limited (DOW) - Solid 1Q08 result, but outlook bleak

ING Office Fund (IOF) - Successful completion of institutional placement

Page 16

IndustrialsBen Brownette

ASX: ASB Bloomberg: ASB AU Reuters: ASB.AX 02 November 2007

AustalWarning shot fired across bow, but ASBstill afloat

EventUS Navy has cancelled the second Littoral Combat Ship (LCS) beingbuilt by ASB. The company said the cancellation was because of theNavy being unable to reach an agreement on a fixed price contract withthe prime contractor, General Dynamics (GD). The first LCS is notimpacted by the decision, with construction of the vessel now 70%complete and scheduled for launch in 2H08. ASB said US Navy wasassisting it in identifying short-term contracts so that it can fully utiliseits workforce. We have also had discussions with the company andprovide an update.

ImplicationsWe have removed the second LCS from our ASB order book,decreasing our FY08 and FY09 revenue forecast by approximatelyA$150M (our assumed value of the LCS). As a result, our FY08 andFY09 EPS forecasts have decreased by approximately 5% and 31%respectively. We have also decreased our capacity growthassumptions from FY10 and increased the company's beta. Thecombined changes to our EPS forecasts and beta, have decreased ourvaluation and 12-month price target by 36% and 35%, respectively. Ournew 12-month price target is $3.47, implying a total 12-month return ofapproximately 33%. We remain bullish on both a 12-month and longterm outlook and our recommendation remains BUY, on both 12-monthand long term investment horizons.

Investment OpinionASB is a world-class designer and manufacturer of aluminiumpassenger, commercial, military and cruise vessels. The commercialmarket remains steady and ASB's big order book provides goodvisibility. ASB's move into the defence market has been validated by itswork on the Littoral Combat Ship (LCS) for the US Navy. Longer termgrowth catalysts are additional LCS orders, other military-relatedcontracts and potential acquisition activity (ASC Pty Ltd).

ASB remains capacity-constrained. Management at both its US andAustralian yards cite the need for more skilled workers to keep pacewith current and projected order flows. ASB generates strong cashflow, has no debt and is primed for expansion. Management is alsoheavily invested in the company. We expect margin improvement whenproductivity efficiencies are gained as new labour integrates. In theshort term, we believe the share price will take its lead from newcontract wins.

Key Information

Price Performance

Market Statistics

Key Assumptions

Share Price $2.7212 month view BUY12 month target return (%) 33.0

12 month target price $3.47

Long Term View BUYLong Term Target Return (% pa) 16.6

3 year target price n/a

Market Cap (M) $609

Shares (M) 184.9

% of Market 0.03

% of Sector 0.33

12 Month Range $2.65 - $4.06

Company Risk

Share Price Risk

Ethical rating

Performance against indices (%)3 Months 6 Months 12 Months

ASB (24.4) (27.5) (21.8)Sector 9.4 4.7 27.4Market 11.1 6.8 24.6

Beta: 1.3

Market risk premium (%): 5.5

Risk free rate (%): 6.1

WACC (%): 13.3

Forecast cashflow (years): 10

Residual value % of total valuation: 40.2

Nominal terminal growth rate (%): 3.0

Earnings Summary

1 NPAT and EPS are adjusted by removing non-recurring items. All the above statistics are derived from normalised earnings.

Yr to Jun NPATRep $M

NPAT1

Adj $MEPS1

cEPS chg

%PER

xPER rel

All Ords xPER rel

Sector xDPS

cYield

%Franking

%ROE

%

2006A 40.6 29.2 15.4 (14.2) 17.6 0.8 0.6 11.0 4.0 100 17.4

2007A 45.1 45.1 24.0 55.3 11.3 0.6 0.4 12.0 4.4 100 24.0

2008F 55.1 55.1 29.8 24.3 9.1 0.6 0.4 14.9 5.5 100 25.0

2009F 41.6 41.6 22.5 (24.4) 12.1 0.9 0.7 11.3 4.1 100 17.1

Austal

Year end Jun. All figures in A$M

Notes: 1. The 12M recommendation rates stocks on a 12 month, absolute basis based on the total return (capital and dividends). BUY denotes an expectation of 15% ormore total return; SELL 5% or less; HOLD within the range of 5-15%. ACCEPT OFFER relates to a situation where there is a public offer for shares and our view is toaccept that offer.2. The Long Term Recommendation rates stocks on a long term, absolute basis based on the average total return per annum (capital and dividends). BUY denotes a longterm expectation of 1% or more above the cost of equity (also known as the required return, which measures the the return required by investors given the company's risk);HOLD within the range of 1% above and 3% below the cost of equity; SELL more than 3% below the cost of equity but above a total forecast annual return for the stock of0%; AVOID denotes a long term expectation of a total annual return below 0%. ACCEPT OFFER relates to a situation where there is a public offer for shares and our viewis to accept that offer.

12M Recommendation1: BUY 12M Target: $3.47 Long Term Recommendation 2: BUY Long Term Target Return: 16.6% pa

Profit & loss summary 2006A 2007A 2008F 2009F

Operating revenue 387.9 538.1 554.1 453.4Invest & other income 0.0 0.0 0.0 0.0

EBITDA 47.0 63.9 76.0 55.4Depreciation/Amort (4.3) (5.4) (5.2) (5.3)

EBIT 42.7 58.5 70.8 50.1Net Interest 3.1 5.2 6.7 8.6

Pre-tax profit 45.8 63.8 77.5 58.8Tax expense (13.0) (18.0) (21.7) (16.5)

Minorities/Assoc./Prefs (3.5) (0.7) (0.7) (0.7)

NPAT 29.2 45.1 55.1 41.6Non recurring items 11.5 0.0 0.0 0.0

Reported profit 40.6 45.1 55.1 41.6NPAT add Goodwill & Pref 0.0 0.0 0.0 0.0

Adjusted profit 29.2 45.1 55.1 41.6

Cashflow summary 2006A 2007A 2008F 2009F

EBITDA 47.0 63.9 76.0 55.4Working capital changes (43.9) 21.8 5.4 19.4

Interest and tax (10.9) (3.9) (16.5) (11.2)

Other operating items 42.9 147.4 (1.8) (6.5)

Operating cashflow 35.1 229.3 63.0 57.1Required capex (15.8) (23.6) (3.1) (3.2)

Maintainable cashflow 19.3 205.7 60.0 53.9Dividends (17.0) (20.8) (22.2) (27.5)

Acq/Disp 0.0 (23.0) 0.0 0.0

Other investing items 0.0 2.7 0.0 0.0

Free cashflow 2.3 164.6 37.8 26.4Equity (0.6) 0.0 0.0 0.0

Debt inc/(red'n) 10.2 (13.0) (37.8) (26.4)

Balance sheet 2006A 2007A 2008F 2009FCash & deposits 98.5 140.5 153.8 180.2

Inventories 65.8 88.7 82.5 60.4

Trade debtors 61.1 24.4 22.7 16.6

Other curr assets 13.9 128.6 128.4 127.9

Total current assets 239.3 382.2 387.5 385.1Prop., plant & equip. 87.1 99.0 96.9 94.7

Non-curr intangibles 0.7 0.5 0.5 0.5

Non-curr investments 0.0 0.0 0.0 0.0

Other non-curr assets 16.1 22.7 22.7 22.7

Total assets 343.1 504.5 507.6 503.1Trade creditors 34.6 37.4 34.8 25.5

Curr borrowings 8.5 8.5 8.5 8.5

Other curr liabilities 59.4 187.3 184.2 175.0

Total current liab. 102.5 233.2 227.5 209.0Borrowings 32.2 24.5 0.0 0.0

Other non-curr liabilities 20.2 37.3 37.0 36.2

Total liabilities 154.9 294.9 264.5 245.2Minorities/Convertibles 3.8 0.0 0.7 1.4

Shareholders equity 188.2 209.6 243.1 257.9

Ratio analysis 2006A 2007A 2008F 2009FRevenue growth (%) 21.9 38.7 3.0 (18.2)

EBITDA growth (%) 8.4 36.2 18.8 (27.0)

EPS growth (%) (14.2) 55.3 24.3 (24.4)

EBITDA/Sales margin (%) 12.1 11.9 13.7 12.2

EBIT/Sales margin (%) 11.0 10.9 12.8 11.1

Tax rate (%) 28.5 28.2 28.0 28.0

Net debt/equity (%) (31.4) (51.3) (60.0) (67.0)

Net debt/net debt + equity (%) (45.7) (105.5) (149.8) (202.7)

Net interest cover (x) n/a n/a n/a n/a

Payout ratio (%) 71.3 50.1 50.0 50.0

Capex to deprec'n (%) 367.4 437.8 59.3 59.3

NTA per share ($) 0.97 1.13 1.31 1.38

ROA (%) 13.8 15.2 14.1 9.9

ROE (%) 17.4 24.0 25.0 17.1

Multiple analysis 2006A 2007A 2008F 2009FMarket cap (M) 609

Net debt ($M) (107.6)

Peripheral assets ($M) (0.0)

Enterprise value ($M) 501.0

EV/EBIT (x) 11.7 8.6 7.1 10.0

EV/EBITDA (x) 10.7 7.8 6.6 9.0EV/EBITDA All Ind (x) 10.3 9.1 8.2 7.6

EV/EBITDA rel All Ind (x) 1.0 0.9 0.8 1.2

P/E (x) 17.6 11.3 9.1 12.1P/E rel All Ind (x) 0.8 0.6 0.5 0.8

P/E rel All Ind ex banks (x) 0.7 0.5 0.5 0.8

P/E sector (x) 31.3 26.8 22.1 18.5

P/E rel sector (x) 0.6 0.4 0.4 0.7

Assumptions 2006A 2007A 2008F 2009FGDP growth (%) 2.92 2.50 3.02 3.64

Interest Rates (%) 5.73 6.38 6.34 6.30

Inflation (%) 3.20 3.09 2.47 2.50

Notes To AccountsReports using A-IFRS.

Copyright © 2000 - 2007 Aegis Equities Holdings Pty Limited. All rights reserved.This information must be read in conjunction with the Legal Notice which can be located at http://www.aegis.com.au/public/disclaimer.aspx.

Austal

Earnings Forecast Adjustments

� We have removed the second LCS from our ASB order book, decreasing our FY08 and FY09 revenue forecast byapproximately A$150M (our assumed value of the LCS). As a result, our FY08 and FY09 EPS forecasts have decreasedby approximately 5% and 31% respectively.

� Until US Navy releases its 2008 budget and until more certainty is available regarding contract wins, we feel that thecompany's potential order book is now significantly more risky. We note that previously in our model, we had assumedcapacity at Austal USA, with some minor growth assumptions. We have now added probability weightings to ourcapacity assumptions and removed our growth assumptions until greater certainty is realised.

FY08 and FY09 Outlook

� ASB advised that US Navy was assisting it in identifying short-term contracts so that it can fully utilise its workforce. Thecompany advised us that its employees, who were presently working on the second LCS, would be transferred to workon the Hawaiian Superferry, also being built at Austal USA in the mean time.

� We have chosen to take a conservative view of the company being awarded further work, and have not included anyfurther contract wins into our FY08 and FY09 forecasts. That said, any additional work the company may win, willprovide upside to our valuation and 12-month price target.

� The company advised that it believes it has enough work at Austal USA for its present workforce for about another 10months. If ASB is not awarded the LCS program or is not awarded the preliminary contract for the joint high speedvessel (JHSV) program, the company would have to start laying off workers, which would be drastic to its growthprospects and our medium and long term growth forecasts for the company. We note that there is a possibility of a thirdHawaiian Superferry, but we have not factored this into our forecasts.

Littoral Combat Ship (LCS) Program Recap

In May 2004, US Navy awarded contracts to Lockheed Martin (Lockheed) and General Dynamics (GD) to build two LCS' each,with an intention to procure a total of 55 vessels. ASB is acting as a subcontractor to GD on the LCS program.

� The design of the Lockheed team offers a high-speed, semi-planing monohull based on Fincantieri (Italian shipbuilder)designs, whereas the GD team is offering a futuristic high-speed trimaran (multihull boat ) based on ASB designs.

� On 12 April 2007, US Navy cancelled the second of the two vessels to be built by Lockheed after negotiations to controlcost overruns failed. At this time Lockheed had built approximately 80% of its first vessel.

� On 25 September 2007, US Navy requested that the GD team propose a fixed-price contract for its second LCS. As hasbeen announced today, these negotiations have failed and US Navy has cancelled the vessel.

� US Navy will trial the Lockheed and GD LCS vessels in August/September 2008 and then it is scheduled to select itspreferred design some time in 2009. We note that ASB could immediately begin work on the LCS program, because ithad started the initial work on the second vessel.

� ASB remains confident that the 55 vessel LCS program will go ahead as planned. Approximately two or three vesselsper annum are scheduled to be built by the preferred contractor.

� ASB believes that it is well placed to be chosen ahead of Lockheed due to its design and due to Lockheed having ahistory of cost blow-outs. We note however that after the most recent round of negotiations with US Navy, GD has mostprobably disadvantaged itself to some extent and that the advantage it did have over Lockheed in that respect has alsodiminished somewhat.

� Each LCS vessel is worth approximately A$150M revenue to ASB. We note that at its current operations, Austal USAhas the capacity to build around 1.5 vessels a year. However, the company currently has significant expansion plansand we believe it will be able to handle the extra capacity (we discuss ASB's US expansions below).


Austal

Joint High Speed Vessel (JHSV) Program Recap

The Joint High Speed Vessel (JHSV) program is a cooperative effort for a high-speed, shallow draft vessel intended for rapidintra-theatre transport of medium sized cargo payloads. The JHSV program is part of a US$1.5B acquisition program and eachvessel is expected to land at around US$130M each.

� US Navy has issued its phase I request for proposals for full and open solicitation of industry designs. Phase II detail-design-and-construction source selection is planned for early 2008. The company outlined a potential pipeline of eightvessels from 2008-2012 should it win the tender.

� ASB will be the prime-contractor in the JHSV program and its partner GD will be the sub-contractor. Thus we areconfident the same issues arising out of GD not being able to come to terms with its fixed-price contract, will not be asgreat of an issue. The JHSV also has a minimal amount of combat systems on board, thus a greater proportion of theboat will be built by ASB, as opposed to the LCS which had a large combat system built by GD.

� ASB has tendered its proposal to US Navy and it is aware of only two other competitors lodging tenders, Bollinger andBath Iron Works (BIW). Bollinger are involved with the LCS program with Lockheed and it also has a strategic alliancewith Incat. While Bollinger is experienced in building aluminium vessels such as Navy and Coast Guard patrol boats, ithas never built an aluminium high speed vessel. We note however that Bollinger has a strategic relationship withAustralian boat builder, Incat, which does have experience in aluminium high speed vessels. BIW is part of GeneralDynamics and ASB has advised us that BIW has also tendered for the JHSV. BIW historically has built steel hulledvessels and has also never built a high speed aluminium vessel.

� ASB's design for the JHSV is approximately 130 metres in length and is very similar to its existing aluminium hull designof the Hawaiian Superferry which is around 107 metres. As ASB has built many high speed, large, aluminium vessels,we believe it is better placed than the other two tenderers. In an industry that is so sensitive to cost blow outs and faultyor ineffective products, having a track record is a clear strategic advantage for ASB.

� Should ASB be one of the two tenderers chosen for preliminary discussions, which we believe is a high probability, it willbe given US$3M to further develop the vessel. We believe that sometime between January and June 2008, US Navy willthen select its preferred design and award the contract to one of the companies.

Expansions at Austal USA

ASB is receiving financial support to expand its Alabama shipyard, from both US Congress, through the Katrina Relief Fund,and the State of Alabama. Congress has granted the Navy approximately US$140M for allocation to boat builders in the statesof Alabama, Louisiana and Mississippi for repair and expansion of existing facilities. US Navy has granted Austal USA asignificant amount and we understand the State of Alabama is also providing funding. ASB's new facility will cost approximatelyUS$65/70M, so with the state and federal government grants, ASB will only need to contribute around half of the total cost. Theadditional facilities at its shipyards will allow for increased capacity to accommodate vessels up to 135 metres. We note:

� US Navy has invested heavily in the training of workers at Austal USA to ensure additional capacity is ready to use.

� After cancelling the second LCS, US Navy has advised ASB that it will assist the company to identify short-termcontracts so that ASB can fully utilise its workforce.

� US Navy has appropriated a significant portion of its total Katrina funding to ASB.

� US Navy is fully aware that the current capacity at Austal USA would be for around 1.5 boats per annum around the sizeof the LCS. Therefore it must be aware that if it did not provide funding to train workers and build extra capacity, AustalUSA would be unable to build the targeted LCS and JHSV orders. US Navy's apparent commitment to Austal USA isa strong signal that it is a front runner for the LCSs and/or JHSVs.

We believe these points have significant relevance because over the next 12 months, US Navy will announce:

� The preferred builder of the 53 remaining LCS vessels; and

� The two preferred designs on the JHSV, followed by the preferred builder.

We are of the opinion that US Navy's investments in Austal USA is recognition of its excellent work performed thus far on thefirst LCS. Further, we believe that US Navy's offer of assistance in finding the company short-term work means that itrecognises that Austal USA will struggle to retain its workforce before US Navy announces its preferred builder of the LCS andJHSV. In light of US Navy appropriating a significant proportion of funds to Austal USA, we believes this indicates that US Navysees Austal USA fitting into its plans at some time in the future. We consider it likely that the GD/ASB vessel will be thepreferred LCS option.


Austal

Australian Submarine Corporation

We also believe ASB to be well placed to launch a competitive bid for ASC (Australian Submarine Corporation) and expect theshare price to react positively. The Australian Government will sell ASC through a competitive tender trade sale, starting latethis year and concluding in 2008. ASC has a 25-year submarine maintenance contract that generates about $200M in revenuesannually. ASC reported $18.5M NPAT in FY06 and is also the preferred builder for the $8B Air Warfare Destroyers. We havenot factored this into our forecasts.

Share Price Catalysts

� Early 2008 - Phase II detail-design-and-construction source selection for the JHSV.

� August/September 2008 - US Navy will trial the Lockheed and GD LCS vessels.

� 2008 - US Navy will select the preferred design of the LCS.

� Early 2009 - US Navy will select its preferred LCS.

Adjustments to Valuation Metrics

As shown by the recent discussions with US Navy and GD, ASB does not have the prime position at the bargaining table. WithUS Navy showing its position in cancelling the vessel completely over a contract dispute, it is apparent that there is significantrisk to ASB's potential cash flow.

As a result, we have adjusted our measure of risk of the company by increasing its beta from 1.1 to 1.3. The beta increases thecost of equity of the company and consequently increases the discount factor used in the discounted cash flow valuation. Whilewe are of the opinion that this is merely a cash flow timing issue, we recognise that our forecasts now carry additional risk. Theupward revision of the company's beta has significantly reduced our valuation and 12-month price target. The change in thebeta reduced our valuation by approximately 9% and our 12-month price target by approximately 8.5%.

Summary

ASB continues to transform its construction process, where construction has begun in the Australian shipyards. When fullyimplemented, the Advanced Ship Building project will simplify the construction process adding to efficiency. These processes, inconjunction with new automated machinery, are being replicated at Austal USA, where further benefits are expected. While weconsider US Navy cancelling the second LCS to be a "hiccup", we do acknowledge that the company's potential cash flow fromits US-based operations (that are linked to Naval projects) are now significantly less certain. We note however that we haveaccounted for that appropriately in our valuation metrics with the increase to the company's beta.

Although we did flag the possibility of the second LCS being abandoned in FY08 because of funding concerns in a note in June,the announcement to cancel the vessel completely did come as a major surprise to us. We have removed the second LCS fromour ASB order book, decreasing our FY08 and FY09 revenue forecast by approximately A$150M (our assumed value of theLCS). As a result, our FY08 and FY09 EPS forecasts have decreased by approximately 5% and 31% respectively. We havealso decreased our capacity growth assumptions from FY10 until more certainty is available as to contract wins, particularly USNavy's 2008 budget and have also added probability weightings to potential contract wins.

Investment Opinion

The combined changes to the downward revision of our EPS forecasts and the increase to the company's beta have decreasedour valuation and 12-month price target by 36% and 35%, respectively. Our new 12-month price target is $3.47, implying a total12-month return of approximately 33%. We note that the share price lost approximately 16% of its value today, 2 November2007, however we remain of the opinion that this is an overreaction. We believe the company is primed for growth and is wellplaced to be the preferred builder of both the LCS and JHSV.

We highlight that the company faces a 12-month period of large uncertainty as it waits for US Navy to release its budget and itspreferred designs for the LCS and JHSV programs. In those circumstances, we accentuate that some investors may not bewilling to exercise the required amount of patience and this may cause the share price to react negatively and experience acutevolatility. We note that the risk profile of the company has changed considerably. That said, we remain of the opinion that ASB’sbusiness prospects are strong and that the stock is undervalued. We remain bullish on a 12-month and long term outlook andour recommendation remains BUY, on both 12-month and long term investment horizons.


UtilitiesWilbur Tong

ASX: AGK Bloomberg: AGK AU Reuters: AGK.AX 03 November 2007

AGL EnergyAlintaAGL sale - a short term gain, but along term loss

EventAGK advised it will sell its 33% interest in AlintaAGL to Alinta for$522M. AGK stated that the price offered by Alinta exceeds thevaluation placed on the investment by AGK and will result in a pre-taxprofit of $125M on the investment. It is anticipated that the transactionwill be finalised by the end of December 2007. The sale is expected tobe immediately EPS accretive, and there is no change to AGK’srevised 2008 earnings guidance of $330M-$360M.

ImplicationsWhile the sale of its interest in AlintaAGL may achieve short-term gain,it may not be beneficial to AGK's long-term strategy. Strategically,AlintaAGL could have provided AGL with a number of significantgrowth opportunities in the WA market, both in retail and generation.For example, AlintaAGL offered a development pipeline of some750MW and the option to expand into mass market electricity retailwhen full retail contestability is introduced in 2010/11. However, theseopportunities are now forgone. Since this transaction is immediatelyearning accretive, we have reduced our interest expense to reflect thepay down of debt. As a result, our FY08 EPS forecasts rise by 1% to76.2c, but the FY09 EPS falls by 2.5% due to the forgone AlintaAGLbusiness. Overall, our 12-month target price has been revised slightlyupwards, from $14.28 to $14.33. We retain our HOLDrecommendations on both the 12-month and long term investmenthorizons. Despite the recent sharp fall in the share price, we remainskeptical whether it represents a buying opportunity now, fearing morebad news to come as the company reviews its business. We need tosee the results of the full review and the reasons behind the AGM profitdowngrade on 8-Nov-07, before we review our rating.

Investment OpinionAGK is the leading energy utility in Australia with the greatest retailmarket share and customer base. The AGL-Alinta demerger processand Powerdirect acquisition have further reshaped the group'soperations.

Our investment view on AGK remains cautious, due to: (1) the recentintensified competition in the Retail market, as reflected in theincreasing churn rate and lower margins; (2) high wholesale gas prices;and (3) risks in successfully implementing its restructuring planexpected to realise full benefits in medium future.

Key Information

Price Performance

Market Statistics

Key Assumptions

Share Price $13.0312 month view HOLD12 month target return (%) 14.0


Long Term View HOLDLong Term Target Return (% pa) 11.9


Market Cap (M) $5,708

Shares (M) 438

% of Market 0.28

% of Sector 15.88

12 Month Range $11.96 - $18.23

Company Risk

Share Price Risk

Ethical rating


AGK (13.7) (14.3) (15.1)Sector (4.2) (8.7) 8.3Market 11.1 6.8 24.6

Beta: 1.1



WACC (%): 10.3




Earnings Summary



NPAT1

Adj $MEPS1

cEPS chg

%PER

xPER rel

All Ords xPER rel

Sector xDPS

cYield

%Franking

%ROE

%

2006A 251 340 74.3 86.8 17.5 0.8 0.6 17.0 1.3 100 9.6

2007A 410 520 132.6 78.4 9.8 0.5 0.4 35.5 2.7 100 19.6

2008F 421 334 76.2 (42.5) 17.1 1.1 0.9 52.0 4.0 100 5.6

2009F 327 327 74.8 (1.9) 17.4 1.2 1.0 53.6 4.1 100 4.9

AGL Energy



12M Recommendation1: HOLD 12M Target: $14.33 Long Term Recommendation 2: HOLD Long Term Target Return: 11.9% pa


Operating revenue 4,269 3,760 5,194 4,967Invest & other income 0 0 0 0

EBITDA 757 923 789 765Depreciation/Amort (206) (163) (179) (184)

EBIT 551 760 610 581Net Interest (125) (95) (133) (113)

Pre-tax profit 426 665 477 468Tax expense (187) (181) (143) (140)

Minorities/Assoc./Prefs 101 36 0 0

NPAT 340 520 334 327Non recurring items (88) (110) 88 0

Reported profit 251 410 421 327NPAT add Goodwill & Pref 0 0 0 0

Adjusted profit 340 520 334 327


EBITDA 757 923 789 765Working capital changes 216 (76) 159 0

Interest and tax (314) (146) (418) (254)

Other operating items (191) (411) 1 0

Operating cashflow 468 290 531 510Required capex (270) (150) (156) (149)

Maintainable cashflow 198 139 375 361Dividends (288) (36) (228) (231)

Acq/Disp (2,007) (1,880) 397 0

Other investing items (11) (237) 125 0

Free cashflow (2,109) (2,014) 669 130Equity (21) 912 0 0

Debt inc/(red'n) 1,886 1,342 (669) (130)

Balance sheet 2006A 2007A 2008F 2009FCash & deposits 58 280 150 150

Inventories 22 28 29 29

Trade debtors 209 1,702 1,564 1,565

Other curr assets 419 5,148 5,148 5,148

Total current assets 708 7,159 6,891 6,892Prop., plant & equip. 845 1,102 682 647

Non-curr intangibles 847 3,205 3,205 3,205

Non-curr investments 550 1,106 1,106 1,106

Other non-curr assets 43 1,420 1,420 1,420

Total assets 2,993 13,991 13,303 13,269Trade creditors 59 1,482 1,504 1,505

Curr borrowings 2,273 406 317 317

Other curr liabilities 166 2,226 2,121 2,120

Total current liab. 2,497 4,114 3,943 3,943Borrowings 223 2,041 1,331 1,201

Other non-curr liabilities 143 1,434 1,435 1,435

Total liabilities 2,864 7,590 6,709 6,579Minorities/Convertibles 0 0 0 0

Shareholders equity 130 4,214 6,594 6,690

Ratio analysis 2006A 2007A 2008F 2009FRevenue growth (%) (11.2) (11.9) 38.2 (4.4)

EBITDA growth (%) 61.5 22.1 (14.6) (3.1)

EPS growth (%) 86.8 78.4 (42.5) (1.9)



Tax rate (%) 44.0 27.2 30.0 30.0

Net debt/equity (%) >1000 51.4 22.7 20.5

Net debt/net debt + equity (%) 94.9 34.0 18.5 17.0

Net interest cover (x) 4.4 8.0 4.6 5.1

Payout ratio (%) 22.9 26.8 68.2 71.6

Capex to deprec'n (%) 131.3 91.9 87.2 81.1

NTA per share ($) (1.57) 2.30 7.74 7.96

ROA (%) 7.2 10.5 4.5 4.4

ROE (%) 9.6 19.6 5.6 4.9

Multiple analysis 2006A 2007A 2008F 2009FMarket cap (M) 5,708

Net debt ($M) 1,499

Peripheral assets ($M) 571

Enterprise value ($M) 6,635

EV/EBIT (x) 12.0 8.7 10.9 11.4





P/E sector (x) 31.3 25.8 19.8 17.0

P/E rel sector (x) 0.6 0.4 0.9 1.0


Interest Rates (%) 5.73 6.38 6.34 6.30

Inflation (%) 3.20 3.09 2.47 2.50

Notes To AccountsIn an attempt to capture the essence of the transformed AGK, ourprojections for FY07 adopt the use of the pro forma financials, which,in effect, have been prepared after taking into account the completionof the scheme proposal. However, we stress that these numbers are,as a result, quite fluid, and will only firm up as more definitivefinancials for the still-evolving AGK come to hand.


AGL Energy

AGL's decision not to exercise

AGL Energy elected to not exercise its option and instead sell its 33% interest in AlintaAGL for $522M. AGK stated that theprice offered by Alinta exceeds the valuation placed on the investment by AGL, substantially more than it values the stake on itsown books. AGL stated the deal would return it a pre-tax profit of $125M in just over 12 months, which it expects will beimmediately earnings accretive. The proceeds will be utilised to pay down syndicated debt.

Since AGL's ex-CEO, Paul Anthony's departure, the group noted a comprehensive review of outlook for future years is to becarried out. That is the reason that the market is still skeptical whether it represents a buying opportunity now despite the recentsharp fall in the share price, fearing more bad news to come as the company reviews its business.

After the appointment of the new CEO, Micheal Fraser, the first move AGL made immediately to restore investorconfidence, was to secure the group's downgraded revised earning guidance for FY08, by locking in any earnings accretiveopportunity and trimming down interest expense to improve its bottomline.

While the sale of its interest in AlintaAGL may achieve short-term gain, it may not be beneficial to AGK's long-term strategy.Fraser said he had no plans to change the group's strategy, which includes increasing its share of gas and power generationcapacity and expanding its customer base. AGK is well aware of its major weaknesses, as reflected in its reduced retailmargins, which resulted from high customer churn rates and wholesale gas prices.

Implications

Strategically, AlintaAGL could have provided AGL with a number of significant growth opportunities in the WA market, both inretail and generation. AlintaAGL could provide a wide range of longer-term opportunities, including a development pipeline ofsome 750MW and the option to expand into mass market electricity retail when full retail contestability is introduced in 2010/11.However, these opportunities are now forgone.

� AlintaAGL's existing business comprises retail and generation in WA. AlintaAGL is a WA gas retailer, with around570,000 mass market and SME gas customers as well as a small number of industrial electricity customers. Thegeneration business is currently made up of 630MW of cogeneration and open cycle gas capacity.

� Synergy, a government-owned electricity retailer, currently supplies all residential customers in WA. Full retailcontestability (FRC) is scheduled to be introduced in 2010/11. This could well imply a potential capture of householdelectricity market share from Synergy post FRC, and AlintaAGL could serve as a strong platform from which to expandinto electricity retail.

� AlintaAGL currently has some 750MW of potential cogen projects available through its relationship with Alcoa. The first140MW Pinjarra plant has been commissioned for over 12 months and the second 140MW Pinjarra plant was completedin February 2007. Two more units at Wagerup Refinery of 180MW are under construction and are scheduled to entercommercial service during the final quarter of 2007. The real asset for these businesses today is the access to gasgeneration in the tight WA market. The strengthening of the supply to the existing business and an entry into the massretail market would be the platform and the justification to pursue these development projects, which could effectivelyunderpin sales into the retail business post FRC.

On a positive note, relatively low-priced gas contracts are due to start rolling off in the coming months, which will have to bereplaced by substantially higher priced agreements reflective of WA’s currently tight gas market. The WA regulator is currentlyreviewing retail tariffs for the next three years and a new price path will be effective July 2008. We expect the retail price path tolag the increase in wholesale gas costs, thereby putting upside potential on margins.

AGK also jumped 5% late last week on speculation it may be a takeover target. It was reported that a Hong Kong powercompany is interested in assets in New South Wales.


AGL Energy

Investment View

We believe AGL can achieve its revised 2008 profit forecast of between $330M-$360 million, down from an earlier forecast ofbetween A$380M-A$400M. The company also stated its dividend forecast for the year would remain unaltered, at between 52cand 55c, and aimed to deliver 15% EPS growth per year in the medium term. However, our forecasts remainconservative, unless the company can formulate a strategy to address its underlying business threats including high customerchurn rate and wholesale gas prices.

Since this transaction is immediately earning accretive, we have reduced our interest expense to reflect the pay down of debt.As a result, our FY08 EPS forecasts rise by 1% to 76.2c, but the FY09 EPS falls by 2.5% due to the forgone AlintaAGLbusiness. Overall, our 12-month target price has been revised slightly upwards, from $14.28 to $14.33. We retain our HOLDrecommendations on both the 12-month and the long term investment horizons.

Despite the recent sharp fall in the share price, we remain skeptical whether it represents a buying opportunity now, fearingmore bad news to come as the company reviews its business. We need to see the results of the full review and the reasonsbehind the profit downgrade at its Annual General Meeting on 8 November 2007, before we review our rating on the company.


Health CareJohn Kessell

ASX: RMD Bloomberg: RMD AU Reuters: RMD.AX 02 November 2007

ResMed1Q08 Result: US sales and margins sufferfrom competitor discounting

EventRMD reported 1Q08 sales of US$186M, 14% up on pcp. Sales in theUS suffered from continued discounting by major RMD competitorRespironics, which also caused a squeeze on gross margins. Marginalso declined at the EBIT level, resulting in adjusted NPAT ofUS$25.3M, down 3% on pcp, and EPS of US3.21 cents per AustralianCDI, down 4% on pcp. RMD does not pay dividends, preferring toretain cash for reinvestment into growth.

ImplicationsRMD is struggling to regain its previous growth momentum and facesmargin pressures. Management and sales force distraction from theworldwide product recall have affected sales growth. Growth inEuropean markets has lagged Respironics. The sinking US dollar hashelped US sales into Europe and Asia, but will adversely affecttranslation into A$ earnings. We have reduced our sales growthexpectations in FY08 towards 15% from the high teens. We have alsolowered gross margin expectations from 61.5% to 60.5%, and slightlyincreased our operating cost forecasts. The net effects of our modellingchanges have been reductions in our US$ denominated EPS forecastsof 7% in FY08 and 5% in FY09. However, higher A$ assumptions takesa further 7% off the FY08 and FY09 EPS on A$ translation. Our 12month target price in A$ is down 6%. Our 12 month forecast total returnis 10% while our 3 year forecast internal rate of return is less than 1%below RMD's cost of equity.

Investment OpinionResMed remains the global leader in the Sleep Disordered Breathing(SDB) market, although CY07's product recall and loss of salesmomentum to competitor Respironics is concerning. Management isexperienced and stable. The SDB market is in its infancy, with studiesincreasingly showing links of SDB to serious medical conditions suchas heart disease and diabetes. Our long-term view is neutral.

We continue to like RMD's long term market opportunity in sleepdisordered breathing, as well as its high quality product suite. However,we would like to see a reversal of the downward trend in sales growthand margins and consider earnings risks to be to the downside.Nevertheless, at current prices, RMD appears fairly valued.

Key Information

Price Performance

Market Statistics

Key Assumptions






Shares (M) 782.5

% of Market 0.18

% of Sector 6.22

12 Month Range $4.39 - $7.04

Company Risk

Share Price Risk

Ethical rating


RMD (7.3) (10.0) (19.9)Sector 10.4 6.5 30.7Market 11.1 6.8 24.6

Beta: 1.1



WACC (%): 11.3




Earnings Summary



NPAT1

Adj $MEPS1

cEPS chg

%PER

xPER rel

All Ords xPER rel

Sector xDPS

cYield

%Franking

%ROE

%

2006A 119.5 129.9 17.3 39.6 26.6 1.2 0.7 0.0 0.0 0 17.0

2007A 83.2 139.2 18.3 5.5 25.2 1.3 0.9 0.0 0.0 0 13.4

2008F 135.3 140.5 18.3 0.2 25.1 1.6 1.0 0.0 0.0 0 12.5

2009F 174.8 180.1 23.2 26.6 19.9 1.4 1.0 0.0 0.0 0 13.5

ResMed





Operating revenue 821.6 883.6 945.0 1,127.4Invest & other income 1.8 0.0 0.0 0.0




Minorities/Assoc./Prefs 0.0 0.0 0.0 0.0

NPAT 129.9 139.2 140.5 180.1Non recurring items (4.8) (50.3) 0.0 0.0


Adjusted profit 129.9 139.2 140.5 180.1


EBITDA 223.4 237.1 229.9 282.0Working capital changes (55.8) (85.2) (25.7) (58.4)

Interest and tax (66.8) (54.5) (19.6) (45.0)

Other operating items 25.7 0.0 0.0 0.0


Maintainable cashflow (12.4) 65.3 153.4 145.0Dividends 0.0 0.0 0.0 0.0

Acq/Disp (14.2) 0.0 0.0 0.0

Other investing items (8.9) (71.8) 0.0 0.0

Free cashflow (35.4) (6.5) 153.4 145.0Equity 59.4 0.0 0.0 67.2

Debt inc/(red'n) 71.6 (29.7) (153.4) (212.2)


Inventories 156.3 189.2 199.2 239.0

Trade debtors 185.9 202.0 204.6 245.5


Total current assets 686.5 803.2 847.8 1,159.9Prop., plant & equip. 330.1 373.7 342.6 340.2




Total assets 1,355.1 1,505.0 1,497.4 1,812.2Trade creditors 60.6 63.8 64.7 77.7






Shareholders equity 993.1 1,120.6 1,202.2 1,487.1

Ratio analysis 2006A 2007A 2008F 2009FRevenue growth (%) 48.4 7.5 7.0 19.3

EBITDA growth (%) 38.3 6.1 (3.0) 22.6

EPS growth (%) 39.6 5.5 0.2 26.6



Tax rate (%) 31.3 31.6 30.6 31.0

Net debt/equity (%) (13.3) (17.4) (28.2) (38.0)



Payout ratio (%) 0.0 0.0 0.0 0.0

Capex to deprec'n (%) 387.7 80.6 70.5 70.5

NTA per share ($) 0.88 1.09 1.19 1.50

ROA (%) 15.9 14.1 12.9 14.2

ROE (%) 17.0 13.4 12.5 13.5


Net debt ($M) (199.6)


Enterprise value ($M) 3,400.0

EV/EBIT (x) 18.1 17.2 18.3 14.5





P/E sector (x) 35.8 29.3 24.4 20.8

P/E rel sector (x) 0.7 0.9 1.0 1.0

Assumptions 2006A 2007A 2008F 2009FUS$/A$ ($) 0.74 0.79 0.87 0.86

Euro/A$ ($) 0.61 0.60 0.59 0.58

Inflation (%) 3.20 3.09 2.47 2.50

Notes To AccountsAll P&L items (except Reported profit) now exclude GoodwillAmortisation as per the IFRS requirements. Note: RMD reports inUSD but all data are translated into AUD in this table.


ResMed

1Q08 Result

TABLE 2: QUARTERLY EARNINGS HISTORY

Source: Company/Aegis Equities

� Revenue - RMD reported sales of US$186M, up 14% on pcp. Sales in the Americas grew just 9% on 1Q07, but thelatter's result was aided by the declining sales in the RMT (motors) business which RMD has been exiting. Excluding thisdiscontinued business, Americas' sales growth was 11%, which is still well down on historical quarter on quarter growthrates that have reached nearly 50% in some periods over the past 12-18 months. Unit volumes were said to be growingwell, but the average selling price of some products has come under continued pressure from discounting by RMD'smajor competitor, Respironics.

� In the Rest of World, the growth rate was 19%, which is higher than the growth rates seen in the last two quarters (15-16%) but still down on growth rates that have ranged from 20-50% in the preceding 12-18 month period. Currencyboosted the ROW sales growth by about 5-6%, so constant currency sales in ROW was also disappointing. Germanyremains a challenging market for RMD, but most other regions were said to be "growing strongly".

� RMD confirmed that the sales force continued to be somewhat distracted by the product recall issue, but where thesales people had been spending up to one quarter of their time dealing with this in the early stages of the recall, nowaround 10-15% of time was spent servicing clients in regards to the recall.

� Operating Expenses - Selling, general and administrative (SG&A) costs (excluding stock based compensationcosts) for the quarter rose 17% over 1Q07 to reach US$58M. However, in constant currency terms, SG&A costs rose11%, which is less than the overall rate of sales growth.

� Stock based compensation costs increased 26% over pcp to US$4.6M. Note that RMD reports proforma SG&A costs,which strips out stock based compensation, in addition to GAAP SG&A costs, which includes employee payments instock, as RMD appears to believe that proforma earnings without the stock based compensation gives a better indicationof the true picture of the business. We consider stock based compensation as a real cost, and in accordance withcurrently accepted standards (AIFRS), we include these in our earnings numbers.

� RMD continues to maintain its strong R&D spending, with 7% of sales spent on R&D in the quarter (9% in constantcurrency terms). Continued innovation is a necessity if RMD is to regain its ability to charge premium prices across itsproduct lines in the face of discounting by Respironics.

$M(USD) 1Q07 2Q07 3Q07 4Q07 FY07 1Q08Sales 163.6 178.4 183.0 191.3 716.3 185.7...% change pp -4% 9% 3% 5% -3%...% change pcp 29% 22% 13% 12% 18% 14%EBITDA 44.4 50.4 46.9 48.3 190.01 43.1...% change pp -2% 13% -7% 3% -11%...% change pcp 35% 21% 4% 7% 15% -3%Depreciation2 -8.0 -8.0 -8.0 -8.0 -32.0 -9.8EBIT 36.4 42.4 38.9 40.3 158.0 33.3...% change pp -6% 16% -8% 4% -17%...% change pcp 38% 22% 1% 4% 14% -9%Net interest 1.5 1.5 1.6 1.9 6.5 2.3Pre-Tax Profit 37.9 43.9 40.5 42.2 164.5 35.6Tax Expense -11.8 -13.8 -12.9 -13.4 -51.9 -10.3Adjusted NPAT 26.1 30.0 27.5 28.9 112.5 25.3...% change pp -6% 15% -8% 5% -12%...% change pcp 50% 29% 0% 4% 17% -3%Non-recurring (net of tax) 0.0 0.0 -41.8 0.0 -41.8 0.0G/will Amort. (net of tax) -1.1 -1.1 -1.1 -1.2 -4.6 -1.2Reported Net profit 25.0 28.9 -15.4 27.7 66.2 24.1EBITDA Margin 27.2% 28.2% 25.6% 25.3% 26.5% 23.2%EBIT Margin 22.3% 23.8% 21.2% 21.1% 22.1% 17.9%Diluted EPS (US¢)1 33.5 38.4 35.1 36.8 143.8 32.1...% change pp -6% 15% -8% 5% -13%...% change pcp 46% 27% 0% 3% 16% -4%Note 1: Diluted EPS is US cents per Australian CDI (10 CDI's issued for each US$ RMD share)Note 2: Depreciation estimated in FY08


ResMed

� Margins - Gross margin (GM) for the quarter was 60.2%, which we believe is the lowest level of gross margin recordedby RMD for a quarter. The GM in FY05 was 64.6%, which declined to an average of 62% in each of FY06 and FY07. Inthe fourth quarter of FY07, the GM was 61.3%, with a large part of the decline blamed on "irrational" pricing fromcompetitors. The 1Q08 GM is surprisingly low, providing evidence that the discounting behaviour in RMD's key marketshas not stopped. RMD indicated that it expected the GM to remain in the 60-61% range for the foreseeable future, so wehave adjusted down our margin expectation accordingly.

� RMD's 1Q08 EBIT of US$33.3M equated to an EBIT margin of 17.9%, which is well down on the 22.3% recorded in1Q07. This is a concerning result and we have lowered our EBIT margin expectations for the remainder of FY08 from22% to 20%.

� Working Capital - RMD's inventory level at the end of 1Q08 of US$167M represents a ratio of 22.6% of inventory to thepast 12 months of sales (ie rolling four quarters). At the end of 1Q07, this ratio was 19.1%. In addition, accountsreceivables days sales outstanding in 1Q08 amounted to 79 days, which is up from 70 days in the year ago period.These figures suggest that RMD would benefit from tighter working capital management, although some of the inventoryincrease may be related to the management of the recall.

� Operating Cashflow - RMD generated operating cashflow of US$28.1M for the current quarter, 8% higher than pcp.

� Profit - Our adjusted NPAT for the quarter is US$25.3M, which is 3% below the profit achieved in 1Q07. The pricediscounting and lower than expected sales growth rates are hurting RMD's profit growth. Profit is also weighed down byhigher stock based compensation payments, which could be better aligned with the company's actual profitperformance.

� We calculate EPS for RMD for 1Q08 as US32.1 per US share (US3.21c per Australian CDI), 4% below the pcp. Notethat we remove amortisation of acquired intangibles from our expenses (and so differ from RMD's reported US GAAPearnings). As RMD frequently books minor "restructuring" costs, we treat these as ordinary expenses, as does theGAAP standard. RMD's reported "proforma" earnings excludes both amortisation and restructuring costs as well asstock based compensation expenses, so our EPS numbers differ materially from this presentation of earnings.

Summary and Investment View

� RMD is struggling to regain its previous growth momentum and faces margin pressures - CY07 is the year RMDhas stumbled in the face of major competitor Respironics' play for greater US market share through discounting.Management and sales force distraction from the worldwide product recall have contributed to lower sales growth. RMDhas also faced disappointing growth in European markets compared with Respironics. The Saime acquisition hasyielded unpleasant product quality surprises, with the first Saime ventilators only now reaching a quality that will allowRMD to market beyond the existing Saime customer base. Gross margins have been pressured by price competition inthe US and operating margins have also narrowed. The sinking US dollar has helped US sales into European and Asianmarkets, but will adversely affect the level of earnings when translated back into A$.

� We reduce our valuation outlook ...- We have reduced our sales growth expectations in FY08 towards 15% from thehigh teens. We have also lowered gross margin expectations from 61.5% to 60.5%, and slightly increased our operatingcost forecasts. The net effects of our modelling changes have been reductions in our US$ denominated EPS forecastsof 7% in FY08 and 5% in FY09. However, our higher A$ assumptions, which we have peaking at $0.87 currently anddeclining to a long term average of $0.75 in three years time, takes a further 7% off the FY08 and FY09 EPS on A$translation. Our 12 month target price in A$ is down 6%.

� ... but maintain our HOLD recommendations - We continue to like RMD's long term market opportunity in sleepdisordered breathing, as well as its high quality product suite. However, we would like to see a reversal of the downwardtrend in sales growth and margins and consider earnings risks to be to the downside. Nevertheless, at current prices,RMD appears fairly valued. Our 12 month forecast total return is 10% while our 3 year forecast internal rate of return isless than 1% below RMD's cost of equity. We therefore retain our HOLD recommendations on 12 month and long terminvestment horizons.


Health CareSam Haddad

ASX: ANN Bloomberg: ANN AU Reuters: ANN.AX 02 November 2007

AnsellBuoyant 1Q08 though weighed down byweaker US dollar

EventANN at today's AGM reconfirmed its FY08 EPS guidance of US$0.56to US$0.60. Management noted good sales growth in all three regionsand in all three businesses including Occupational, Professional andConsumer. Occupational commenced the year on a buoyant note,though concerns about the US outlook were noted. Consumer is seeinggrowth from acquisitions and organically, with most condom markets,except the US, seeing gains on last year. Professional has seen somemargin improvement, but not to the extent management was expecting.Management noted that while the weaker US dollar does not pose adownside risk to US dollar EPS, the translation impact into Australiandollars is expected to be negative. On other issues, the buy-back of5.7M shares between 1 July 1 to 19 October will be EPS accretive inthe current year. It was also noted that the recent increase in marketinterest rates has not impacted ANN, which mostly has a three to fiveyear fixed interest rate debt profile.

ImplicationsANN continues to face headwinds as a result of the weaker US dollar,the slowing US economy and the high price of latex. The open briefingclearly highlighted these factors and their implications to ANN. While nonew material information was announced, the openbriefing reconfirmed our forecasts. As a result, we have madeno changes to our model and our FY08-FY09 EPS forecasts areunchanged. Our 12-month price target remains at $13.31 and we retainour Hold recommendation.

Investment OpinionPersistently high latex prices create headwinds for ANN, but we expectsupply increases to come on-stream in about two years. ANN is stillamong the top three globally in each of its major product categoriesand the difficult latex environment has forced ANN to focus oninnovating and reducing costs. The current efficiency initiatives willstand the company in very good stead when latex prices revert towardslong-term averages. Our long-term investment view on ANN is neutral.

We like the bolt-on condom acquisitions made by ANN in China, Braziland Poland. ANN has great brands in each of its three divisions and wewould still like to see ANN add to this portfolio with a large acquisition,but recognise the scarcity of sizeable, attractively priced targets.Despite the attractive forward P/Es compared with forecast EPS growthrates, the stock is fairly valued on a DCF basis. ANN is susceptible to astrengthening A$. HOLD.

Key Information

Price Performance

Market Statistics

Key Assumptions






Shares (M) 146.8

% of Market 0.09

% of Sector 3.17

12 Month Range $10.52 - $13.40

Company Risk

Share Price Risk

Ethical rating


ANN 5.9 12.4 13.3Sector 12.9 9.5 33.7Market 13.3 10.1 27.5

Beta: 1.1



WACC (%): 10.7




Earnings Summary



NPAT1

Adj $MEPS1

cEPS chg

%PER

xPER rel

All Ords xPER rel

Sector xDPS

cYield

%Franking

%ROE

%

2006A 116.1 121.6 76.1 13.8 16.2 0.7 0.4 21.0 1.7 0 19.0

2007A 100.0 100.0 66.7 (12.4) 18.5 1.0 0.6 24.0 1.9 0 16.4

2008F 98.9 98.9 69.8 4.6 17.7 1.1 0.7 24.5 2.0 0 17.5

2009F 111.1 111.1 81.3 16.5 15.2 1.1 0.7 28.5 2.3 0 19.5

Ansell





Operating revenue 1,138.2 1,248.7 1,262.4 1,378.5Invest & other income 0.0 0.0 0.0 0.0


EBIT 138.0 122.6 137.4 152.6Net Interest (5.9) (9.0) (12.8) (12.4)



NPAT 121.6 100.0 98.9 111.1Non recurring items (5.5) 0.0 0.0 0.0


Adjusted profit 121.6 100.0 98.9 111.1


EBITDA 162.6 148.4 164.5 181.0Working capital changes (29.7) 14.2 (20.0) (27.8)

Interest and tax (22.2) (27.2) (26.0) (34.4)

Other operating items 15.2 (13.4) 1.5 7.9



Acq/Disp 29.0 (52.4) 0.0 0.0


Free cashflow 107.9 13.5 63.4 70.3Equity (99.0) (111.9) (128.0) 0.0

Debt inc/(red'n) 60.9 (24.9) 64.6 (70.3)


Inventories 186.0 183.0 195.9 217.1

Trade debtors 221.5 207.8 214.6 237.9







Curr borrowings 114.3 17.2 17.2 17.2







EBITDA growth (%) (4.9) (8.7) 10.8 10.1

EPS growth (%) 13.8 (12.4) 4.6 16.5



Tax rate (%) 6.0 8.4 17.0 17.0

Net debt/equity (%) 11.3 21.6 36.4 20.3



Payout ratio (%) 27.6 36.0 35.1 35.1

Capex to deprec'n (%) 63.5 89.8 75.0 75.0

NTA per share ($) 2.24 1.84 1.49 2.06

ROA (%) 10.8 10.1 12.8 14.7

ROE (%) 19.0 16.4 17.5 19.5


Net debt ($M) 129.2



EV/EBIT (x) 14.3 16.1 14.4 12.9





P/E sector (x) 36.2 29.6 24.6 21.0

P/E rel sector (x) 0.4 0.6 0.7 0.7

Assumptions 2006A 2007A 2008F 2009FUS$/A$ ($) 0.74 0.79 0.87 0.86

Interest Rates (%) 5.73 6.38 6.34 6.30

Inflation (%) 3.20 3.09 2.47 2.50

Notes To AccountsAll P&L items (except Reported profit) now exclude GoodwillAmortisation as per the new IFRS requirements.


MaterialsGaius King

ASX: MBN Bloomberg: MBN AU Reuters: MBN.AX 02 November 2007

Mirabela Nickel Limited1Q08: Updated commodity and currencyassumptions increase valuation by 26%

EventAfter the release of the BFS in 4Q07, MBN had been waiting for anenvironmental licence, which was subsequently awarded. MBN hasapproved the immediate commencement of construction at Santa Rita,establishing a site office, amenities and the upgrade of local roads.GRD Minproc has completed basic engineering for the plant and hasbeen retained by the company to supply consultation services. TwoBrazilian firms have also been engaged: ECM will be responsible forproject scheduling, engineering and procurement, while ConstrutoraBarbosa Mello will be responsible for the construction. MBN stillbelieves that commissioning of the plant remains on target for 1Q10.

ImplicationsWhat has been of particular interest during the quarter is thetremendous exploration success at the Southern Deeps, Santa Ritaand Peri Peri projects, suggesting that overall resources may getsignificantly larger yet. We have also updated our commodityassumptions, the USD/AUD exchange rate forecast, increased the finalyear of operation from 2040 to 2050 and adjusted for the recentappreciation of the Brazilian Real on long-term operating costs. As aresult of the above changes, our valuation has increased 26% to $8.84per share.

Investment OpinionThe research on this company has been commissioned and as suchAegis has received a fee for its initiation and ongoing researchcoverage. No part of either the fee received by Aegis or thecompensation paid to its analysts involved in preparing this report was,is or will be directly or indirectly, related to the valuation, earningsforecast or views expressed in this report.

From 31 May 2007 Aegis has discontinued providing a rating on thoseequities it has been commissioned to provide research coverage. Aegiscontinues to provide detailed research analysis on all issues likely tohave a material impact on the equity, commentary on market sensitiveannouncements and financial models and valuations.

Key Information

Price Performance

Market Statistics

Key Assumptions

Share Price $6.17Valuation $8.84

Market Cap (M) $842

Shares (M) 130.5

% of Market 0.04

% of Sector 0.12

12 Month Range $1.90 - $7.20

Company Risk

Share Price Risk

Ethical rating


MBN 27.4 9.3 >99Sector 24.0 35.1 49.4Market 13.3 10.1 27.5

Beta: 1.7



WACC (%): 12.5




Earnings Summary



NPAT1

Adj $MEPS1

cEPS chg

%PER

xPER rel

All Ords xPER rel

Sector xDPS

cYield

%Franking

%ROE

%

2006A (0.9) (0.9) (2.1) n/a (<99) (13.3) (15.6) 0.0 0.0 0 (13.8)

2007A (3.1) (3.1) (2.9) n/a (<99) (11.2) (12.6) 0.0 0.0 0 (3.2)

2008F (5.4) (5.4) (3.3) n/a (<99) (11.5) (13.3) 0.0 0.0 0 (2.1)

2009F 148.4 148.4 114.4 n/a 5.4 0.4 0.4 0.0 0.0 0 46.2

Mirabela Nickel Limited


Notes:1. The risk ratings are on a 12 month perspective, where five stars denotes low risk and one star denotes high risk. Company risk takes into account expectedfinancial, strategic and execution risks associated with the company. Share price risk is a measure of the expected volatility of the price and other trading factors.2. The Ethical rating rates a company on an ethical investment basis where five stars denote very good and one star a poor rating. The score is based on four key factors:areas of operating, environmental, corporate governance and social factors. For more information see www.aegis.com.au.

Valuation: $8.84 Company risk 1: Share Price risk 1: Ethical rating 2:


Operating revenue 0.0 0.0 0.0 285.3Invest & other income 0.0 (0.2) (2.6) (1.0)

EBITDA (1.1) (3.1) (7.6) 191.8Depreciation/Amort (0.0) (0.0) 0.0 (12.0)

EBIT (1.1) (3.1) (7.6) 179.8Net Interest 0.2 0.0 2.2 (4.0)

Pre-tax profit (0.9) (3.1) (5.4) 175.8Tax expense (0.0) 0.0 0.0 (27.5)


NPAT (0.9) (3.1) (5.4) 148.4Non recurring items 0.0 0.0 0.0 0.0

Reported profit (0.9) (3.1) (5.4) 148.4NPAT add Goodwill & Pref 0.0 0.0 0.0 0.0

Adjusted profit (0.9) (3.1) (5.4) 148.4


EBITDA (1.1) (3.1) (7.6) 191.8Working capital changes 0.0 0.6 (0.3) (93.0)

Interest and tax 0.0 2.4 2.2 (8.2)

Other operating items (0.2) (0.2) 2.3 0.8

Operating cashflow (1.3) (0.3) (3.3) 91.5Required capex (0.2) 0.0 0.0 (10.5)

Maintainable cashflow (1.5) (0.3) (3.3) 81.0Dividends 0.0 0.0 0.0 0.0

Acq/Disp (7.6) (31.7) (292.6) (18.0)

Other investing items (0.0) 0.0 0.0 0.0

Free cashflow (9.1) (32.0) (295.9) 63.0Equity 13.6 246.1 0.4 0.8

Debt inc/(red'n) 0.2 0.0 295.5 (63.8)


Inventories 0.0 0.0 0.0 47.0

Trade debtors 0.8 1.0 0.0 46.0














EBITDA growth (%) n/a n/a n/a n/a

EPS growth (%) n/a n/a n/a n/a



Tax rate (%) (0.8) 0.2 0.0 15.6

Net debt/equity (%) (31.4) (82.7) 30.9 3.8

Net debt/net debt + equity (%) (45.7) (477.9) 23.6 3.7

Net interest cover (x) n/a n/a n/a 44.8

Payout ratio (%) 0.0 0.0 0.0 0.0

Capex to deprec'n (%) 674.6 0.0 0.0 87.5

NTA per share ($) 0.11 1.83 1.58 2.69

ROA (%) (15.7) (3.1) (2.6) 43.7

ROE (%) (13.8) (3.2) (2.1) 46.2


Net debt ($M) (382.3)



EV/EBIT (x) (<99) (<99) (62.1) 2.6

EV/EBITDA (x) (<99) (<99) (62.1) 2.4EV/EBITDA All Ind (x) 10.3 9.2 8.3 7.6

EV/EBITDA rel All Ind (x) (42.3) (17.3) (7.5) 0.3

P/E (x) (<99) (<99) (<99) 5.4P/E rel All Ind (x) (12.5) (10.9) (10.8) 0.4

P/E rel All Ind ex banks (x) (11.4) (10.3) (10.5) 0.3

P/E sector (x) 18.5 17.1 14.0 12.3

P/E rel sector (x) (15.6) (12.6) (13.3) 0.4


Interest Rates (%) 5.73 6.38 6.34 6.30

Inflation (%) 3.20 3.09 2.47 2.50


Mirabela Nickel Limited

Updated Commodity & Currency AssumptionsWe have recently updated our commodity and currency assumptions. In particular, our long-term USD/AUD rate was raised 4%to US$0.75. Likewise, our long-term nickel price rose from US$5.70/lb to US$6.60/lb. The increase in the nickel price is primarilythe reason why our valuation has increased 26%.

Significant and Continued Exploration SuccessMBN has had exploration success at the following:

� The Central and Southern Deeps region at Santa Rita;

� The discovery of a new zone of mineralisation at Santa Rita in an area that previously was thought to have terminated;and

� Recent drill results from Peri Peri indicate that the ore body thickens at depth.

Although conservative, the company has yet to update its JORC-compliant resource/reserve figures. Therefore, we haveincreased only the final year of production from 2040 to 2050. It has had a marginal effect on valuation by increasing it 2%.

Effect of Brazilian Real - Construction CostsThe total project cost of Santa Rita is estimated to be around US$260M. Of MBN's cash holdings, approximately $160M hasbeen allocated to construction, with the balance ($100M) funded via debt. The Brazilian Real (BR$) has recently appreciatedmarkedly versus the USD and is currently 1.73.

� The Santa Rita BFS construction costs were based on a US$/BR$ exchange rate of 2.05 (+/-10%);

� MBN estimates that 80% of construction costs will be denominated in the Brazilian currency;

� The company has ordered long-lead items such as Ball and SAG mills worth US$22M, a cost that has beendenominated in USD, which has effectively de-risked from further BR$ appreciation;

� MBN has entered into forward exchange contracts to convert US$140M to Brazilian Real at an average exchange rate of2.034; and

� As a result of prudent currency hedging by MBN management, we estimate that the average-weighted total constructioncost is still (just) within the BFS estimate (+9.7%).

In reality, however, the company is in a very strong capital position, that is, if construction costs do exceed the BFS estimate (aswe expect), it has ample reserves and project flexibility to absorb it. If and when the Brazilian Real exceeds the BFSconstruction cost estimate variance, we will begin to account for it in our valuation.

Effect of the Brazilian Real - Long-term Operating CostsIn the BFS, Santa Rita's long-term operating costs were estimated at an exchange rate of 2.22 (+/-15%).

� At the current exchange rate of 1.73, long-term operating costs are 13% higher than the BFS estimate.

� The alternate valuation for MBN if the Brazilian Real was still within GRD's BFS estimate would have been 5% higherat $9.29 per share.


IndustrialsBen Holgate

ASX: PMP Bloomberg: PMP AU Reuters: PMP.AX 02 November 2007

PMP LtdFY08 guidance reaffirmed; ACCC clearsacquisition of Times Printers

EventPMP today reaffirmed its guidance that FY08 EBIT would be similar toFY07 EBIT. PMP expects 1H08 earnings to be between $45M and$48M. Softer earnings in the first half will be offset by a strongersecond half on a comparable basis. Capex, excluding final paymentsfor the press upgrade at Moorebank, is expected to be $35M in FY08,with net debt of $220M and finance costs of $20M. Meanwhile, theACCC has approved PMP's acquisition of Times Printers (Australia), aVictorian-based printer of magazines and catalogues, from TimesPublishing Limited (TPL) of Singapore for about $80M. PMP will issueabout 39M new PMP ordinary shares to TPL at an issue price of $1.65,with the balance of about $15M to be paid in cash.

ImplicationsPMP's guidance is consistent with our forecasts. We have slightlyupgraded our FY08 forecasts for capex and finance costs. TheTimes acquisition will benefit PMP in three ways: it will be EPSaccretive from FY09; PMP establishes a relationship with an Asianpartner via TPL's 11.5% stake in PMP; and PMP will avoid spendingtens of millions of dollars upgrading its Victorian presses. Although thetransaction occurs in November 2007, we assume it will besome months into 2H08 before Times makes meaningful earningscontributions due to restructuring costs and integration issues. OurEPS forecasts decline 3% in FY08 and increase 2% in FY09. Our 12-month target price is now $1.80. We retain our neutral view on thestock.

Investment OpinionPMP is one of Australia's largest printers in the magazine, retailcatalogue and directory market segments. However, PMP's earningshistory has been volatile, partially due to the competitive industrydynamics and management's operational abilities. Currentmanagement upgraded the presses and printing plants, which grantsPMP a more competitive footing. However, long term, it faces pressurefrom low-cost Asian competitors and online publishing.

Price pressure and increased competition have prevented growth inPMP's core Printing business, which generates about 89% of EBIT andmore than half of total revenues. Management guidance is for earningsto be flat in FY08. PMP's $80M acquisition of Victorian-based TimesPrinters will be EPS accretive from FY09. We hold a neutral view onthe stock on a short-term basis.

Key Information

Price Performance

Market Statistics

Key Assumptions





Market Cap (M) $524

Shares (M) 305.3

% of Market 0.03

% of Sector 0.28

12 Month Range $1.40 - $2.09

Company Risk

Share Price Risk

Ethical rating


PMP 2.7 (8.6) (5.6)Sector 12.1 7.0 29.2Market 13.3 10.1 27.5

Beta: 1.3



WACC (%): 10.6




Earnings Summary



NPAT1

Adj $MEPS1

cEPS chg

%PER

xPER rel

All Ords xPER rel

Sector xDPS

cYield

%Franking

%ROE

%

2006A 33.6 54.9 18.1 11.7 9.1 0.4 0.3 0.0 0.0 0 26.3

2007A 46.4 48.6 16.1 (11.5) 10.3 0.5 0.4 3.0 1.8 0 19.4

2008F 53.3 53.3 17.0 5.8 9.7 0.6 0.4 2.6 1.6 0 17.3

2009F 61.8 61.8 17.9 5.6 9.2 0.6 0.5 5.4 3.3 0 15.3

PMP Ltd














EBITDA 115.8 128.3 132.5 141.5Working capital changes 7.7 (6.0) (1.1) (3.4)

Interest and tax (27.7) (25.0) (39.7) (33.2)

Other operating items (39.7) 7.1 0.8 2.2


Maintainable cashflow 2.9 56.9 57.5 72.2Dividends 0.0 0.0 (13.2) (13.6)

Acq/Disp 1.8 34.5 (75.0) 0.0


Free cashflow 1.3 90.3 (30.7) 58.6Equity 2.1 1.6 65.8 0.0

Debt inc/(red'n) (3.4) (91.0) (35.1) (58.6)


Inventories 80.8 81.7 83.5 88.7

Trade debtors 138.6 152.5 155.8 165.6













Ratio analysis 2006A 2007A 2008F 2009FRevenue growth (%) (6.6) 3.5 2.2 6.1

EBITDA growth (%) 6.2 10.8 3.3 6.8

EPS growth (%) 11.7 (11.5) 5.8 5.6



Tax rate (%) 1.1 28.0 25.0 25.0

Net debt/equity (%) 152.6 93.9 58.3 37.9



Payout ratio (%) 0.0 18.7 15.3 30.1

Capex to deprec'n (%) 157.5 128.4 84.2 77.5

NTA per share ($) 0.43 0.57 0.81 0.95

ROA (%) 10.7 11.6 11.2 11.5

ROE (%) 26.3 19.4 17.3 15.3


Net debt ($M) 255.1



EV/EBIT (x) 9.5 8.5 8.6 8.1





P/E sector (x) 31.4 26.8 22.1 18.5

P/E rel sector (x) 0.3 0.4 0.4 0.5


Interest Rates (%) 5.73 6.38 6.34 6.30

Inflation (%) 3.20 3.09 2.47 2.50

Notes To AccountsAll P&L items (except Reported profit) now exclude GoodwillAmortisation as per AIFRS requirements.


FinancialsPeter Rae

ASX: PTM Bloomberg: PTM AU Reuters: PTM.AX 02 November 2007

Platinum Asset ManagementEarnings downgrade following AGMguidance

EventPTM announced that normalised NPAT for 1Q08 is $58.7M, up 4% onpcp, and that costs are tracking predictably. The unknown factors areinvestment performance, funds flow and funds under management(FUM). PTM anticipated paying out 80% to 90% of NPAT, with futuredividends expected to be fully franked. PTM will not be offeringearnings guidance or forecasts, but hoped the FY08 result wouldparallel the FY07 results and had a cautious outlook due to highlyvolatile markets.

ImplicationsThe 1Q08 decline in PTM’s FUM from $21.2B at 30 June 2007 to$21.1B at 30 September 2007, coupled with the anticipated outflow of$487M during October 2007 from an institutional mandate, hasprompted a revision to PTM’s earnings outlook. We have reduced ourforecasts for full year growth in FUM and aligned full year performancefees to PTM’s guidance of $26M. These changes have resulted in areduction in our FY08 EPS forecast from 36.3 cents to 33.1 cents and adrop in FY09 EPS forecast from 39.4 cents to 36.7 cents.Consequently, our 12-month target has decreased from $6.60 to $6.23.We retain our HOLD recommendation on both a 12-month and a long-term view.

Investment OpinionThe growth in wealth management and superannuation assets isexpected to increase demand for the type of products offered by PTM.Over the long term, we expect the demand for investment assets inAustralia to exceed supply, which will push investors to seek moreoffshore diversification, thus benefiting global fund managers such asPTM. This should translate into strong earnings growth over themedium to long term. However, at current prices, we rate PTM as aHOLD on a long-term view.

We have a positive long-term view of PTM, given the outlook for thewealth management industry and the expected growth in demand foroffshore assets. However, there a number of challenges in the shortterm, given the under-performance of its funds over the past year,outflows from institutional mandates and the current volatility in globalequity markets. At current prices, we rate PTM as a HOLD on a 12-month view.

Key Information

Price Performance

Market Statistics

Key Assumptions






Shares (M) 588.4

% of Market 0.17

% of Sector 0.52

12 Month Range $5.00 - $9.11

Company Risk

Share Price Risk

Ethical rating


PTM (12.0) n/a n/aSector 9.9 1.2 14.5Market 11.2 8.1 25.1

Beta: 1.2



WACC (%): 12.7




Earnings Summary



NPAT1

Adj $MEPS1

cEPS chg

%PER

xPER rel

All Ords xPER rel

Sector xDPS

cYield

%Franking

%ROE

%

2006A 211.3 187.6 33.2 51.5 17.9 0.8 0.8 0.0 0.0 0 95.3

2007A 186.2 189.1 33.6 1.2 17.6 0.9 1.0 0.0 0.0 0 190.6

2008F 186.3 186.3 33.1 (1.4) 17.9 1.1 1.2 30.0 5.1 100 121.2

2009F 207.6 207.6 36.7 10.9 16.1 1.1 1.2 33.0 5.6 100 104.3

Platinum Asset Management










NPAT 187.6 189.1 186.3 207.6Non recurring items 23.8 (2.9) 0.0 0.0


Adjusted profit 187.6 189.1 186.3 207.6


EBITDA 268.7 271.0 268.3 298.8Working capital changes (5.9) 3.6 3.7 (1.3)

Interest and tax (26.5) (121.9) (80.9) (84.9)




Acq/Disp 0.0 0.0 0.0 0.0


Free cashflow 99.5 (396.6) 93.3 33.5Equity 17.0 12.3 0.0 0.0

Debt inc/(red'n) 0.0 0.0 (93.3) (33.5)


Inventories 0.0 0.0 0.0 0.0

Trade debtors 21.3 24.1 20.7 23.2














EBITDA growth (%) 54.6 0.9 (1.0) 11.4

EPS growth (%) 51.5 1.2 (1.4) 10.9



Tax rate (%) 30.0 30.1 30.0 30.0

Net debt/equity (%) (117.7) (93.9) (98.5) (100.1)

Net debt/net debt + equity (%) 664.1 (<1000) (<1000) >1000


Payout ratio (%) 0.0 0.0 90.6 89.8

Capex to deprec'n (%) 78.3 383.1 115.5 115.5

NTA per share ($) 0.39 0.14 0.30 0.36

ROA (%) 106.7 177.8 142.2 125.1

ROE (%) 95.3 190.6 121.2 104.3


Net debt ($M) (73.1)



EV/EBIT (x) 12.7 12.6 12.8 11.5





P/E sector (x) 21.7 17.9 14.9 13.5

P/E rel sector (x) 0.8 1.0 1.2 1.2


Interest Rates (%) 5.73 6.38 6.34 6.30

Inflation (%) 3.20 3.09 2.47 2.50

Notes To AccountsFY06 and FY07 reported profit figures are statutory numbers. FY06and FY07 adjusted profit figures are pro forma adjusted numbers.


EnergyTony Stepcich

ASX: ORG Bloomberg: ORG AU Reuters: ORG.AX 02 November 2007

Origin Energy1Q08 Production report

EventORG has released the 1Q08 quarterly production report for its oil & gasexploration & production subsidiaries. Sales revenue was $129.6M, up6% on the pp and 11% higher than that of the pcp. Total productionwas 24.2PJe, up 9% on the pp and 10% higher than that of the pcp.Coal seam gas (CSG) production was 7.6PJ, up 24% on the pp. Oilproduction of 254kbbl's was 22% lower than the pp. The Otway GasProject commenced production in September. Work continues on theKupe gas project, which is expected to be in production in 1H FY09.

ImplicationsORG's oil and gas subsidiaries had a record quarter; the only blackspot was the fall in oil production. A leak in the Moonie to Brisbanepipeline resulted in the temporary shut-in of the Yanda oilfield, costing3,600bbl of oil production. There was also a wax blockage in the SACopper Basin pipeline, resulting in the shut-in of some wells. Weassume the rest of the oil production reduction was from natural fielddecline. We maintain our current HOLD recommendation on ORG witha 12-month price target of $10.37. We also maintain our long-termHOLD recommendation on ORG.

Investment OpinionORG is a well-integrated diversified energy company with good organicgrowth prospects helped by healthy gas reserves. ORG's earningsstream is characterised by strong and reliable cash flow. ORG has anexcellent management team and a consistent sound growth strategy.ORG remains one of our preferred exposures in the diversified utilitiesmarket segment.

ORG has a well-established growth path through its upstream andproduction investments, with various development projects either inramp-up, under construction or in planning. During this transitionalstage, the usual valuation exercises are next to useless. ORG isnevertheless in demand as believers in the company's strategy get onboard. Talk of corporate activity will keep the interest of investors whohave a shorter-term focus.

Key Information

Price Performance

Market Statistics

Key Assumptions






Shares (M) 887

% of Market 0.40

% of Sector 6.62

12 Month Range $7.06 - $10.76

Company Risk

Share Price Risk

Ethical rating


ORG (5.6) 2.0 29.4Sector 17.2 20.1 39.5Market 13.3 10.1 27.5

Beta: 0.9



WACC (%): 9.4




Earnings Summary



NPAT1

Adj $MEPS1

cEPS chg

%PER

xPER rel

All Ords xPER rel

Sector xDPS

cYield

%Franking

%ROE

%

2006A 332 338 42.6 5.5 21.3 1.0 0.8 18.0 2.0 100 12.4

2007A 457 370 43.6 2.5 20.8 1.1 0.7 21.0 2.3 100 9.6

2008F 442 442 50.4 15.5 18.0 1.1 1.0 22.5 2.5 100 7.4

2009F 466 466 53.0 5.1 17.1 1.2 1.0 24.0 2.6 100 7.4

Origin Energy





Operating revenue 5,988 6,471 7,604 7,739Invest & other income (10) (32) (36) (18)

EBITDA 1,073 1,184 1,053 1,073Depreciation/Amort (297) (330) (263) (263)

EBIT 776 854 790 810Net Interest (167) (215) (168) (157)

Pre-tax profit 609 639 621 653Tax expense (169) (157) (122) (129)

Minorities/Assoc./Prefs (102) (112) (57) (58)

NPAT 338 370 442 466Non recurring items (6) 87 0 0

Reported profit 332 457 442 466NPAT add Goodwill & Pref 0 0 0 0

Adjusted profit 338 370 442 466


EBITDA 1,073 1,184 1,053 1,073Working capital changes 55 (135) (22) (5)

Interest and tax (427) (387) (281) (281)

Other operating items 107 95 68 47

Operating cashflow 808 757 818 834Required capex (209) (525) (300) (300)

Maintainable cashflow 599 232 518 534Dividends (163) (183) (188) (201)

Acq/Disp (557) (1,341) (260) (150)

Other investing items 79 10 0 0

Free cashflow (42) (1,282) 70 183Equity 4 486 1 24

Debt inc/(red'n) 292 735 (71) (208)

Balance sheet 2006A 2007A 2008F 2009FCash & deposits 309 268 200 200

Inventories 102 114 206 211

Trade debtors 875 1,610 619 634

Other curr assets 263 3,098 3,098 3,098

Total current assets 1,549 5,090 4,123 4,144Prop., plant & equip. 5,245 5,776 5,993 6,139

Non-curr intangibles 1,543 2,939 2,983 3,005

Non-curr investments 295 895 906 917

Other non-curr assets 33 65 65 65

Total assets 8,665 14,765 14,071 14,271Trade creditors 796 1,540 619 634

Curr borrowings 512 507 507 507

Other curr liabilities 270 679 694 702

Total current liab. 1,578 2,726 1,820 1,844Borrowings 2,208 2,719 2,580 2,372

Other non-curr liabilities 1,234 2,351 2,362 2,367

Total liabilities 5,019 7,796 6,762 6,583Minorities/Convertibles 955 1,088 1,171 1,261

Shareholders equity 3,646 6,969 7,308 7,688


EBITDA growth (%) 16.3 10.3 (11.1) 2.0

EPS growth (%) 5.5 2.5 15.5 5.1



Tax rate (%) 27.8 24.5 19.7 19.7

Net debt/equity (%) 89.6 50.3 47.0 41.7



Payout ratio (%) 42.3 48.1 44.6 45.3

Capex to deprec'n (%) 71.4 160.6 115.4 115.4

NTA per share ($) 1.45 3.37 3.61 3.91

ROA (%) 9.0 8.2 5.6 5.7

ROE (%) 12.4 9.6 7.4 7.4


Net debt ($M) 2,958

Peripheral assets ($M) 895

Enterprise value ($M) 10,294

EV/EBIT (x) 13.3 12.1 13.0 12.7





P/E sector (x) 26.2 28.0 18.6 16.5

P/E rel sector (x) 0.8 0.7 1.0 1.0

Assumptions 2006A 2007A 2008F 2009FOil (US$/bbl) 66.96 63.47 74.44 71.20

GDP growth (%) 2.92 2.50 3.02 3.64

Interest Rates (%) 5.73 6.38 6.34 6.30

Notes To AccountsAll P&L items (except Reported profit) now exclude GoodwillAmortisation as per the new IFRS requirements.


EnergyTony Stepcich

ASX: ARQ Bloomberg: ARQ AU Reuters: ARQ.AX 02 November 2007

Arc Energy1Q08 production report

EventTotal revenue for 1Q08 was $50M, an increase of 64% on the pp andan increase of 73% on the pcp. Production for 1Q08 was 808,753boe,an increase of 62% on the pp and an increase of 56% on the pcp. Theinclusion of the assets from the Wandoo acquisition has significantlyboosted production and revenue. ARQ has announced a proposedmerger with Anzon through a scheme of arrangement. ARQ's Canningbasin acreage has been expanded through a farm-in to leases EP338and EP448. During the quarter, ARQ received a A$40M prepayment forCanning basin gas from Alcoa. The company's development programcontinued with the completion of the Apium-2 and Beharra-4 gas wells.Two exploration wells were drilled during the quarter, Valentine-1 andStokes Bay-1. Valentine was a duster; however, Stokes Bay-1 has hadencouraging gas shows, which require further testing. ARQ's AGM willbe held on 16 November in Perth.

ImplicationsARQ is undergoing an aggressive expansion campaign with twocompany-transforming acquisitions being undertaken. The first, theWandoo acquisition, seems to have been bedded down well into ARQ'sproduction profile. The second, the proposed Anzon merger, willincrease ARQ's net 2P reserves to 51.1mmboe and result in forecastFY08 production of 4mmboe. We maintain BUY recommendation onARQ with a 12-month price target of $1.89. We also maintain our long-term HOLD recommendation on ARQ.

Investment OpinionARQ is a cashflow-positive business, which enjoys operating marginsbetter than those of many industry participants. As a result of theWandoo Petroleum acquisition, ARQ's production profile hasincreased. ARQ also has substantial near-field explorationopportunities, moving forward. Oil price movements and explorationresults will determine how the share price performs in the long term.

ARQ is an established oil and gas producer in a growing energymarket. ARQ has purchased the Australian assets of WandooPetroleum. EPS in 2008 and beyond has improved as a result of thetransaction.

Key Information

Price Performance

Market Statistics

Key Assumptions





Market Cap (M) $523

Shares (M) 327.2

% of Market 0.03

% of Sector 0.42

12 Month Range $1.21 - $1.85

Company Risk

Share Price Risk

Ethical rating


ARQ 3.9 12.7 8.1Sector 17.2 20.1 39.5Market 13.3 10.1 27.5

Beta: 1.5



WACC (%): 12.8




Earnings Summary



NPAT1

Adj $MEPS1

cEPS chg

%PER

xPER rel

All Ords xPER rel

Sector xDPS

cYield

%Franking

%ROE

%

2006A 15.5 15.5 7.9 (63.3) 19.9 0.9 0.8 0.0 0.0 0 9.2

2007A 6.1 9.9 3.9 (49.9) 39.6 2.1 1.4 0.0 0.0 0 4.4

2008F 63.4 63.4 19.5 393.3 8.0 0.5 0.4 0.0 0.0 0 17.8

2009F 52.1 52.1 16.0 (18.0) 9.8 0.7 0.6 0.0 0.0 0 12.5

Arc Energy



12M Recommendation1: BUY 12M Target: $1.89 Long Term Recommendation 2: HOLD Long Term Target Return: 12.7% pa


Operating revenue 115.4 118.5 190.4 157.2Invest & other income (33.9) (19.6) (19.6) (19.6)


EBIT 20.6 14.5 89.9 71.6Net Interest (2.0) (4.9) 0.6 2.9

Pre-tax profit 18.6 9.6 90.5 74.4Tax expense (3.1) 1.6 (27.2) (22.3)

Minorities/Assoc./Prefs 0.0 (1.3) 0.0 0.0

NPAT 15.5 9.9 63.4 52.1Non recurring items 0.0 (3.8) 0.0 0.0




EBITDA 51.1 61.7 104.3 86.0Working capital changes 0.0 0.0 5.8 (5.0)

Interest and tax (13.2) (8.4) (14.5) (21.6)



Maintainable cashflow 43.4 46.2 83.4 63.4Dividends 0.0 0.0 0.0 0.0

Acq/Disp (33.0) (263.7) (25.0) (48.0)


Free cashflow 11.4 (217.5) 58.4 15.4Equity 0.0 123.7 10.0 0.0

Debt inc/(red'n) 2.2 117.8 (68.4) (15.4)



Trade debtors 12.6 13.3 17.0 16.7













Ratio analysis 2006A 2007A 2008F 2009FRevenue growth (%) 9.6 2.7 60.7 (17.4)

EBITDA growth (%) (30.8) 20.7 69.2 (17.6)

EPS growth (%) (63.3) (49.9) 393.3 (18.0)



Tax rate (%) 16.7 (17.2) 30.0 30.0

Net debt/equity (%) (27.8) 8.0 (11.1) (13.3)

Net debt/net debt + equity (%) (38.5) 7.4 (12.5) (15.3)

Net interest cover (x) 10.5 2.9 n/a n/a

Payout ratio (%) 0.0 0.0 0.0 0.0

Capex to deprec'n (%) 521.3 82.5 111.1 111.1

NTA per share ($) 0.31 0.74 0.95 1.11

ROA (%) 9.8 5.0 20.1 14.8

ROE (%) 9.2 4.4 17.8 12.5


Net debt ($M) 25.3



EV/EBIT (x) 26.9 38.4 6.1 7.6





P/E sector (x) 26.2 28.0 18.6 16.5

P/E rel sector (x) 0.8 1.4 0.4 0.6

Assumptions 2006A 2007A 2008F 2009FOil (US$/bbl) 66.96 63.47 74.44 71.20

US$/A$ ($) 0.74 0.79 0.87 0.86

GDP growth (%) 2.92 2.50 3.02 3.64


Arc Energy

TABLE 1: 1Q08 SUMMARY


FIGURE 1: QUARTERLY PRODUCTION COMPARISON


PRODUCTION 1Q07 4Q07 1Q08 1Q08:1Q07 1Q08:4Q07pcp pp current

Hovea/Eremia bbls 122,203 139,407 112,233 -8% -19%Dongara bbls 2,818 0 0 -100% -Jingemia bbls 65,025 88,249 61,190 -6% -31%Cliff Head bbls 51,296 47,391 240,505 369% 407%Yolla bbls 0 0 27,916 - -Other bbls 584 4,407 13,020 2129% 195%Xyris TJ's 295 219 420 42% 92%Yolla TJ's 0 0 645 - -Dongara TJ's 912 672 519 -43% -23%Beharra Springs TJ's 361 315 364 1% 16%Yolla LPG tonnes 0 0 1,961 - -Woodada TJ's 176 128 145 -18% 13%Totals BOE 517,320 496,947 808,753 56% 63%

SALES REVENUE 1Q07 4Q07 1Q08 1Q08:1Q07 1Q08:4Q07

Oil revenue $M 23.03 23.60 39.82 73% 69%Gas revenue $M 6.80 6.83 10.20 50% 49%Other revenue $M 0.02 0.02 0.03 50% 50%Totals $M 29.85 30.45 50.05 68% 64%

CASH POSITIONCash $M 56.80 92.30 135.26 138% 47%Debt $M 0.00 120.02 113.29 - -6%

Net Cash $M 56.80 -27.72 21.97 -61% -179%

CAPITAL EXPENDITUREExploration & Appraisal $M 6.83 10.13 13.70 101% 35%Development & Plant $M 9.93 6.43 4.71 -53% -27%Acquisitions $M 0.00 205.86 1.50 - -99%Totals $M 16.76 222.42 19.91 19% -91%


Consumer DiscretionaryBen Holgate

ASX: PBL Bloomberg: PBL AU Reuters: PBL.AX 02 November 2007

Publishing & BroadcastingMacau JV raises US$581M

EventPBL's vehicle for its Macau casinos, Melco PBL Entertainment (Macau)(MPEL), which is listed on the NASDAQ, has raised equity via a follow-on public offering at US$15.50 per American Depository Share (ADS),compromising 37.5M ADS representing 112.5M shares in MPEL. Grossproceeds from the equity offering totalled US$581M. As a result of thefollow-on offering, PBL's interest in MPEL will decline from 41.39% to37.86% and will be further diluted to 37.39% if the underwritersexercise an option for an additional 5.625M ADS, representing 16.9Mshares. MPEL intends to use the net proceeds from the follow-onoffering for costs related to the construction of the apartment hotelcomplex at the City of Dreams casino resort; funding to MPEL'ssubsidiaries for their development projects and operations; and generalcorporate and working capital requirements.

ImplicationsThis is the second tranche of funding MPEL has secured for its US$3BCity of Dreams casino, its second in Macau, which is scheduled toopen in 2009. In September 2007, MPEL announced it had secured aUS$1.75B senior debt facilities agreement with a banking syndicate tofund the construction of City of Dreams, which was a restructuring of aprevious US$2.75B credit facility. We note that MPEL is yet toannounce how it will fund the remaining US$670M to build the casino.The follow-on public offering has no impact on our investment view ofPBL. We will soon publish an analysis of PBL's schemes ofarrangement relating to the company's proposed split. PBLshareholders vote on the demerger on 23 November 2007. We remainpositive on PBL in the short term.

Investment OpinionPBL may split into two separately listed companies, one for gaming andone for media, pending a shareholder vote on 23-Nov-07. PBL's focusis increasingly on gaming rather than media, and it is expanding itsoperations in the former internationally.

PBL is likely to use its $2.2B cash war chest to help fund its aggressivegaming expansion around the globe. PBL no longer has any directcontrol over media assets and has left the running of its TV networkand magazine stable to private equity partner CVC. However, PBLdoes have direct exposure to some high-growth new media assets. Webelieve the stock is undervalued at the current price.

Key Information

Price Performance

Market Statistics

Key Assumptions






Shares (M) 688.5

% of Market 0.70

% of Sector 7.43

12 Month Range $16.18 - $22.50

Company Risk

Share Price Risk

Ethical rating


PBL 12.9 2.0 7.8Sector 2.0 (5.6) 8.5Market 13.3 10.1 27.5

Beta: 1.1



WACC (%): 10.3




Earnings Summary



NPAT1

Adj $MEPS1

cEPS chg

%PER

xPER rel

All Ords xPER rel

Sector xDPS

cYield

%Franking

%ROE

%

2006A 610.0 619.2 91.9 8.7 22.4 1.0 1.0 59.0 2.9 100 15.9

2007A 1,957.2 589.1 85.9 (6.5) 24.0 1.2 1.2 55.0 2.7 100 12.5

2008F 1,152.5 645.0 93.7 9.0 22.0 1.4 1.0 60.0 2.9 100 10.1

2009F 683.8 683.8 99.3 6.0 20.7 1.4 1.1 63.5 3.1 100 10.1

Publishing & Broadcasting



12M Recommendation1: BUY 12M Target: $22.78 Long Term Recommendation 2: HOLD Long Term Target Return: 11.1% pa



EBITDA 977.7 1,005.8 619.2 683.9Depreciation/Amort (161.5) (164.9) (82.9) (88.1)

EBIT 816.2 840.9 536.3 595.8Net Interest (117.4) (150.3) 155.8 142.1



NPAT 619.2 589.1 645.0 683.8Non recurring items (9.2) 1,368.1 507.5 0.0

Reported profit 610.0 1,957.2 1,152.5 683.8NPAT add Goodwill & Pref 0.0 0.0 0.0 0.0

Adjusted profit 619.2 589.1 645.0 683.8


EBITDA 977.7 1,005.8 619.2 683.9Working capital changes 181.2 (120.5) (35.1) 7.0

Interest and tax (316.0) (355.9) (207.2) (35.9)

Other operating items (97.0) 195.2 (47.7) 13.6



Acq/Disp (228.3) (3.3) (20.0) (170.0)

Other investing items 9.5 (116.9) 0.0 0.0

Free cashflow 15.0 (44.6) (154.0) (20.8)Equity (9.1) 3.5 0.0 0.0

Debt inc/(red'n) (53.9) 1,083.1 154.0 20.8

Balance sheet 2006A 2007A 2008F 2009FCash & deposits 1,185.1 2,227.7 1,744.5 1,723.6

Inventories 40.9 9.7 6.5 7.2

Trade debtors 394.2 105.0 70.6 77.5


Total current assets 2,123.3 2,802.6 2,277.7 2,265.3Prop., plant & equip. 1,910.2 1,831.1 2,732.2 2,911.8

Non-curr intangibles 3,039.6 884.8 884.8 884.8

Non-curr investments 1,314.7 1,313.2 1,304.7 1,456.6





Total current liab. 1,728.2 494.0 379.6 410.5Borrowings 2,094.6 309.1 0.0 0.0


Total liabilities 4,591.1 1,314.4 879.8 912.9Minorities/Convertibles 3.3 0.0 24.0 48.0

Shareholders equity 4,130.5 5,865.3 6,667.6 6,953.5

Ratio analysis 2006A 2007A 2008F 2009FRevenue growth (%) 6.6 0.2 (37.9) 9.7

EBITDA growth (%) 7.4 2.9 (38.4) 10.4

EPS growth (%) 8.7 (6.5) 9.0 6.0



Tax rate (%) 20.9 20.4 25.0 25.0

Net debt/equity (%) 42.1 (32.4) (26.3) (25.0)

Net debt/net debt + equity (%) 29.6 (47.9) (35.6) (33.3)

Net interest cover (x) 7.0 5.6 n/a n/a

Payout ratio (%) 64.2 64.0 64.0 63.9

Capex to deprec'n (%) 107.6 177.3 166.7 166.7

NTA per share ($) 1.61 7.32 8.46 8.85

ROA (%) 9.7 7.9 7.0 7.6

ROE (%) 15.9 12.5 10.1 10.1


Net debt ($M) (1,898.5)

Peripheral assets ($M) (3,745.0)


EV/EBIT (x) 10.7 10.4 16.3 14.7





P/E sector (x) 23.3 20.8 22.2 19.6

P/E rel sector (x) 1.0 1.2 1.0 1.1


Interest Rates (%) 5.73 6.38 6.34 6.30

Inflation (%) 3.20 3.09 2.47 2.50

Notes To AccountsAll P&L items (except Reported profit) now exclude GoodwillAmortisation as per AIFRS requirements.


FinancialsPeter Rae

ASX: ASX Bloomberg: ASX AU Reuters: ASX.AX 02 November 2007

ASX LimitedVolume growth prompts earnings upgrade

EventASX announced its 1Q FY08 volumes, which were up strongly on theprior corresponding period in the following areas: capital formation(listings and capital raisings), corporate actions, trade execution(equities and derivatives) and depository holdings. ASX outlined areasof opportunity, with the most immediate being the exchange-tradedContracts for Difference (CFD) market, which is scheduled for launch inearly November 2007. The other near-term opportunity is the listing ofexchange-traded funds managed by Barclays Global Investors,providing investors access to offshore markets via AUD-denominatedsecurities.

ImplicationsThe strong volumes for 1Q FY08 bodes well for ASX, which continuesto benefit from vibrant domestic markets for most of its services. Weexpect promising results from ASX’s foray into the CFD product as theASX-listed CFDs is likely to provide greater credibility and depth thanmany of the current market-makers. We have revised our forecasts toreflect the launch of the CFDs as well as the continued high growth intransaction volumes which results in an increase in our 12-month pricetarget from $52.35 to $60.02. We retain our HOLD recommendation onboth a 12-month and long-term view.

Investment OpinionASX provides direct exposure to the rapidly expanding equity andderivative markets with leverage to trading volume activity. Over themedium to long term, we expect strong growth in ASX’s core markets,with equities volumes helped by growth in superannuation. The mergedASX/SFE is also a cost-efficient business. With a strong balance sheetand an expanding footprint, ASX is well placed to compete in furtherglobal exchange consolidation. We have a long-term HOLD at currentprices.

While the earnings outlook for ASX is partly dependent on continuedshort- to medium-term market growth, it now has a more diversifiedbusiness following the merger with SFE and earnings are less sensitiveto a downturn in any one market. With volumes continuing to grow andthe full benefit of merger synergies yet to be reflected in earnings, weexpect another good year in FY08. We have a HOLD on the stock on a12-month outlook at current prices.

Key Information

Price Performance

Market Statistics

Key Assumptions






Shares (M) 170.8

% of Market 0.49

% of Sector 1.48

12 Month Range $34.05 - $59.90

Company Risk

Share Price Risk

Ethical rating


ASX 20.7 23.4 67.3Sector 11.7 2.9 16.4Market 13.3 10.1 27.5

Beta: 1.1



WACC (%): 12.2




Earnings Summary



NPAT1

Adj $MEPS1

cEPS chg

%PER

xPER rel

All Ords xPER rel

Sector xDPS

cYield

%Franking

%ROE

%

2006A 135.5 137.1 133.4 22.9 43.2 2.0 2.0 120.1 2.1 100 41.8

2007A 292.9 313.1 187.7 40.7 30.7 1.6 1.7 163.8 2.8 100 14.8

2008F 406.1 406.1 237.7 26.6 24.2 1.5 1.6 207.5 3.6 100 14.5

2009F 492.7 492.7 288.4 21.3 20.0 1.4 1.5 251.5 4.4 100 17.0

ASX Limited












Adjusted profit 137.1 313.1 406.1 492.7



Interest and tax (30.0) (67.8) (138.4) (164.6)




Acq/Disp 52.7 (43.0) 0.0 0.0

Other investing items 6.0 2,801.2 0.0 0.0

Free cashflow 227.5 2,822.4 167.0 121.1Equity 0.0 (99.3) 0.0 0.0

Debt inc/(red'n) 0.4 0.0 (167.0) (121.1)



Trade debtors 22.4 6,921.4 6,915.2 6,927.0


Total current assets 676.4 7,047.3 7,208.1 7,341.1Prop., plant & equip. 17.2 19.0 20.5 26.3

Non-curr intangibles 25.2 2,262.8 2,262.8 2,262.8



Total assets 813.2 9,518.5 9,680.7 9,819.5Trade creditors 18.6 30.0 19.3 22.6


Other curr liabilities 420.8 6,647.5 6,718.8 6,747.7

Total current liab. 439.3 6,677.4 6,738.1 6,770.3Borrowings 0.0 0.0 0.0 0.0


Total liabilities 457.3 6,762.1 6,837.7 6,875.9Minorities/Convertibles 0.0 0.0 0.0 0.0



EBITDA growth (%) 17.3 123.3 39.9 19.7

EPS growth (%) 22.9 40.7 26.6 21.3



Tax rate (%) 29.4 29.3 29.3 29.3

Net debt/equity (%) (57.5) (4.3) (10.0) (13.8)



Payout ratio (%) 90.0 87.2 87.3 87.2

Capex to deprec'n (%) 132.4 107.1 135.9 163.8

NTA per share ($) 3.22 2.89 3.40 3.99

ROA (%) 27.3 6.6 5.8 6.9

ROE (%) 41.8 14.8 14.5 17.0


Net debt ($M) (118.7)



EV/EBIT (x) 56.4 24.7 17.9 14.8





P/E sector (x) 21.9 18.2 15.1 13.6

P/E rel sector (x) 2.0 1.7 1.6 1.5


Interest Rates (%) 5.73 6.38 6.34 6.30

Inflation (%) 3.20 3.09 2.47 2.50

Notes To AccountsThe FY06 financial information represents ASX standalone companydata. ASX's FY07 statutory income statement excludes SFE activityfor the period 1–11 July 2006. ASX's pro forma income statementincludes SFE for the 12-month period to 30 June 2007, as if themerger was effective 1 July 2006. All analysis referring to previousperiods is also based on pro forma combined ASX/SFE data. The proforma income statement reflects performance as if the two companieswere one during those periods.


ASX Limited

TABLE 2: ASX VOLUMES FOR 1Q FY08 VS. 1Q FY07


1Q -FY07 1Q -FY08 ChangeCapital FormationListings 50 73 46%Capital Raisings ($B) 12 23.8 98%Market Capitalisation at end of period ($ trn) 1.2 1.6 33%

Corporate ActionsCompany Announcements 28,537 32,801 15%Buybacks/DRPs 208 232 12%Trade ExecutionCash EquitiesVolumes (M) 9.9 19.4 96%Value ($B) 269.1 431.7 60%DerivativesFutures/Options Volumes (M) 21.8 25.1 15%Stock and Index Options(M) 5.2 6.8 31%Warrants 142,460 210,156 48%Risk ManagementMargins ($B) 4.6 4.1 -11%

Depository HoldingsEquity - CHESS ($trn) 1 1.5 50%Fixed Income - Austraclear ($B) 679.6 882.4 30%


IndustrialsBen Brownette

ASX: DOW Bloomberg: DOW AU Reuters: DOW.AX 02 November 2007

Downer EDI LimitedSolid 1Q08 result, but outlook bleak

EventDOW advised at its AGM that it expects FY08 EBIT to be $280M,which would be flat on the prior year. Some of the problemsexperienced in its mining division in FY07 are anticipated to negativelyimpact the company in FY08 as well. This overshadows a solid 1Q08result with EBIT up 16% on the pcp.

ImplicationsAlthough the company said its first quarter was solid, we continue to bewary of the business with respect to its operations. Our previousforecast for FY08 EBIT was a 4% increase on the pcp. As a result ofthe comments made by the company at its AGM, we havedecreased our forecast, bringing FY08 EBIT in line with EBIT in thepcp. The adjustment has decreased our FY08 EPS forecast byapproximately 4.3%. We have also decreased our FY09 EPS forecastby approximately 3.7%. We continue to look unfavourably on thestock and we retain the discount applied to our price targets. Theanalyst discount was inserted on 2 August after the company issued aprofit downgrade, recognising the significant operational risk of thecompany. Our 12-month price target has decreased by approximately5.9%, to $6.47, implying a total 12-month return of 13.6%. Weremain neutral on both 12-month and long-term investment horizons.

Investment OpinionDOW provides infrastructure and engineering services across severalsectors, including water, rail, power and mining. The companycontinues to perform successfully across all its business divisions,which we forecast to continue in the medium term. Management's newapproach to risk management and the arrival of a new CEO should bepositive for the company. We are neutral on a long-term investmentview.

From an underlying business point of view, we see a strong company,marred by operational shortcomings, with successive profit write-downsin the past two years. While we look positively on the business and ourfundamentals suggest that the business looks attractive on a PEmultiple, we are hesitant to look favourably on the business from aninvestment point of view. Until we see a greater focus on mitigating theoperational risk of the company, we are neutral on a 12-month outlook.

Key Information

Price Performance

Market Statistics

Key Assumptions






Shares (M) 300.0

% of Market 0.10

% of Sector 1.16

12 Month Range $4.99 - $7.85

Company Risk

Share Price Risk

Ethical rating


DOW (5.3) (11.3) 3.1Sector 12.1 7.0 29.2Market 13.3 10.1 27.5

Beta: 1.1



WACC (%): 10.7




Earnings Summary



NPAT1

Adj $MEPS1

cEPS chg

%PER

xPER rel

All Ords xPER rel

Sector xDPS

cYield

%Franking

%ROE

%

2006A (24.9) 138.1 45.5 5.7 13.0 0.6 0.4 20.0 3.4 42 14.8

2007A 101.5 161.6 51.0 11.9 11.7 0.6 0.4 26.5 4.5 0 15.5

2008F 170.6 170.6 53.1 4.1 11.2 0.7 0.5 26.5 4.5 0 13.9

2009F 186.7 186.7 57.3 8.0 10.4 0.7 0.6 28.5 4.8 60 13.9

Downer EDI Limited











Reported profit (24.9) 101.5 170.6 186.7NPAT add Goodwill & Pref 0.0 0.0 0.0 0.0

Adjusted profit 138.1 161.6 170.6 186.7



Interest and tax (69.1) (61.6) (124.8) (109.6)



Maintainable cashflow (107.5) (21.6) 113.7 152.1Dividends (36.9) (36.2) (81.7) (89.3)

Acq/Disp (190.4) (140.2) 0.0 0.0


Free cashflow (331.5) (155.2) 31.9 62.8Equity 142.6 4.0 24.5 26.8

Debt inc/(red'n) 188.4 223.8 (56.5) (89.6)


Inventories 173.6 177.5 189.1 198.7

Trade debtors 948.8 1,090.4 1,161.6 1,220.1


Total current assets 1,350.4 1,558.7 1,398.8 1,466.8Prop., plant & equip. 676.4 754.2 790.5 821.6





Curr borrowings 136.5 193.7 193.7 193.7


Total current liab. 1,147.4 1,274.6 1,330.0 1,388.9Borrowings 503.8 499.3 200.1 110.5


Total liabilities 1,809.3 2,010.1 1,773.1 1,748.0Minorities/Convertibles 0.0 0.0 0.0 0.0



EBITDA growth (%) 19.2 28.2 1.3 4.9

EPS growth (%) 5.7 11.9 4.1 8.0



Tax rate (%) 29.1 28.2 29.0 29.0

Net debt/equity (%) 49.7 38.5 30.7 21.6



Payout ratio (%) 43.9 52.0 49.9 49.7

Capex to deprec'n (%) 190.4 98.5 133.0 128.2

NTA per share ($) 1.30 1.88 2.21 2.55

ROA (%) 8.5 9.3 8.9 9.2

ROE (%) 14.8 15.5 13.9 13.9


Net debt ($M) 450.2



EV/EBIT (x) 11.7 9.2 9.2 8.7





P/E sector (x) 31.4 26.8 22.1 18.5

P/E rel sector (x) 0.4 0.4 0.5 0.6


Interest Rates (%) 5.73 6.38 6.34 6.30

Inflation (%) 3.20 3.09 2.47 2.50

Yen/A$ ($) 85.54 92.54 92.53 87.75

NZ$/A$ ($) 1.14 1.13 1.15 1.17

Notes To AccountsAll P&L items (except Reported profit) now exclude GoodwillAmortisation as per the new IFRS requirements.The forecast tax rate is significantly lower in FY07 and has the effectof skewing some ratio analysis.


FinancialsNick Tsia

ASX: IOF Bloomberg: IOF AU Reuters: IOF.AX 02 November 2007

ING Office FundSuccessful completion of institutionalplacement

EventIOF has successfully raised $70M from an institutional placement.Approximately 41M ordinary units were issued at a price of $1.72 perunit, being a 4.4% discount to yesterday's closing price of $1.80. Theproceeds will be used to partially fund the acquisition of Bastion Towerin Brussels, which was announced yesterday. The placement units willbe allotted on 9 November 2007 and will rank equally with existing IOFunits for the December 2007 quarter distribution.

ImplicationsAs a result of the placement, we have made adjustments in our model.Our valuation has decreased by 3.3% to $1.76. Our 12-month targetremains at $1.79 and we continue to maintain our neutral view on thestock on both a short-term and a long-term basis.

Investment OpinionIOF is a passively managed trust, investing in Australian, Europeanand US office properties, ranging from quality CBD assets to high-yielding suburban office properties. The Fund is also looking to investin Japan and South Korea. While the earnings profile for the trust ismoderately flat, downside is largely protected by long lease durationswith predictable income growth. Over 60% of rental income is fromblue-chip tenants.

We expect the improving office market conditions to benefit IOF'searnings going forward and help the trust achieve its DPU growth rate.With the recent strong run in the property trust sector, yields havebecome less attractive. Nevertheless, we retain our neutral view on thisstock on a 12-month investment horizon.

Key Information

Price Performance

Market Statistics

Key Assumptions






Shares (M) 1,258.5

% of Market 0.11

% of Sector 0.32

12 Month Range $1.47 - $1.88

Company Risk

Share Price Risk

Ethical rating


IOF 7.5 9.1 13.2Sector 11.7 2.9 16.4Market 13.3 10.1 27.5

Beta: 0.9



WACC (%): 9.4




Earnings Summary



NPAT1

Adj $MEPS1

cEPS chg

%PER

xPER rel

All Ords xPER rel

Sector xDPS

cYield

%Franking

%Deferred Tax

%

2006A 329.8 111.7 10.8 (0.5) 16.7 0.8 0.8 10.4 5.8 0 44

2007A 572.7 124.3 10.8 (0.4) 16.7 0.9 0.9 11.5 6.4 0 30

2008F 135.4 135.4 10.9 1.5 16.5 1.0 1.1 10.8 6.0 0 35

2009F 138.4 138.4 11.0 0.8 16.4 1.1 1.2 11.2 6.2 0 35

ING Office Fund





Operating revenue 222.7 276.3 329.3 345.0Invest & other income (9.5) 30.4 (20.1) (20.6)

EBITDA 163.7 249.0 257.2 262.3Depreciation/Amort 0.0 0.0 0.0 0.0




NPAT 111.7 124.3 135.4 138.4Non recurring items 218.1 448.4 0.0 0.0


Adjusted profit 111.7 124.3 135.4 138.4


EBITDA 163.7 249.0 257.2 262.3Working capital changes (38.8) 232.9 2.3 0.2

Interest and tax (41.4) (51.0) (142.3) (112.9)

Other operating items (4.6) 25.4 0.0 0.0

Operating cashflow 78.9 456.3 117.2 149.7Required capex 0.0 0.0 (3.3) (3.3)


Acq/Disp (137.2) 76.9 (169.7) 0.0


Free cashflow (252.2) (120.9) (200.2) 7.9Equity 78.5 197.8 70.0 0.0

Debt inc/(red'n) 147.4 268.1 130.2 (7.9)



Trade debtors 12.9 27.0 18.6 19.1




Non-curr investments 2,527.9 3,174.3 3,347.3 3,350.6





Total current liab. 657.8 65.0 27.3 28.1Borrowings 368.5 1,170.8 1,297.2 1,289.4


Total liabilities 1,046.0 1,315.8 1,404.5 1,397.5Minorities/Convertibles 29.5 26.6 37.6 48.6

Shareholders equity 1,528.8 2,136.0 2,208.0 2,219.0


EBITDA growth (%) 12.9 52.1 3.3 2.0

EPS growth (%) (0.5) (0.4) 1.5 0.8



Tax rate (%) 3.3 34.9 25.0 25.0

Net debt/equity (%) 63.6 54.6 59.1 58.7



Payout ratio (%) 95.9 107.0 99.3 101.6

Capex to deprec'n (%) 0.0 0.0 0.0 0.0

NTA per share ($) 1.39 1.73 1.72 1.72

ROA (%) 7.0 8.0 7.2 7.3

ROE (%) 8.3 6.8 6.3 6.4


Net debt ($M) 1,152.0



EV/EBIT (x) 20.4 13.4 13.0 12.7





P/E sector (x) 21.9 18.2 15.1 13.6

P/E rel sector (x) 0.8 0.9 1.1 1.2


Interest Rates (%) 5.73 6.38 6.34 6.30

Inflation (%) 3.20 3.09 2.47 2.50

Notes To AccountsAll income statement items (except reported profit) now excludeGoodwill Amortisation as per the new IFRS requirements. We alsoexclude revaluation gains from reported profit to estimate theoperating profit generated by the Fund.


Andrew Black Neil Verringer General Manager, St George Private Bank Head of BSA Private Bank [email protected] [email protected] Phone +61 2 9236 3056 Phone + 61 088424 54 87 St.George Private Bank & BankSA Private Bank Locations Sydney Level 4, 182 George Street, Sydney, NSW 2000 Phone (02) 9236 1882 Melbourne Level 8, 530 Collins Street, Melbourne, VIC 3000 Phone (03) 9274 4850 Brisbane Central Plaza, Level 4, 345 Queen Street, Brisbane, QLD 4000 (07) 3232 8888 Perth 152-158 St Georges Terrace, Perth, WA 6000 Phone (08) 9265 7510 Adelaide BankSA Private Bank Level 1, 97 King William Street Adelaide, SA 5000 (08) 8424 4141 Staff Directory Private Bank Directors Warren Acworth Brisbane [email protected] Richard Battifuoco Adelaide [email protected] David Gray Sydney [email protected] David Scannell Sydney [email protected] David Wyndham Sydney [email protected] Private Bank Relationship Managers – Financial Advi ce Peter Coulthard Melbourne [email protected] Jason Whitaker Sydney [email protected] Terri Ho Sydney [email protected] Andrew Smith Sydney [email protected] Damien Ferguson Brisbane [email protected] Gerry Duffy Sydney [email protected] ROXANNE GORMAN SYDNEY [email protected] Private Bank Relationship Managers – Banking Jeanette McCann Sydney [email protected] Brett Edwards Sydney [email protected] Anne Fraser Sydney [email protected] Scott Heyes Melbourne [email protected] Andrew Horsnell Adelaide [email protected] Bruce Kleem Sydney [email protected] Lisa Marks Melbourne [email protected] Kishore Mudaliar Sydney [email protected] Richard Northey Sydney [email protected] Josie Prasad Sydney [email protected] Geoffrey Bell Sydney [email protected] Josephine Prasad Sydney [email protected]

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05 Novt 2007 Bulletin