Weekly Hits: Food sector, Temenos & SAP

KeyInvest Weekly Hits

Friday, 22.02.2019

  • Topic 1: Food sector - Acquiring a taste for more
  • Topic 2: Temenos/SAP - Fast-growing software duo

Food sector
Acquiring a taste for more

In 2018, Nestlé generated organic revenue growth of 3%, in line with the target. According to the reported figures, not only the share of the world’s largest food company climbed to an all-time high. The STOXX™ Europe 600 Food & Beverage Index also reached a historic best in the wake of the industry giant.¹ An ETT (symbol: ETFOO) replicates the benchmark of 24 European food and beverage manufacturers. Last summer Nestlé, along with Barry Callebaut and EMMI, was selected as the underlying for an Early Redemption (ER) Kick-In GOAL (symbol: KCAODU). With this product, investors can add a return opportunity of 6.7% p.a. to their portfolio. Even the current worst performer, EMMI, has a comfortable distance to the barrier of 38.8%.

«Growth has picked up in our two largest markets, the U.S. and China, as well as in infant nutrition,» explained Nestlé CEO Mark Schneider. At the same time, he stressed that the Group had «made significant progress» with its realignment. The profit grew disproportionately, not least thanks to one-off effects from the saleof business units: Below the line, Nestlé earned CHF 10.1 billion in 2018, 41.6% more than in the previous year. Shareholders are to participate with a dividend that increased by 10 centimes to CHF 2.45 per share certificate. Schneider is anticipating a further acceleration in growth for 2019. At the same time, he wants to improve the margin, profit and capital efficiency. (Source: Nestlé, media release, February 14, 2019)

According to UBS CIO GWM, the food company has achieved a turnaround in 2018 after six years of declining growth. For the current period, analysts already believe that the industry giant will generate organic sales growth of 3.6%. CIO GWM continues to rate the large cap as a «buy» and raised its price target to CHF 100. (Source: UBS CIO GWM, Nestlé, February 18, 2019)
A few days after Nestlé, Danone corroborated the upturn in the food industry. On a comparable basis, the dairy group reported sales growth of 2.9% in 2018, which exceeded expectations. For 2019, the French company forecasts a growth in sales of around 3%. (Source: Thomson Reuters, media release, February 19, 2019) EMMI’s latest figures fit the latest world’s largest yogurt producer’s expectations : On January 30, 2019, the domestic milk processor reported organic (currency- and acquisition-adjusted) revenue growth of 2.3% for last year. According to the company, this was the highest increase since 2014.

Opportunities: Investors who have acquired a taste for the food industry can position themselves in the European food sector in an easy and diversified manner with the ETT (symbol: ETFOO) on the STOXX™ Europe 600 Food & Beverage Index. There are typically no ongoing fees for this product structure.² EMMI is not included in this benchmark.- The mid cap however, together with Nestlé and chocolate specialist Barry Callebaut, provides an attractive yield opportunity of 6.7% p.a. for the ER Kick-In GOAL (Symbol: KCAODU). Although EMMI exhibits the weakest price trend of the three compared to when shares were issued, the share has a distance to the barrier of 38.8%. Once all three underlyings are quoted at or above the starting level on an observation date, the early redemption will take place and the issuer will repay the full nominal and pro-rata coupon early.

Risks: The aforementioned products do not have capital protection. Should the underlying assets deliver a negative performance, the ETT will incur commensurate losses. If one of the underlyings in a Worst of Kick-In GOAL touches or falls below the respective kick-in level (barrier) and the early redemption feature does not apply, repayment at maturity may be in cash, reflecting the weakest performance of the trio from strike (but no more than nominal value plus coupon). In this case, it is likely that losses will be incurred. Investors in structured products are also exposed to issuer risk, which means that the invested capital may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

STOXX™ Europe 600 Food & Beverages Index vs. STOXX™ Europe 600 Index
(five years, for illustrative purposes only, figures in %)¹

With the recent all-time high, the STOXX™ Europe 600 Food & Beverages Index set out to break out of a sideways movement that had been observed for almost two years.

Source: UBS AG, Bloomberg

As of 20.02.2019

Barry Callebaut vs. EMMI vs. Nestlé
(five years, for illustrative purposes only, figures in %)¹

EMMI outperformed the two large caps over a period of five years. While both the milk processor and Barry Callebaut showed marked swings, Nestlé exhibited a relatively stable upward trend.

Source: UBS AG, Bloomberg

As of: 20.02.2019

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

ETT on STOXX™ Europe 600 Food & Beverages NR Index

Symbol ETFOO
SVSP Name Tracker Certificates
SPVSP Code 1300
Underlying STOXX™ Europe 600 Food & Beverages Net Return Index
Currency EUR
Ratio 1:1
Administration fee 0.00% p.a.²
Expiry Open End
Participation 100%
Issuer UBS AG, London
Bid/Ask EUR 1’291.00 / 1’298.00 
 

5.00% p.a. Early Redemption Kick-In GOAL on Barry Callebaut / EMMI AG / Nestlé

Symbol KCAODU
SVSP Name Barrier Reverse Convertible
SPVSP Code 1230 (Auto-Callable)
Underlying Barry Callebaut / EMMI AG / Nestlé
Currency CHF
Coupon 5.00% p.a.
Sideways return 13.03% (6.47% p.a.)
Kick-In Level (Distance) Barry Callebaut: CHF 1’041.00 (40.14%)
EMMI AG: CHF 490.50 (39.52%)
Nestlé: CHF 47.94 (47.04%)
Expiry 26.01.2021
Issuer UBS AG, London
Bid/Ask 96.10% / 97.10%
 

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Source: UBS AG, Bloomberg

As of: 20.02.2019

Market overview

Index Quotation Week¹
SMI™ 9’315.63 Pt. 1.7%
SLI™ 1’433.77 Pt. 1.2%
S&P 500™ 2’284.70 Pt. 1.2%
Euro STOXX 50™ 3’259.49 Pt. 1.8%
S&P™ BRIC 40 4’180.10 Pt. 0.0%
CMCI™ Compos. 928.80 Pt. 2.6%
Gold (troy ounce) 1’347.90 USD 2.5%

¹ Change based on the closing price of the previous day compared to the closing price a week ago.

SMI™ vs. VSMI™ 1 year

smi vs vsmi

The VSMI™ Index is calculated since 2005. It shows the volatility of the stocks within the SMI™ index. A portfolio which reacts only to changes in volatility instead of volatility itself is relevant for the calculation. Thereby, the VSMI™ methodology uses the squared volatility, known as variance, of the SMI options with remaining time to expiry of 30 days traded at the Eurex.

Source: UBS AG, Bloomberg

As of: 20.02.2019

Temenos/SAP
Fast-growing software duo

When it comes to software, it has been impossible to avoid the cloud for some time now. There is an ever-increasing demand for outsourcing data and software to the Internet. As a result, SAP expanded its cloud business by 32% to EUR 4.99 billion in 2018. The fact that this growth will continue is underscored by the «new cloud bookings» figure, which rose by 25%. Temenos’s programs have also been well received. The company launched a core banking system in the cloud for the first time in 2011. The banking software specialist increased its software license revenues by 21% last year. In order to maintain the momentum, the company, based in French-speaking Switzerland,launched two new cloud products at the beginning of the year: Temenos Infinity and Temenos T24 Transact. The Kick-In GOAL (symbol: KDEADU) available for subscription brings SAP and Temenos together as underlying values. With a risk buffer of 40%, the duo offers a return opportunity of 6.00% p.a.

Not only are the software companies excelling on the sales side, they are also both generating high profits. SAP’s operating margin was 29% in 2018 and profitability is expected to increase even further. At Capital Markets Day in New York, Chief Financial Officer Luka Mucic held out the prospect of an improvement in margins year over year. An improved revenue mix in particular should lead to greater profitability. For example, Mucic wants to improve the gross margin in the cloud business from the current 63% to 71% by 2020. (Source: Finanzen.net, media report, February 7, 2018)

Temenos is also expected to continue its upward trend. The former COO and CFO Max Chuard, who will take over the leadership at the banking software manufacturer on March 1, wants to continue the successful strategy of his predecessor David Arnott. In the medium term, the company anticipates an annual increase in business volume of 10-15%. Profitability is also expected to improve by 100 to 150 basis points p.a. In 2018, the EBIT margin increased by one percentage point to 31.5%. (Source: Temenos, media release, February 12, 2019)

Opportunities: Since the beginning of the year, SAP and Temenos shares have significantly outperformed the market as a whole. For example, the Swiss mid cap has gained 21% since December 31.¹ Further price premiums are not necessary for the Kick-In GOAL (symbol: KDEADU) in subscription. The product offers a maximum return of 6.00% p.a. This is subject to the condition that none of the underlyings touches or falls below the barrier fixed at 60% of the starting values within the 18-month term.

Risks: Kick-In GOALs do not have capital protection. If the underlyings equal or fall below the respective kick-in level (barrier), the amount repaid on the date of maturity may be in cash, reflecting the worst performance of the two shares (but not more than nominal value plus coupon). In this case, it is likely that losses will be incurred. Investors in structured products are also exposed to issuer risk, which means that the capital invested may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Temenos vs. SAP
(five years, for illustrative purposes only, figures in %)¹

Source: UBS AG, Bloomberg

As of: 20.02.2019

6.00% p.a. Worst of Kick-In GOAL on Temenos / SAP

Symbol KDEADU
SVSP Name Barrier Reverse Convertibles
SPVSP Code 1230
Underlyings Temenos / SAP
Currency CHF (Quanto)
Coupon 6.00% p.a.
Strike Level 100%
Kick-In Level (barrier) 60%
Expiry 31.08.2020
Issuer UBS AG, London
Subscription until 27.02.2019, 15:00 h
 

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Source: UBS AG, Bloomberg

As of: 20.02.2019

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

This material has been prepared by UBS AG or one of its affiliates («UBS»). This material is for distribution only as permitted by law. It is not prepared for the needs of any specific recipient. It is published solely for information and is not a solicitation or offer to buy or sell any securities or related financial instruments (“Instruments”). UBS makes no representation or warranty, either express or implied, on the completeness or reliability of the information contained in this document (“Information”) except that concerning UBS AG and its affiliates. The Information should not be regarded by recipients as a substitute for using their own judgment. Any opinions expressed in this material may change without notice and may be contrary to opinions expressed by other business areas of UBS as a result of using different assumptions or criteria. UBS is under no obligation to update the Information. UBS, its officers, employees or clients may have or have had an interest in the Instruments and may at any time transact in them. UBS may have or have had a relationship with entities referred to in the Information. Neither UBS nor any of its affiliates, or their officers or employees, accepts any liability for any loss arising from use of the Information. This presentation is not a basis for entering into a transaction. Any transaction between you and UBS will be subject to the detailed provisions of the term sheet, confirmation or electronic matching systems relating to that transaction. Clients wishing to effect transactions should contact their local sales representative.
This information is communicated by UBS AG and/or its affiliates («UBS»). * (see below) UBS may from time to time, as principal or agent, have positions in, or may buy or sell, or make a market in any securities, currencies, financial instruments or other assets underlying the product to which this website relates (the «Structured Product»). UBS may provide investment banking and other services to and/or have officers who serve as directors of the companies referred to in this website. UBS’s trading and/or hedging activities related to the Structured Product may have an impact on the price of the underlying asset and may affect the likelihood that any relevant barrier or relevant trigger event is crossed or triggered. UBS has policies and procedures designed to minimise the risk that officers and employees are influenced by any conflicting interest or duty and that confidential information is improperly disclosed or made available. UBS may pay or receive brokerage or retrocession fees in connection with the Structured Product described herein. In respect of any Structured Product that is a security, UBS may, in certain circumstances, sell the Structured Product to dealers and other financial institutions at a discount to the issue price or rebate to them for their own account some proportion of the issue price. Further information is available on request. Structured Products are complex and may involve a high risk of loss. Prior to purchasing the Structured Product you should consult with your own legal, regulatory, tax, financial and accounting advisors to the extent you consider it necessary, and make your own investment, hedging and trading decisions (including decisions regarding the suitability of the Structured Product) based upon your own judgement and advice from those advisers you consider necessary. Save as otherwise expressly agreed in writing, UBS is not acting as your financial adviser or fiduciary in relation to the Product. UBS generally hedges its exposure to Structured Products, although it may elect not to hedge or to partially hedge any Structured Product. UBS’s hedging activity may be conducted through transactions in the underlying asset, index or instrument or in options, futures or other derivatives related to the underlying asset, index or instrument on publicly traded markets or otherwise, and may have an impact on the price of the under-lying asset. If a transaction is cash settled, UBS will generally unwind or offset any hedge it has for such Structured Product in close proximity to the relevant valuation time or period. In some cases, this activity may affect the value of the Structured Product. Unless stated otherwise in this document, (i) this document is for information purposes only and should not be construed as an offer, personal recommendation or solicitation to purchase the Structured Product and should not be treated as giving investment advice, and (ii) the terms of any investment in the Structured Product will be exclusively subject to the detailed provisions, including risk considerations, contained in the more detailed legal documentation that relates to the Structured Product (being the confirmation, information memorandum, prospectus or other issuer documentation as relevant). UBS makes no representation or warranty relating to any information herein which is derived from independent sources. This document shall not be copied or reproduced without UBS’s prior written permission. In respect of any Structured Product that is a security, no action has been or will be taken in any jurisdiction that would permit a public offering of the Product, save where explicitly stated in the issuer documentation. The Structured Product must be sold in accordance with all applicable selling restrictions in the jurisdictions in which it is sold.
© UBS 2018. All rights reserved. UBS prohibits the forwarding of this information without the approval of UBS.
Weekly Hits: Food sector, Temenos & SAP2019-02-22T09:23:13+01:00

Weekly Hits: European Insurers, Spotify & Twitter

KeyInvest Weekly Hits

Friday, 15.02.2019

  • Topic 1: European Insurers - A good start into the reporting season
  • Topic 2: Spotify and Twitter - Two platforms with tremendous reach

European Insurers
A good start into the reporting season

The insurance industry has now entered the latest financial reporting season too. Zurich Insurance was the first Swiss insurance company to release its figures for the last fiscal year, while in Germany Munich Re was the frontrunner. Both companies presented squeaky clean balance sheets and exceeded analysts› expectations, and their strong operating profits are reflected in the share prices. The pair is ahead of the market average for the year, and Munich Re shares have just reached an all-time high, while Zurich shares are within sight of the mark.¹ The ETT tracker certificate (symbol: ETINS) for the STOXX™ Europe 600 Insurance Index allows full participation in the growth of the industry with broad diversification.² The Kick-In GOAL (Symbol: KCNGDU) on Zurich Insurance gives conservative investors an opportunity to take a position in the market. A 9.4 percent return is possible with this structured product even if prices move sideways.

Zurich Insurance recorded impressive full-year results with a net profit of USD 3.72 billion that exceeded the highest analyst estimate of USD 3.56 billion. The reported operating profit of 4.57 billion US dollars was also significantly above the consensus estimate. «We have further increased profitability and lowered costs,» said Zurich Chief Executive Mario Greco, commenting on the company’s good numbers. (Source: Zurich Insurance press release of February 2, 2019) Zurich’s goals remain unchanged, as the Group is striving for an after-tax operating profit for the years 2017 – 2019 representing more than twelve percent return on capital. For last year, this figure was 12.1 percent. And shareholders should profit from this success, as for 2018 the Executive Board has proposed a dividend of 19 Swiss francs per share, which is one franc higher than last year.

Munich Re is increasing its dividend as well after announcing good results: For 2018 the world’s largest reinsurer recorded a net profit of approximately 2.3 billion euros, coming after a mere 0.4 billion euros for the previous year. Shareholders can look forward to a 7.5 percent dividend increase, up to 9.25 euros per share.
Over the next few weeks we will find out how many other European insurers will be able to keep pace with Zurich Insurance and Munich Re. Swiss Re and AXA, for example, will be releasing their books on February 21, followed by Swiss Life on February 26 and Baloise on March 7. The greatest anticipation swirls around Allianz: Europe’s largest insurance group will be releasing its figures on February 15. According to Thomson Reuters, analysts are expecting a 15.9 percent rise in earnings per share to 17.65 euros. The German insurance industry can expect 2019 to be a good year overall, the German Insurance Association GDV is projecting premiums to further increase by roughly two percent.

Opportunities: The ETT tracker certificate on the STOXX™ Europe 600 Insurance Index (symbol: ETINS) affords investors a diversified investment opportunity in the industry. This product has no annual management fee, thus tracking the performance of the underlying index exactly.² The index is comprised of 35 stocks; the dividend yield is 4.3 percent. Distributions are accounted on a net basis. The Callable Worst of Kick-In GOAL (symbol: KCNGDU) on Zurich Insurance is a partially protected vehicle for investment in the insurance industry. The product features a risk buffer of 27.4 percent and a sideways yield of 9.4 percent.

Risks: The products are not capital-protected investments. Negative performance of the underlying stock results in corresponding loss in value for the ETT. In contrast, Worst of Kick-In GOALs do offer contingent capital protection. If the underlying is quoted at or below the kick-in level (barrier) once during the product term and the callable function is not triggered, the underlying has to at least trade back at the strike level by the expiration date. If not, payout takes place in the form of delivery of a fixed number of shares. In addition, the investor bears issuer risk with structured products, which means capital invested may be lost if UBS AG should go bankrupt, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

STOXX™ Europe 600 Insurance Index (5 years)

The uptrend that lasted from 2016 to 2018 gave way to sideway trading in the 600 point range. The sector index’s bottom-line performance has been good over a five-year period.

Source: UBS AG, Bloomberg

As of 13.02.2019

Zurich Insurance vs. SMI™
(five years, for illustrative purposes only, figures in %)¹

Zurich Insurance shares have traded up and down in recent years. The stock has been slightly more volatile than the overall market, but has ultimately performed the SMI™.

Source: UBS AG, Bloomberg

As of: 13.02.2019

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

ETT on STOXX™ Europe 600 Insurance Index

Symbol ETINS
SVSP Name Tracker Certificates
SPVSP Code 1300
Underlying STOXX™ Europe 600 Insurance Net Return Index
Currency EUR
Ratio 1:1
Administration fee 0.00% p.a.²
Expiry Open End
Participation 100%
Issuer UBS AG, London
Bid/Ask EUR 600.50 / 604.00
 

5.00% p.a. Callable Kick-In GOAL on Zurich Insurance

Symbol KCNGDU
SVSP Name Barrier Reverse Convertible
SPVSP Code 1230 (Callable)
Underlying Zurich Insurance
Currency CHF
Coupon 5.00% p.a.
Sideways return 9.38% / 5.55% p.a.
Kick-In Level (Distance) CHF 231.825 (27.55%)
Sideways return 9.38% / 5.55% p.a.
Expiry 05.10.2020
Issuer UBS AG, London
Bid/Ask 97.95% / 98.95%
 

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Source: UBS AG, Bloomberg

As of: 13.02.2019

Market overview

Index Quotation Week¹
SMI™ 9’164.06 0.2%
SLI™ 1’417.38 0.1%
S&P 500™ 2’753.03 0.8%
Euro STOXX 50™ 3’202.37 -0.3%
S&P™ BRIC 40 4’178.84 0.0%
CMCI™ Compos. 905.13 -0.9%
Gold (troy ounce) 1’315.10 USD 0.1%

¹ Change based on the closing price of the previous day compared to the closing price a week ago.

SMI™ vs. VSMI™ 1 year

smi vs vsmi

The VSMI™ Index is calculated since 2005. It shows the volatility of the stocks within the SMI™ index. A portfolio which reacts only to changes in volatility instead of volatility itself is relevant for the calculation. Thereby, the VSMI™ methodology uses the squared volatility, known as variance, of the SMI options with remaining time to expiry of 30 days traded at the Eurex.

Source: UBS AG, Bloomberg

As of: 13.02.2019

Spotify and Twitter
Two platforms with tremendous reach

Whether listening to music on the way to work or popping off a quick tweet in the evening – for many people, Spotify and Twitter are an integral part of everyday life. Together the streaming provider and short message service had more than half a billion active users at the end of 2018. The two make for an interesting Early Redemption (ER) Kick-In GOAL product too (symbol: KCTLDU). This product offers a potential sideways annualized yield of 14.5 percent p.a. Both stocks have declined since their IPOs in November 2018, the current worst-performer of the two, Twitter, still has a safety buffer of more than 40 percent.

Spotify, Twitter and many other internet stocks got off to a strong start to the year¹, but the two lost momentum after releasing their financials. Spotify announced recording an operating profit for the first quarter ever despite analysts expecting the company to remain in the red. Growing at a rate of 30 percent, the music platform managed to roughly meet sales expectations for the period October to December 2018. Investors were apparently concerned about the outlook for this Swedish company, as Spotify is forecasting declining gross margin for 2019 among other things. (Source: Thomson Reuters Media Report, February 6, 2019)

The US short message service Twitter has recently found itself in a similar situation, reporting strong figures for the fourth quarter of 2019, partly on rising video advertising income, which contributed to a 24 percent increase in sales. The social media company reported better-than-expected earnings as well, yet investors were still disappointed about the outlook for Twitter. For the first quarter of 2019 management estimates sales will range between 715 and 775 million US dollars, the mid-point of which is below the average sales previously projected by analysts. (Source: Thomson Reuters Media Report, 2/7/2019)

Opportunities: The ER Kick-In GOAL is an alternative option to directly investing in Spotify and Twitter (symbol: KCTLDU). As long as neither of the stocks falls to or below their respective barrier, the structured product can afford an annualized yield of up to 14.5 percent at maturity. The underlying stocks are currently trading more than 40 percent above the kick-in level. The first possible early redemption is on November 7, 2019. If Spotify and Twitter trade at or above the starting level on this day or any other quarterly observation day, the Kick-in GOAL expires early. In such case, investors will receive the full nominal amount plus pro rata coupon transferred to their account a few days later.

Risks: Kick-In GOALs are not capital-protected investments. If one of the underlyings trades at or below the applicable kick-in level (barrier) during the product term and the early redemption feature cannot apply, the product may be redeemed on the expiry date in cash based on the price of the weaker performing of the two (relative to the strike, not to exceed nominal value plus coupon). Losses are likely in such case. In addition, investors in structured products bear issuer risk, which means capital invested may be lost if UBS AG should go bankrupt, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Spotify Technology vs. Twitter
(since Spotify IPO, for illustrative purposes only; figures in %)¹

Source: UBS AG, Bloomberg

As of: 13.02.2019

12.00% p.a. Early Redemption Kick-In GOAL on Spotify Technology / Twitter

Symbol KCTLDU
SVSP Name Barrier Reverse Convertibles
SPVSP Code 1230 (Auto-Callable)
Underlyings Spotify Technology / Twitter
Currency USD
Coupon 12.00% p.a.
Sideways return 16.29% (12.84% p.a.)
Kick-In Level (Distance)
Spotify: USD 72.885 (49.22%)
Twitter: USD 17.495 (43.78%)
Expiry 08.05.2020
Issuer UBS AG, London
Bid/Ask 97.50% / 98.50%
 

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Source: UBS AG, Bloomberg

As of: 13.02.2019

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

This material has been prepared by UBS AG or one of its affiliates («UBS»). This material is for distribution only as permitted by law. It is not prepared for the needs of any specific recipient. It is published solely for information and is not a solicitation or offer to buy or sell any securities or related financial instruments (“Instruments”). UBS makes no representation or warranty, either express or implied, on the completeness or reliability of the information contained in this document (“Information”) except that concerning UBS AG and its affiliates. The Information should not be regarded by recipients as a substitute for using their own judgment. Any opinions expressed in this material may change without notice and may be contrary to opinions expressed by other business areas of UBS as a result of using different assumptions or criteria. UBS is under no obligation to update the Information. UBS, its officers, employees or clients may have or have had an interest in the Instruments and may at any time transact in them. UBS may have or have had a relationship with entities referred to in the Information. Neither UBS nor any of its affiliates, or their officers or employees, accepts any liability for any loss arising from use of the Information. This presentation is not a basis for entering into a transaction. Any transaction between you and UBS will be subject to the detailed provisions of the term sheet, confirmation or electronic matching systems relating to that transaction. Clients wishing to effect transactions should contact their local sales representative.
This information is communicated by UBS AG and/or its affiliates («UBS»). * (see below) UBS may from time to time, as principal or agent, have positions in, or may buy or sell, or make a market in any securities, currencies, financial instruments or other assets underlying the product to which this website relates (the «Structured Product»). UBS may provide investment banking and other services to and/or have officers who serve as directors of the companies referred to in this website. UBS’s trading and/or hedging activities related to the Structured Product may have an impact on the price of the underlying asset and may affect the likelihood that any relevant barrier or relevant trigger event is crossed or triggered. UBS has policies and procedures designed to minimise the risk that officers and employees are influenced by any conflicting interest or duty and that confidential information is improperly disclosed or made available. UBS may pay or receive brokerage or retrocession fees in connection with the Structured Product described herein. In respect of any Structured Product that is a security, UBS may, in certain circumstances, sell the Structured Product to dealers and other financial institutions at a discount to the issue price or rebate to them for their own account some proportion of the issue price. Further information is available on request. Structured Products are complex and may involve a high risk of loss. Prior to purchasing the Structured Product you should consult with your own legal, regulatory, tax, financial and accounting advisors to the extent you consider it necessary, and make your own investment, hedging and trading decisions (including decisions regarding the suitability of the Structured Product) based upon your own judgement and advice from those advisers you consider necessary. Save as otherwise expressly agreed in writing, UBS is not acting as your financial adviser or fiduciary in relation to the Product. UBS generally hedges its exposure to Structured Products, although it may elect not to hedge or to partially hedge any Structured Product. UBS’s hedging activity may be conducted through transactions in the underlying asset, index or instrument or in options, futures or other derivatives related to the underlying asset, index or instrument on publicly traded markets or otherwise, and may have an impact on the price of the under-lying asset. If a transaction is cash settled, UBS will generally unwind or offset any hedge it has for such Structured Product in close proximity to the relevant valuation time or period. In some cases, this activity may affect the value of the Structured Product. Unless stated otherwise in this document, (i) this document is for information purposes only and should not be construed as an offer, personal recommendation or solicitation to purchase the Structured Product and should not be treated as giving investment advice, and (ii) the terms of any investment in the Structured Product will be exclusively subject to the detailed provisions, including risk considerations, contained in the more detailed legal documentation that relates to the Structured Product (being the confirmation, information memorandum, prospectus or other issuer documentation as relevant). UBS makes no representation or warranty relating to any information herein which is derived from independent sources. This document shall not be copied or reproduced without UBS’s prior written permission. In respect of any Structured Product that is a security, no action has been or will be taken in any jurisdiction that would permit a public offering of the Product, save where explicitly stated in the issuer documentation. The Structured Product must be sold in accordance with all applicable selling restrictions in the jurisdictions in which it is sold.
© UBS 2018. All rights reserved. UBS prohibits the forwarding of this information without the approval of UBS.
Weekly Hits: European Insurers, Spotify & Twitter2019-02-15T12:00:25+01:00

Weekly Hits: Dividend strategy & Tesla

KeyInvest Weekly Hits

Friday, 08.02.2019

  • Topic 1: Dividend strategy - The harvest can be brought in
  • Topic 2: Tesla - Profits rolling off the production line

Dividend strategy
The harvest can be brought in

While the turnaround of interest rates in the US is stagnating, there is still no sign of an end to the ultra-loose monetary policy here in Switzerland – the yields achievable on the CHF bond market are correspondingly poor. In strong contrast to this, the dividend yield of just over 3% being generated on the Swiss equity market is quite impressive. UBS CIO GWM believes that this discrepancy is an interesting proposition for investors in the medium term, particularly for those investors who focus on companies with high-quality distributions. This is exactly where the Dow Jones Switzerland Select Dividend 15 Index™ comes in. This benchmark systematically searches the domestic equity market for attractive dividend stocks. On the other hand, the UBS Global Quality Dividend Payers Total Return Index takes a global approach. Open End PERLES offer simple and cost-effective access to both strategies. The product (symbol: SWDIV) focusing on domestic stocks is denominated in Swiss francs, while the UBS Global Quality Dividend Payers Index is available in Swiss francs (symbol: DIVQC), euros (symbol: DIVQE) and US dollars (symbol: DIVQD).

According to UBS CIO GWM, Swiss companies currently have historically low levels of debt and are robustly profitable. Although the number of mergers and acquisitions is increasing both on a national and global level, experts are acting on the assumption that distribution rates will continue to remain high. According to CIO GWM, sustainability and the distribution yields are just some of the objective and common criteria in the search for attractive dividend stocks. In contrast, dividend growth is sometimes overlooked. However, analysts believe that companies that show high yields but lag behind in terms of profit and dividend growth are likely to underperform, especially in the current environment (Source: UBS CIO GWM, “Swiss high-quality dividends”, Equities, January 21, 2019).

With the Dow Jones Switzerland Select Dividend 15 Index™, dividend growth is one of the key selection criteria. This strategy examines profit sharing over a period of three years, with dividend yields and the return on equity also playing an important role, in addition to other parameters such as trading liquidity. The UBS Global Quality Dividend Payers Index takes an extremely similar approach, albeit with one major difference – UBS Research is responsible for the composition of the index. Every quarter, the analysts filter 30 value stocks out of an international universe of more than 3,300 equities. This evaluation takes into consideration both the interest rate applied to the distribution as well as the return on equity. The experts also focus on equities with sustainable revenue and earnings growth. In addition, the experts ensure that there is healthy diversification within the portfolio in terms of countries and sector allocation.

Opportunities: The next dividend season will begin in the coming weeks and this issue is likely to be brought further into the spotlight. With Open End PERLES (symbol: SWDIV), investors can take up an early position in a selection of Swiss value stocks via the Dow Jones Switzerland Select Dividend 15 Index™. Should the international markets seem more appealing, investors can look to the UBS Global Quality Dividend Payers Index. With this benchmark, investors can choose between three different trading currencies (see right). In the interests of consistency, both benchmarks are total return indices. This means that any dividend payments are reflected in the calculation of each of the underlying assets.

Risks: Open End PERLES do not have capital protection. Losses will be made if the underlying index declines. The currency risk must also be taken into account, as the trading currency of some index constituents may differ from the trading currency of the certificate shown. Investors in structured products are also exposed to issuer risk, which means that the invested capital may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Dow Jones Switzerland Select Dividend 15 Index™ vs. SMI™ Index
(5 years; for illustrative purposes only; figures in %)

Searching specifically for attractive dividend stocks really pays off – historically, the Dow Jones Switzerland Select Dividend 15 Index™ has massively outperformed the SMI™.

Source: UBS AG, Bloomberg

As of 06.02.2019

UBS Global Quality Dividend Payers Index vs. MSCI™ World Index
(five years, for illustrative purposes only, figures in %)¹

The UBS Global Quality Dividend Payers Index has also recorded higher returns than the broad equity market, with the benchmark increasingly outperforming the MSCI™ World Index since 2016. ¹) Please note that past performance is not an indication of future performance.

Source: UBS AG, Bloomberg

As of: 06.02.2019

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

Open End PERLES on Dow Jones Switzerland Select Dividend 15 Index™

Symbol SWDIV
SVSP Name Tracker Certificates
SPVSP Code 1300
Underlying Dow Jones Switzerland Select Dividend 15 Total Return Index™
Currency CHF
Ratio 10:1
Administration fee 0.40% p.a.
Expiry Open End
Participation 100%
Issuer UBS AG, London
Bid/Ask CHF 207.80 / 209.10
 

Open End PERLES on UBS Global Quality Dividend Payers Net Total Return Index

Symbol DIVQC
Symbol DIVQD
Symbol DIVQE
SVSP Name Tracker Certificates
SPVSP Code 1300
Ratio 1:1
Administration fee 1.00% p.a.
Participation 100%
Expiry Open End
Issuer UBS AG, London
Bid/Ask CHF 266.01 / 268.70
USD 314.22 /317.39
EUR 377.75 / 380.50
 

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Source: UBS AG, Bloomberg

As of: 06.02.2019

Market overview

Index Quotation Week¹
SMI™ 9’143.00 Pt. 2.0%
SLI™ 1’415.70 Pt. 1.5%
S&P 500™ 2’731.61 Pt. 1.9%
Euro STOXX 50™ 3’212.75 Pt. 1.6%
S&P™ BRIC 40 4’177.63 Pt. 1.1%
CMCI™ Compos. 913.51 Pt. 0.8%
Gold (troy ounce) 1’314.40 USD -0.1%

¹ Change based on the closing price of the previous day compared to the closing price a week ago.

SMI™ vs. VSMI™ 1 year

smi vs vsmi

The VSMI™ Index is calculated since 2005. It shows the volatility of the stocks within the SMI™ index. A portfolio which reacts only to changes in volatility instead of volatility itself is relevant for the calculation. Thereby, the VSMI™ methodology uses the squared volatility, known as variance, of the SMI options with remaining time to expiry of 30 days traded at the Eurex.

Source: UBS AG, Bloomberg

As of: 06.02.2019

Tesla
Profits rolling off the production line

The balance sheets of US electric car pioneer Tesla have long been in the red. However, change has been afoot since the second half of 2018, with the California-based group posting a profit in two successive quarters. This positive trend looks set to continue, as company founder Elon Musk announced that the company would close each quarter in 2019 with a profit. The drivers behind this good performance include the Model 3 car, which the company has pinned its hopes on and is now scheduled to be available on European shores in February. There is, however, some bad news – the production target of more than 500,000 units per year that was previously promised to be met in 2018 will probably only be achieved between the fourth quarter of 2019 and the second quarter of 2020 (Source: Thomson Reuters media report, January 30, 2019). With the Kick-In GOAL (symbol: KCWSDU) on Tesla, great profits can also be made on a bumpy road. The product comes with a risk buffer of 42% and offers a potential return of 19.1%.

Despite these initial profits, Tesla can expect a fluctuating performance, both in its operational business and on the stock exchange. The US car manufacturer’s share has been yo-yoing between 280 and 380 US dollars for months. Although Tesla has kept to its promise of remaining in the black from a fundamental perspective, the CEO of the company Musk is still a long way from achieving his goal. There are many factors causing difficulties for the charismatic head of the company, chief among them being the trade dispute between China and the US. Tesla is now having to slash the price of the Model 3 so that it can offset the higher tariffs. In order to avoid such problems in the future, Tesla wants its manufacturing operations to be carried out directly in China. Production is set to commence in the Shanghai plant in the second half of this year, with the target of 3,000 Model 3 cars rolling off the production line every week (Source: Thomson Reuters media report, February 2, 2019). The US group is also introducing cost-cutting measures. “We have to mercilessly cut costs to ensure that we can build affordable cars and not go broke,» said CEO Elon Musk at an analysts’ conference held on January 31.

Opportunities: Despite the initial profits, Tesla will still have to battle against the odds. It could therefore be sensible to invest in the electric car manufacturer with conditional partial protection rather than directly in the share. The Kick-In GOAL (symbol: KCWSDU) offers a high potential return with a healthy risk buffer. The security issued in December 2018 has an annual coupon of 15%. As the Kick-In GOAL is listed under par, the annual return is currently 22.8%. The barrier currently stands at USD 181.53, i.e. 42% of the current price.

Risks: Kick-In GOALs do not have capital protection. If Tesla touches or falls below the kick-in level once during the term, the underlying stock has to be trading at least at the strike level on maturity. Otherwise, the amount repaid in cash will reflect the subscription ratio. In this case, it is likely that losses will be incurred. Investors in structured products are also exposed to issuer risk, which means that the invested capital may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Tesla

Source: UBS AG, Bloomberg

As of: 06.02.2019

15.00% p.a. Kick-In GOAL on Tesla

Symbol KCWSDU
SVSP Name Barrier Reverse Convertibles
SPVSP Code 1230
Underlyings Tesla
Currency USD
Coupon 15.00% p.a.
Sideways return 19.83% (23.82% p.a.)
Kick-In Level (Distance)
USD 181.53 (43.06%)
Expiry 05.12.2019
Issuer UBS AG, London
Bid/Ask 92.72% / 93.72%
 

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Source: UBS AG, Bloomberg

As of: 06.02.2019

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

This material has been prepared by UBS AG or one of its affiliates («UBS»). This material is for distribution only as permitted by law. It is not prepared for the needs of any specific recipient. It is published solely for information and is not a solicitation or offer to buy or sell any securities or related financial instruments (“Instruments”). UBS makes no representation or warranty, either express or implied, on the completeness or reliability of the information contained in this document (“Information”) except that concerning UBS AG and its affiliates. The Information should not be regarded by recipients as a substitute for using their own judgment. Any opinions expressed in this material may change without notice and may be contrary to opinions expressed by other business areas of UBS as a result of using different assumptions or criteria. UBS is under no obligation to update the Information. UBS, its officers, employees or clients may have or have had an interest in the Instruments and may at any time transact in them. UBS may have or have had a relationship with entities referred to in the Information. Neither UBS nor any of its affiliates, or their officers or employees, accepts any liability for any loss arising from use of the Information. This presentation is not a basis for entering into a transaction. Any transaction between you and UBS will be subject to the detailed provisions of the term sheet, confirmation or electronic matching systems relating to that transaction. Clients wishing to effect transactions should contact their local sales representative.
This information is communicated by UBS AG and/or its affiliates («UBS»). * (see below) UBS may from time to time, as principal or agent, have positions in, or may buy or sell, or make a market in any securities, currencies, financial instruments or other assets underlying the product to which this website relates (the «Structured Product»). UBS may provide investment banking and other services to and/or have officers who serve as directors of the companies referred to in this website. UBS’s trading and/or hedging activities related to the Structured Product may have an impact on the price of the underlying asset and may affect the likelihood that any relevant barrier or relevant trigger event is crossed or triggered. UBS has policies and procedures designed to minimise the risk that officers and employees are influenced by any conflicting interest or duty and that confidential information is improperly disclosed or made available. UBS may pay or receive brokerage or retrocession fees in connection with the Structured Product described herein. In respect of any Structured Product that is a security, UBS may, in certain circumstances, sell the Structured Product to dealers and other financial institutions at a discount to the issue price or rebate to them for their own account some proportion of the issue price. Further information is available on request. Structured Products are complex and may involve a high risk of loss. Prior to purchasing the Structured Product you should consult with your own legal, regulatory, tax, financial and accounting advisors to the extent you consider it necessary, and make your own investment, hedging and trading decisions (including decisions regarding the suitability of the Structured Product) based upon your own judgement and advice from those advisers you consider necessary. Save as otherwise expressly agreed in writing, UBS is not acting as your financial adviser or fiduciary in relation to the Product. UBS generally hedges its exposure to Structured Products, although it may elect not to hedge or to partially hedge any Structured Product. UBS’s hedging activity may be conducted through transactions in the underlying asset, index or instrument or in options, futures or other derivatives related to the underlying asset, index or instrument on publicly traded markets or otherwise, and may have an impact on the price of the under-lying asset. If a transaction is cash settled, UBS will generally unwind or offset any hedge it has for such Structured Product in close proximity to the relevant valuation time or period. In some cases, this activity may affect the value of the Structured Product. Unless stated otherwise in this document, (i) this document is for information purposes only and should not be construed as an offer, personal recommendation or solicitation to purchase the Structured Product and should not be treated as giving investment advice, and (ii) the terms of any investment in the Structured Product will be exclusively subject to the detailed provisions, including risk considerations, contained in the more detailed legal documentation that relates to the Structured Product (being the confirmation, information memorandum, prospectus or other issuer documentation as relevant). UBS makes no representation or warranty relating to any information herein which is derived from independent sources. This document shall not be copied or reproduced without UBS’s prior written permission. In respect of any Structured Product that is a security, no action has been or will be taken in any jurisdiction that would permit a public offering of the Product, save where explicitly stated in the issuer documentation. The Structured Product must be sold in accordance with all applicable selling restrictions in the jurisdictions in which it is sold.
© UBS 2018. All rights reserved. UBS prohibits the forwarding of this information without the approval of UBS.
Weekly Hits: Dividend strategy & Tesla2019-02-28T13:23:21+01:00

Weekly Hits: Gaming Industry & Oil companies

KeyInvest Weekly Hits

Friday, 01.02.2019

  • Topic 1: Gaming Industry Basket - Play and win
  • Topic 2: BP / Total / Royal Dutch Shell - Integrated oil companies post their results

Gaming Industry Basket
Play and win

Football is played everywhere; on the field next door, in the schoolyard and even on the beach. But the popular sport is encountering increasing “digital” competition. Virtual kicking is on the march. The Fifa computer game developed by the listed US group Electronic Arts (EA) claims to have sold over 260 million units, making it the most successful video sport game of all time. (Source: EA, media report, 05.09.2018) Given the growth numbers, it is no wonder that the competition is constantly increasing. According to the market research company Newzoo, the global games market likely grew by a total 13.3% in 2018 to USD 137.9 billion. (Source: Newzoo, 02.11.2018) Now UBS is giving investors the ability to take a broadly diversified position in this fast-growing segment via the brand new PERLES on the gaming industry basket (symbol: GAMECU).

One of the growth drivers in the sector is e-sports. The market for sporting competitions between people using computers has more than doubled in recent years. According to UBS CIO GWM it will grow by another 100% to USD 1.5 billion by 2020. The number of e-sports enthusiasts will rise to 286 million by that date. This is equivalent to growth of around 50% compared to 2017. (Source: UBS CIO GWM, Global e-leisure, 21.01.2019)

Geographically, China sets the pace in the global e-gaming segment. The experts at Newzoo expect that last year the country was once again the largest gaming market in the world at USD 34.4 billion. (Source: Newzoo, 03.08.2018) But it’s not just the Chinese who are fanatical about gaming, the whole of Asia loves it. UBS CIO GWM assumes that sales of video games in Asia will rise to USD 200 billion by 2030, equivalent to an annual average growth rate of 9.5%. (Source: UBS CIO GWM, Game on, Asia, 19.09.2018)
As in many other areas of life, gaming too is seeing the trend towards mobile. According to the researchers at Newzoo, mobile games were the largest segment in the global gaming market in 2018, accounting for 47%. The experts think that the shift towards mobile platforms, and especially towards smartphones, will continue in 2019. Newzoo is forecasting that the global market for mobile games will grow to USD 174 billion by 2021, giving it 52% of total revenues. (Source: Newzoo, 02.11.2018) The largest developer of online games is currently Tencent. Recently the Chinese firm has been suffering from the government’s pause on authorizing new games in view of protecting minors and combating gambling addiction. This has dampened growth at Tencent in the recent past. This year, however, the authorities have again started issuing sales permits, causing the stock price to rise.¹

Opportunities: The gaming specialists just mentioned, Electronic Arts and Tencent, are only two of the companies in the new gaming industry basket. They also include Japanese developer Nexon, Take-Two Interactive from the US and the cult firm Nintendo. There are a total of 13 international companies in the well-diversified basket, which consists of Ubisoft of France plus half each from Asia and the USA. The PERLES, which is open for subscription (symbol: GAMECU), allows investors to participate in this innovation-driven growth sector one-to-one (minus a management fee of 0.50% p.a.). Dividends are taken into account on a net basis. At the start of the basket the constituents are all equally weighted, the product term is seven years.

Risks: This product does not have any capital protection. With a PERLES, losses are incurred if the underlying basket falls below the entry price. Investors in structured products are also exposed to issuer risk, which means that the capital invested may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Electronic Arts vs. Tencent vs. Ubisoft
(5 years; for illustrative purposes only; figures in %)

The international gaming trio Electronic Arts, Tencent and Ubisoft have seen their stock prices multiply in recent years. Recently there has been a correction, which is just bottoming out.

Source: UBS AG, Bloomberg

As of 30.01.2019

Forecast growth in revenue and players in e-sports (2015 to 2020)

Experts are predicting that both revenue and the number of players will rise sharply in e-sports in the next few years. (Source: UBS CIO GWM, Global e-leisure, 21.01.2019)

Source: UBS AG, Bloomberg

As of: 30.01.2019

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

PERLES on Gaming Industry Basket

Symbol GAMECU
SVSP Name Tracker Certificates
SPVSP Code 1300
Underlying Gaming Industry Basket
Currency CHF
Ratio 1:1
Administration fee 0.50% p.a.
Expiry 13.02.2026
Participation 100%
Issuer UBS AG, London
Subscripton until 14.02.2019, 15:00 h
 

Basekt members at a glance

Company Weighting
Tencent 7.6923%
Nintendo 7.6923%
Electronic Arts 7.6923%
Take-Two Interactive Softw. 7.6923%
NetEase 7.6923%
Zynga 7.6923%
Nexon 7.6923%
Turtle Beach 7.6923%
Kingsoft 7.6923%
Sea 7.6923%
Ubisoft Entertainment 7.6923%
Bandai Namco 7.6923%
Square Enix 7.6923%
 

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Source: UBS AG, Bloomberg

As of: 30.01.2019

Market overview

Index Quotation Week¹
SMI™ 8’965.71 0.1%
SLI™ 1’394.47 0.3%
S&P 500™ 2’681.05 1.6%
Euro STOXX 50™ 3’161.74 1.6%
S&P™ BRIC 40 4’130.54 2.6%
CMCI™ Compos. 906.03 1.1%
Gold (troy ounce) 1’315.50 USD 2.5%

¹ Change based on the closing price of the previous day compared to the closing price a week ago.

SMI™ vs. VSMI™ 1 year

smi vs vsmi

The VSMI™ Index is calculated since 2005. It shows the volatility of the stocks within the SMI™ index. A portfolio which reacts only to changes in volatility instead of volatility itself is relevant for the calculation. Thereby, the VSMI™ methodology uses the squared volatility, known as variance, of the SMI options with remaining time to expiry of 30 days traded at the Eurex.

Source: UBS AG, Bloomberg

As of: 30.01.2019

BP / Total / Royal Dutch Shell
Integrated oil companies post their results

With the reporting season coming up soon, the focus will be on the major European oil and gas companies. Royal Dutch Shell announced its results yesterday morning (after we had gone to press), and BP is due to report on Tuesday, 5 February. Two days later, Total will follow suit. UBS combines the three European integrated oil stocks as underlyings for an Issuer Callable Worst of Kick-In GOAL (symbol: KDCLDU). Regardless of how the stock prices of the trio perform, investors can expect a coupon payment of 6.00% p.a. from the product. Each underlying has a price cushion of 40% at the initial fixing.

Figures from the oil and gas companies are being eagerly awaited, not least because the price of fuel moved down sharply at the start of the fourth quarter 2018. For example: on 3 October 2018, Brent cost USD 86.74, the highest price in four years. The correction that followed took the price down by up to 42% by the end of December.¹ The change in direction was driven by a completely different situation in the market: whereas global oil production had still been unable to meet demand in the third quarter, the last three months of 2018 saw a considerable surplus. Experts see this persisting in the new year. (Source: Thomson Reuters, 25.01.2019)

The result announcements will show how well the oil and gas sector is coping with the change in fundamentals. Cost cutting and higher prices have allowed the integrated operators to cash in mightily in the past few years. For example, Royal Dutch Shell: the largest stock in the sector by market capitalization in Europe reported operating cash flow of USD 14.7 billion in the third quarter of 2018. CEO Ben Beurden spoke of one of the best quarters in the company’s history. (Source: Royal Dutch Shell, announcement, 01.11.2018) The sector allows shareholders to participate in the success of the business through dividends and share buybacks.

Opportunities: Even if the stock prices of BP, Total and Royal Dutch Shell don’t budge in the next 18 months, the IC Worst-of Kick-In GOAL (Symbol: KDCLDU) offers an attractive minimum return of 6.00% p.a. This assumes that none of the underlyings touches or falls below the low barrier of 60% of the starting level. The issuer has a right of termination. If it makes use of the issuer-call feature on one of the two exercise dates (06.02.2020 and 06.05.2020), investors receive the full nominal and pro-rata coupon repaid early.

Risks: Worst-of Kick-In GOALs do not have capital protection. If one of the underlyings touches or falls below the respective kick-in level (barrier) and the issuer-call feature is not exercised, repayment at maturity will be in cash in line with the weakest performance of the trio (from the strike), but no more than nominal plus coupon. In this case, it is likely that losses will be incurred. Investors in structured products are also exposed to issuer risk, which means that the capital invested may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

BP vs. Total vs. Royal Dutch Shell
(five years, for illustrative purposes only, figures in %)¹

Source: UBS AG, Bloomberg

As of: 30.01.2019

6.00% p.a. IC Worst of Kick-In GOAL on BP / Total / Royal Dutch Shell /

Symbol KDCLDU
SVSP Name Barrier Reverse Convertibles
SPVSP Code 1230 (Callable)
Underlyings BP / Total / Royal Dutch Shell
Currency CHF
Coupon 6.00% p.a.
Kick-In Level
60%
Expiry 06.08.2020
Issuer UBS AG, London
Subscription until 06.02.2019, 15:00 Uhr
 

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Source: UBS AG, Bloomberg

As of: 30.01.2019

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

This material has been prepared by UBS AG or one of its affiliates («UBS»). This material is for distribution only as permitted by law. It is not prepared for the needs of any specific recipient. It is published solely for information and is not a solicitation or offer to buy or sell any securities or related financial instruments (“Instruments”). UBS makes no representation or warranty, either express or implied, on the completeness or reliability of the information contained in this document (“Information”) except that concerning UBS AG and its affiliates. The Information should not be regarded by recipients as a substitute for using their own judgment. Any opinions expressed in this material may change without notice and may be contrary to opinions expressed by other business areas of UBS as a result of using different assumptions or criteria. UBS is under no obligation to update the Information. UBS, its officers, employees or clients may have or have had an interest in the Instruments and may at any time transact in them. UBS may have or have had a relationship with entities referred to in the Information. Neither UBS nor any of its affiliates, or their officers or employees, accepts any liability for any loss arising from use of the Information. This presentation is not a basis for entering into a transaction. Any transaction between you and UBS will be subject to the detailed provisions of the term sheet, confirmation or electronic matching systems relating to that transaction. Clients wishing to effect transactions should contact their local sales representative.
This information is communicated by UBS AG and/or its affiliates («UBS»). * (see below) UBS may from time to time, as principal or agent, have positions in, or may buy or sell, or make a market in any securities, currencies, financial instruments or other assets underlying the product to which this website relates (the «Structured Product»). UBS may provide investment banking and other services to and/or have officers who serve as directors of the companies referred to in this website. UBS’s trading and/or hedging activities related to the Structured Product may have an impact on the price of the underlying asset and may affect the likelihood that any relevant barrier or relevant trigger event is crossed or triggered. UBS has policies and procedures designed to minimise the risk that officers and employees are influenced by any conflicting interest or duty and that confidential information is improperly disclosed or made available. UBS may pay or receive brokerage or retrocession fees in connection with the Structured Product described herein. In respect of any Structured Product that is a security, UBS may, in certain circumstances, sell the Structured Product to dealers and other financial institutions at a discount to the issue price or rebate to them for their own account some proportion of the issue price. Further information is available on request. Structured Products are complex and may involve a high risk of loss. Prior to purchasing the Structured Product you should consult with your own legal, regulatory, tax, financial and accounting advisors to the extent you consider it necessary, and make your own investment, hedging and trading decisions (including decisions regarding the suitability of the Structured Product) based upon your own judgement and advice from those advisers you consider necessary. Save as otherwise expressly agreed in writing, UBS is not acting as your financial adviser or fiduciary in relation to the Product. UBS generally hedges its exposure to Structured Products, although it may elect not to hedge or to partially hedge any Structured Product. UBS’s hedging activity may be conducted through transactions in the underlying asset, index or instrument or in options, futures or other derivatives related to the underlying asset, index or instrument on publicly traded markets or otherwise, and may have an impact on the price of the under-lying asset. If a transaction is cash settled, UBS will generally unwind or offset any hedge it has for such Structured Product in close proximity to the relevant valuation time or period. In some cases, this activity may affect the value of the Structured Product. Unless stated otherwise in this document, (i) this document is for information purposes only and should not be construed as an offer, personal recommendation or solicitation to purchase the Structured Product and should not be treated as giving investment advice, and (ii) the terms of any investment in the Structured Product will be exclusively subject to the detailed provisions, including risk considerations, contained in the more detailed legal documentation that relates to the Structured Product (being the confirmation, information memorandum, prospectus or other issuer documentation as relevant). UBS makes no representation or warranty relating to any information herein which is derived from independent sources. This document shall not be copied or reproduced without UBS’s prior written permission. In respect of any Structured Product that is a security, no action has been or will be taken in any jurisdiction that would permit a public offering of the Product, save where explicitly stated in the issuer documentation. The Structured Product must be sold in accordance with all applicable selling restrictions in the jurisdictions in which it is sold.
© UBS 2018. All rights reserved. UBS prohibits the forwarding of this information without the approval of UBS.
Weekly Hits: Gaming Industry & Oil companies2019-02-28T13:22:34+01:00

Weekly Hits: Mergers and acquisitions & Netflix

KeyInvest Weekly Hits

Friday, 25.01.2019

  • Topic 1: Mergers and acquisitions - Systematic premium hunting
  • Topic 2: Netflix - Performing well

Mergers and acquisitions
Systematic premium hunting

In the Swiss mergers and acquisitions (M&A) market, 2019 began with a bang: On January 16, the logistics group DSV made a non-binding offer for Panalpina. The Danes indicated that they were prepared to pay CHF 170 in cash in addition to treasury shares for each share in the company. The price offered thus represented a premium of 24.1% over the closing price fixed for Panalpina on the day prior to publication.¹ This is yet another example of how lucrative M&A events can be for investors. With Open End PERLES (symbol: MANDAU) on the Solactive M&A Europa Total Return Index, it is possible to systematically hunt for acquisition premiums. The participation product replicates the 40 potential takeover candidates in the benchmark with a subscription ratio of 1:1.

It is clear that some investors are betting on there being further bidders for Panalpina. In any case, one week after the approach by DSV, the logistics company’s shares have been trading almost seven francs higher than the offer price. One potential counterbidder would be Kühne+Nagel. The Swiss sector player already signaled its interest in Panalpina last autumn. In response to an inquiry from Reuters, Kühne+Nagel did not wish to comment on the latest developments, however. (Source: Thomson Reuters media report, 1/16/2019).

Nevertheless, DSV’s approach for the Swiss mid-cap company underlines just how active the Swiss M&A market is. According to a recent study by the consulting and audit company KPMG, the number of deals over the last year rose by 24.8% to 493, which is the highest number since the survey began in 2007. In terms of transaction volumes, the experts have observed above-average growth: This figure increased by 30.9% to USD 101.5 billion, which is still somewhat short of the record USD 188.1 billion from 2014. The largest deal of the year involved an SMI™ heavyweight: Novartis sold a 36.5% stake in a joint venture to GlaxoSmithKline for USD 13 billion. (Source: KPMG, press release, January 16, 2019)
The only Swiss company currently in the M&A Europe Index also comes from the same sector as these two major corporations. Vifor Pharma is one of a total of 40 shares to have currently made it through the multi-level selection process. The first criteria stipulated by the index methodology relate to trading liquidity and market capitalization. All shares that meet these quantitative requirements are then subjected to checks using well-known stock market indicators. In addition to the average analysts’ forecast regarding earnings per share for the upcoming fiscal year (FY1 IBES EPS), the price-to-book value (PBV) ratio and the one-year revenue growth must be positive.
Stocks that are overvalued in terms of PBV compared to their sector are not included. The same applies to companies whose average EPS estimate is below the sector median. Of the remaining stocks, the 40 companies with the strongest revenue growth are taken into the index with equal weightings. Each quarter, Solactive carries out a review and makes adjustments as necessary – this process involves restoring the 40 component stocks to equal weightings.

Opportunities: All it takes is a single order to make this dynamic, Europe-focused M&A strategy part of your portfolio with Open End PERLES (symbol: MANDAU). The product passively replicates the underlying assets without any maturity limitation after deduction of the annual management fee of 0.75% p.a. It allows investors to participate in the distributions from the shares contained in the index – any net dividends are reinvested in the benchmark.

Risks: Open End PERLES do not have capital protection. Losses will be made if the underlying index declines. The currency risk must also be taken into account, as the trading currency of some index constituents may differ from the trading currency of the certificate shown. Investors in structured products are also exposed to issuer risk, which means that the invested capital may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Solactive M&A Europe TR Index vs. EURO STOXX 50™ TR Index
(5 years; for illustrative purposes only; figures in %)

In the wake of the recent stock market correction, the M&A benchmark lost its long-term advantage over the EURO STOXX 50™. However, it was able to make up some ground at the start of 2019.

Source: UBS AG, Bloomberg

As of 23.01.2019

Solactive M&A Europe TR Index: Weighting by country

French companies in the Solactive M&A Europa TR Index are currently setting the tone. German and UK shares are the only others to account for double-digit percentage weightings.

Source: UBS AG, Bloomberg

As of: 23.01.2019

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

Open End PERLES on Solactive M&A Europe Total Return Index

Symbol MANDAU
SVSP Name Tracker Certificates
SPVSP Code 1300
Underlying Solactive M&A Europe Total Return Index
Currency EUR
Ratio 1:1
Administration fee 0.75% p.a.
Expiry Open End
Participation 100%
Issuer UBS AG, London
Bid/Ask EUR 176.20 / 178.00
 

Key facts Solactive M&A Europe Total Return Index

ISIN DE000SLA16H5
Index Sponsor Solactive AG
Index Currency
EUR
Index Components 40
Dividend Reinvest (Total Return Index)
Coupon 14.00% p.a.
Current status
182.10
Underlying / date 100 / 01.03.2010
Issuer UBS AG, London
Subscription until 30.01.2019, 15:00 h
 

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Source: UBS AG, Bloomberg

As of: 23.01.2019

Market overview

Index Quotation Week¹
SMI™ 8’957.19 0.9%
SLI™ 1’390.66 1.2%
S&P 500™ 2’638.70 0.9%
Euro STOXX 50™ 3’112.13 1.1%
S&P™ BRIC 40 4’025.73 0.3%
CMCI™ Compos. 896.53 0.4%
Gold (troy ounce) 1’284.00 USD -0.8%

¹ Change based on the closing price of the previous day compared to the closing price a week ago.

SMI™ vs. VSMI™ 1 year

smi vs vsmi

The VSMI™ Index is calculated since 2005. It shows the volatility of the stocks within the SMI™ index. A portfolio which reacts only to changes in volatility instead of volatility itself is relevant for the calculation. Thereby, the VSMI™ methodology uses the squared volatility, known as variance, of the SMI options with remaining time to expiry of 30 days traded at the Eurex.

Source: UBS AG, Bloomberg

As of: 23.01.2019

Netflix
Performing well

The Netflix share price is once again keeping Wall Street on its toes. Since the start of the year, the streaming service provider has gained 26%, helping it to further build on its long-term lead over the NASDAQ-100 Index (see chart)¹. Even if the technology high-flyer does not maintain this pace, a minimum return of almost 16% would be possible with Kick-In GOAL (symbol: KCEFDU). At present, the underlying stock is 37% away from the barrier.

Netflix has been disrupting the media sector for many years. Now the streaming service provider also has its eyes on the greatest film awards in the world. The Netflix production “Roma” has received ten nominations for this year’s Oscars, including in the “Best Film” category. If it were to actually win this coveted prize, this would be yet another key milestone for Netflix. (Source: Thomson Reuters media report, January 22, 2019).

In operational terms, the company continued to grow in 2018. In the fourth quarter alone, Netflix attracted 8.8 million new customers – more than in any other previous quarter. The company now has 139 million subscribers. By contrast, Wall Street was less impressed with its outlook. For the ongoing first quarter, the company’s management are expecting revenues of almost USD 4.5 billion, with a profit of USD 253 million. This forecast is significantly below previous analyst expectations. In light of this, the euphoria surrounding the Nasdaq share, which was sparked by the announcement of price increases, abated somewhat. (Source: Thomson Reuters media report, January 18, 2019).

Opportunities: Although Kick-In GOAL (symbol: KCEFDU) was able to make up some ground following the recent price rally by Netflix, the structured product is trading some way below the 100% mark. This means there is a return opportunity, which is somewhat larger than the coupon. On maturity, there is the prospect of income amounting to 20% p.a. for Kick-In GOAL. This requires that Netflix does not fall to or below the barrier of USD 208.566. At present, the underlying stock has a safety buffer of 36.6%

Risks: This product does not have capital protection. If Netflix falls to or below the kick-in level (barrier) once during the term, the underlying stock has to be trading at least at the strike level on maturity. Otherwise, the amount repaid will fall in line with the decline in the Netflix share price. In this case, it is likely that losses will be incurred. Investors in structured products are also exposed to issuer risk, which means that the invested capital may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Netflix vs. Nasdaq-100 Index
(five years, for illustrative purposes only, figures in %)¹

Source: UBS AG, Bloomberg

As of: 23.01.2019

10.00% p.a. Kick-In GOAL on Netflix

Symbol KCEFDU
SVSP Name Barrier Reverse Convertibles
SPVSP Code 1230
Underlyings Netflix
Currency USD
Coupon 10.00% p.a.
Sideways return 13.93% (18.02% p.a.)
Kick-In Level (Distance)
USD 208.566 (35.56%)
Expiry 07.11.2019
Issuer UBS AG, London
Bid/Ask 93.14% / 94.14%
 

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Source: UBS AG, Bloomberg

As of: 23.01.2019

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

This material has been prepared by UBS AG or one of its affiliates («UBS»). This material is for distribution only as permitted by law. It is not prepared for the needs of any specific recipient. It is published solely for information and is not a solicitation or offer to buy or sell any securities or related financial instruments (“Instruments”). UBS makes no representation or warranty, either express or implied, on the completeness or reliability of the information contained in this document (“Information”) except that concerning UBS AG and its affiliates. The Information should not be regarded by recipients as a substitute for using their own judgment. Any opinions expressed in this material may change without notice and may be contrary to opinions expressed by other business areas of UBS as a result of using different assumptions or criteria. UBS is under no obligation to update the Information. UBS, its officers, employees or clients may have or have had an interest in the Instruments and may at any time transact in them. UBS may have or have had a relationship with entities referred to in the Information. Neither UBS nor any of its affiliates, or their officers or employees, accepts any liability for any loss arising from use of the Information. This presentation is not a basis for entering into a transaction. Any transaction between you and UBS will be subject to the detailed provisions of the term sheet, confirmation or electronic matching systems relating to that transaction. Clients wishing to effect transactions should contact their local sales representative.
This information is communicated by UBS AG and/or its affiliates («UBS»). * (see below) UBS may from time to time, as principal or agent, have positions in, or may buy or sell, or make a market in any securities, currencies, financial instruments or other assets underlying the product to which this website relates (the «Structured Product»). UBS may provide investment banking and other services to and/or have officers who serve as directors of the companies referred to in this website. UBS’s trading and/or hedging activities related to the Structured Product may have an impact on the price of the underlying asset and may affect the likelihood that any relevant barrier or relevant trigger event is crossed or triggered. UBS has policies and procedures designed to minimise the risk that officers and employees are influenced by any conflicting interest or duty and that confidential information is improperly disclosed or made available. UBS may pay or receive brokerage or retrocession fees in connection with the Structured Product described herein. In respect of any Structured Product that is a security, UBS may, in certain circumstances, sell the Structured Product to dealers and other financial institutions at a discount to the issue price or rebate to them for their own account some proportion of the issue price. Further information is available on request. Structured Products are complex and may involve a high risk of loss. Prior to purchasing the Structured Product you should consult with your own legal, regulatory, tax, financial and accounting advisors to the extent you consider it necessary, and make your own investment, hedging and trading decisions (including decisions regarding the suitability of the Structured Product) based upon your own judgement and advice from those advisers you consider necessary. Save as otherwise expressly agreed in writing, UBS is not acting as your financial adviser or fiduciary in relation to the Product. UBS generally hedges its exposure to Structured Products, although it may elect not to hedge or to partially hedge any Structured Product. UBS’s hedging activity may be conducted through transactions in the underlying asset, index or instrument or in options, futures or other derivatives related to the underlying asset, index or instrument on publicly traded markets or otherwise, and may have an impact on the price of the under-lying asset. If a transaction is cash settled, UBS will generally unwind or offset any hedge it has for such Structured Product in close proximity to the relevant valuation time or period. In some cases, this activity may affect the value of the Structured Product. Unless stated otherwise in this document, (i) this document is for information purposes only and should not be construed as an offer, personal recommendation or solicitation to purchase the Structured Product and should not be treated as giving investment advice, and (ii) the terms of any investment in the Structured Product will be exclusively subject to the detailed provisions, including risk considerations, contained in the more detailed legal documentation that relates to the Structured Product (being the confirmation, information memorandum, prospectus or other issuer documentation as relevant). UBS makes no representation or warranty relating to any information herein which is derived from independent sources. This document shall not be copied or reproduced without UBS’s prior written permission. In respect of any Structured Product that is a security, no action has been or will be taken in any jurisdiction that would permit a public offering of the Product, save where explicitly stated in the issuer documentation. The Structured Product must be sold in accordance with all applicable selling restrictions in the jurisdictions in which it is sold.
© UBS 2018. All rights reserved. UBS prohibits the forwarding of this information without the approval of UBS.
Weekly Hits: Mergers and acquisitions & Netflix2019-02-15T12:08:16+01:00

Weekly Hits: Gold, Airbus & Boeing

KeyInvest Weekly Hits

Friday, 18.01.2019

  • Topic 1: Gold - An increase in the need for protection
  • Topic 2: Airbus/Boeing - A transatlantic duel

Gold
An increase in the need for protection

The British House of Commons has rejected the Brexit agreement negotiated with Brussels by Prime Minister Theresa May. Although the Prime Minister is now working on a “Plan B”, the risk of a “no deal” Brexit has increased. It therefore comes as no surprise that investors are increasingly turning to the crisis currency of gold (the gold price has risen by 3.7% since December 10, 2018).¹ The ETC (symbol: CGCCIU) offers transparent and efficient access to the most important precious metal. The product tracks the performance of the UBS Bloomberg CMCI Gold CHF Monthly Hedged TR Index. The main parties benefitting from the increasing gold prices are precious metal producers such as Kinross Gold, Freeport-McMoRan and Barrick Gold. This trio forms the basis for an Early Redemption (ER) Kick-In GOAL (symbol: KDAIDU). Investors can expect a coupon payment of 14% p.a. with this subscription product. In addition, the three shares prone to fluctuations have low barriers of 50% of the initial price level.

While only 202 MPs voted for the Brexit deal, a clear majority of 432 MPs rejected it. After the vote in the House of Commons, Theresa May nevertheless came out fighting and announced a plan for how to proceed next. However, we may not see this plan in action, as the leader of the opposition Jeremy Corbyn called for a vote of no-confidence (source: Thomson Reuters media report, January 16, 2019). In any case, the gold price initially showed little reaction to the crushing defeat suffered by the British government. However, the precious metal had grown considerably more expensive in the run-up to the vote, with its value increasing by 6.1% over three months.¹ In addition to the Brexit turbulence, the tariff dispute between the US and China has seen investors head to the safe haven offered by gold.

Especially as the unresolved spat is having a noticeable impact on the real economy. One such example is that in December, China reported a 7.6% decline in imports in comparison with the previous year. At the same time, exports also fell by 4.4%. Analysts had expected growth for both indicators (source: Thomson Reuters media report, January 15, 2019).
In the wake of rising precious metal prices, shares in the mining sector have provided a sign of life. In addition, a takeover has made the industry sit up and take notice, with US company Newmont Mining buying its Canadian competitor Goldcorp for USD 10 billion. If the deal actually comes to pass, this merger would see the creation of the world’s largest gold company. Back in September 2018, Barrick Gold merged with Randgold Resources, a deal that saw the company’s market value rise by USD 6.1 billion (source: Thomson Reuters media report, January 14, 2019).

Opportunities: With the ETT (symbol: CGCCIU) on the UBS Bloomberg CMCI Gold CHF Monthly Hedged TR Index, investors can add the crisis currency to their portfolios simply and cost-effectively. The underlying assets and product are denominated in Swiss francs. Any fluctuations in the exchange rate between the Swiss franc and the commodity currency, the US dollar, are hedged on a monthly basis. The Early Redemption Kick-In GOAL (symbol: KDAIDU) on Kinross Gold, Freeport-McMoRan and Barrick Gold provides investors with a partially protected position in the mining sector. Provided that none of the underlyings touch or fall below the barrier of 50%, the product will pay a return of 14% p.a. on the maturity date. Investors may also be able to get their hands on this return at a much earlier date. Thanks to the Early Redemption function, the term can be shortened.

Risks: The aforementioned products do not have capital protection. The ETC will make a loss if the underlying index decreases. If the underlying assets for the ER Kick-In GOAL equal or fall below the respective kick-in level (barrier) and the early redemption feature does not apply, the amount repaid on maturity may be in cash, reflecting the worst performance of the underlyings (but not more than nominal value plus coupon). In this case, it is likely that losses will be incurred. Investors in structured products are also exposed to issuer risk, which means that the invested capital may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Gold (in US dollars per fine ounce) 5 years¹

Gold has been trending upwards strongly for around three years. While experiencing huge fluctuations, the troy ounce rose in price from less than USD 1,100 to just under USD 1,300.

Source: UBS AG, Bloomberg

As of 16.01.2019

Kinross Gold vs. Freeport-McMoRan vs. Barrick Gold
(five years, for illustrative purposes only, figures in %)¹

The gold sector has had quite a hard time with investors in recent years. All the same, the prices of shares in Kinross Gold,
Freeport-McMoRan and Barrick Gold have stabilized somewhat.

Source: UBS AG, Bloomberg

As of: 16.01.2019

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

ETC on UBS Bloomberg CMCI Gold CHF Monthly Hedged TR Index

Symbol CGCCIU
SVSP Name Tracker Certificates
SPVSP Code 1300
Underlying UBS Bloomberg CMCI Gold CHF Monthly Hedged TR Index
Currency CHF
Ratio 10:1
Administration fee 0.38% p.a.
Expiry Open End
Participation 100%
Issuer UBS AG, London
Bid/Ask CHF 77.70 / 78.05
 

14.00% p.a. Early Redemption Worst of Kick-In GOAL on Kinross Gold / FreeportMcRoran / Goldstone

Symbol KDAIDU
SVSP Name Barrier Reverse Convertibles
SPVSP Code 1230 (Auto-Callable)
Underlying Kinross Gold / Freeport-McMoRan / Barrick Gold
Currency USD
Coupon 14.00% p.a.
Kick-In Level
50%
Expiry 30.01.2020
Issuer UBS AG, London
Subscription until 30.01.2019, 15:00 h
 

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Source: UBS AG, Bloomberg

As of: 16.01.2019

Market overview

Index Quotation Week¹
SMI™ 8’873.77 2.1%
SLI™ 1’374.48 2.4%
S&P 500™ 2’616.10 1.2%
Euro STOXX 50™ 3’077.22 0.2%
S&P™ BRIC 40 4’012.62 1.0%
CMCI™ Compos. 893.02 -0.2%
Gold (troy ounce) 1’293.80 USD 0.1%

¹ Change based on the closing price of the previous day compared to the closing price a week ago.

SMI™ vs. VSMI™ 1 year

smi vs vsmi

The VSMI™ Index is calculated since 2005. It shows the volatility of the stocks within the SMI™ index. A portfolio which reacts only to changes in volatility instead of volatility itself is relevant for the calculation. Thereby, the VSMI™ methodology uses the squared volatility, known as variance, of the SMI options with remaining time to expiry of 30 days traded at the Eurex.

Source: UBS AG, Bloomberg

As of: 16.01.2019

Airbus/Boeing
A transatlantic duel

The year had barely come to a close when the two largest aircraft manufacturers in the world presented their operating balance sheets. In 2018, Boeing supplied a total of 806 aircraft and in doing slightly outperformed Airbus, with its rival delivering 800 aircraft to airline and leasing companies. Boeing also led the race on the stock exchange in 2018. As a result, the Dow Jones™ stock thus extended its longer-term lead over Airbus (see chart).¹ With a new Early Redemption (ER) Kick-In GOAL (symbol: KCZHDU), investors are counting on the two large caps to be able to maintain their current altitude on the market and avoid too much turbulence during the term. The annual coupon of 9% comes with a safety buffer of 40%.

Following a strong end to the year, Airbus has succeeded in meeting its own delivery target for 2018 with pinpoint accuracy. Due to problems with the supply of engines, there had been doubts that this forecast would be met in recent months. Despite all the cries of the naysayers, the European group has increased deliveries for the 16th year in a row. Airbus also posted another record year in 2018 with year-on-year growth of 11%. During this time, however, there was a decline in new orders. The company recorded 747 net orders, compared with 1,109 in the previous year. Nevertheless, a record-high order backlog of 7,577 commercial aircraft had piled up at the end of 2018 (source: Airbus media release, January 9, 2019).

By delivering 806 jet aircraft, Boeing also set a new record in 2018, which saw the Seattle-based group enjoying year-on-year growth of 5.6%. At the same time, the company received orders for a net total of 893 aircraft with a total value of USD 143.7 billion. The 737 MAX remains Boeing’s best-selling product, with 675 net orders being placed for this model in 2018. In December, the program hit the 5,000 net orders mark (source: Boeing media release, January 8, 2019).

Opportunities: UBS has combined the shares in the aircraft manufacturers, both of which have been rated as «Buy” by UBS’ inhouse research department, as the underlying assets for an ER Kick-In GOAL (symbol: KCZHDU). A coupon of 9% p.a. is available on the two shares. This return opportunity comes with a barrier of a low 60% of the starting price. The Early Redemption function makes it possible for the maximum return to be paid out early. This requires that both shares close at or above their respective initial prices on one of the observation days.

Risks: This product does not have capital protection. If the underlyings equal or fall below the respective kick-in level (barrier) and the early redemption feature does not apply, the amount repaid on the date of maturity may be in cash, reflecting the worst performance of the two shares (but not more than nominal value plus coupon). In this case, it is likely that losses will be incurred. Investors in structured products are also exposed to issuer risk, which means that the invested capital may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Airbus vs. Boeing
(five years, for illustrative purposes only, figures in %)¹

Source: UBS AG, Bloomberg

As of: 16.01.2019

9.00% p.a. Early Redemption Worst of Kick-In GOAL on Airbus / Boeing

Symbol KCZHDU
SVSP Name Barrier Reverse Convertibles
SPVSP Code 1230 (Auto-Callable)
Underlyings Airbus / Boeing
Currency EUR
Coupon 9.00% p.a.
Kick-In Level 60%
Expiry 25.01.2021
Issuer UBS AG, London
Subscription until 23.01.2019, 15:00 h
 

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Source: UBS AG, Bloomberg

As of: 16.01.2019

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

This material has been prepared by UBS AG or one of its affiliates («UBS»). This material is for distribution only as permitted by law. It is not prepared for the needs of any specific recipient. It is published solely for information and is not a solicitation or offer to buy or sell any securities or related financial instruments (“Instruments”). UBS makes no representation or warranty, either express or implied, on the completeness or reliability of the information contained in this document (“Information”) except that concerning UBS AG and its affiliates. The Information should not be regarded by recipients as a substitute for using their own judgment. Any opinions expressed in this material may change without notice and may be contrary to opinions expressed by other business areas of UBS as a result of using different assumptions or criteria. UBS is under no obligation to update the Information. UBS, its officers, employees or clients may have or have had an interest in the Instruments and may at any time transact in them. UBS may have or have had a relationship with entities referred to in the Information. Neither UBS nor any of its affiliates, or their officers or employees, accepts any liability for any loss arising from use of the Information. This presentation is not a basis for entering into a transaction. Any transaction between you and UBS will be subject to the detailed provisions of the term sheet, confirmation or electronic matching systems relating to that transaction. Clients wishing to effect transactions should contact their local sales representative.
This information is communicated by UBS AG and/or its affiliates («UBS»). * (see below) UBS may from time to time, as principal or agent, have positions in, or may buy or sell, or make a market in any securities, currencies, financial instruments or other assets underlying the product to which this website relates (the «Structured Product»). UBS may provide investment banking and other services to and/or have officers who serve as directors of the companies referred to in this website. UBS’s trading and/or hedging activities related to the Structured Product may have an impact on the price of the underlying asset and may affect the likelihood that any relevant barrier or relevant trigger event is crossed or triggered. UBS has policies and procedures designed to minimise the risk that officers and employees are influenced by any conflicting interest or duty and that confidential information is improperly disclosed or made available. UBS may pay or receive brokerage or retrocession fees in connection with the Structured Product described herein. In respect of any Structured Product that is a security, UBS may, in certain circumstances, sell the Structured Product to dealers and other financial institutions at a discount to the issue price or rebate to them for their own account some proportion of the issue price. Further information is available on request. Structured Products are complex and may involve a high risk of loss. Prior to purchasing the Structured Product you should consult with your own legal, regulatory, tax, financial and accounting advisors to the extent you consider it necessary, and make your own investment, hedging and trading decisions (including decisions regarding the suitability of the Structured Product) based upon your own judgement and advice from those advisers you consider necessary. Save as otherwise expressly agreed in writing, UBS is not acting as your financial adviser or fiduciary in relation to the Product. UBS generally hedges its exposure to Structured Products, although it may elect not to hedge or to partially hedge any Structured Product. UBS’s hedging activity may be conducted through transactions in the underlying asset, index or instrument or in options, futures or other derivatives related to the underlying asset, index or instrument on publicly traded markets or otherwise, and may have an impact on the price of the under-lying asset. If a transaction is cash settled, UBS will generally unwind or offset any hedge it has for such Structured Product in close proximity to the relevant valuation time or period. In some cases, this activity may affect the value of the Structured Product. Unless stated otherwise in this document, (i) this document is for information purposes only and should not be construed as an offer, personal recommendation or solicitation to purchase the Structured Product and should not be treated as giving investment advice, and (ii) the terms of any investment in the Structured Product will be exclusively subject to the detailed provisions, including risk considerations, contained in the more detailed legal documentation that relates to the Structured Product (being the confirmation, information memorandum, prospectus or other issuer documentation as relevant). UBS makes no representation or warranty relating to any information herein which is derived from independent sources. This document shall not be copied or reproduced without UBS’s prior written permission. In respect of any Structured Product that is a security, no action has been or will be taken in any jurisdiction that would permit a public offering of the Product, save where explicitly stated in the issuer documentation. The Structured Product must be sold in accordance with all applicable selling restrictions in the jurisdictions in which it is sold.
© UBS 2018. All rights reserved. UBS prohibits the forwarding of this information without the approval of UBS.
Weekly Hits: Gold, Airbus & Boeing2019-02-15T12:08:47+01:00

Weekly Hits: Automotive industry & Biotech sector

KeyInvest Weekly Hits

Friday, 11.01.2019

  • Topic 1: Automotive industry - Given a polish
  • Topic 2: Biotech sector - Wave of acquisitions set to continue

Automotive industry
Given a polish

With jubilant highs and sorry lows, the automotive industry has endured a rollercoaster of emotions in recent months. Although the prospects of autonomous technology, digital networking and innovative engines have been a ray of light for the industry, economic uncertainty and trade conflicts are providing a much gloomier picture. There has been a prevailing sense of concern over the past year and prices have hit rock bottom¹. It is, however, still unclear whether the sector will experience a change in direction in 2019. At the upcoming Detroit Motor Show, automotive groups will be revealing what they have to offer under the hoods of their vehicles. The ETT on the STOXX™ Europe 600 Automobiles & Parts NR Index (symbol: ETAUT) provides investors with the opportunity to participate in the sector in a diversified manner and without having to pay any fees.² A viable alternative is also presented in the form of the new IC Kick-In GOAL (symbol: KCZTDU) on BMW, Daimler and VW. The product has a buffer of 40% as well as an annual coupon of 10%.

In order to make an impression with those in attendance, the manufacturers polished their cars at the beginning of the year and will present the highlights of their product ranges at various trade fairs. Traditionally, the North American International Auto Show (NAIAS) announces the start of the year for the automotive industry – and has done so since 1907. However, this is the last time the Detroit show will take place in January. From 2020 onwards, the NAIAS will be a summer event held in July. The trade fair opens its gates on January 14 this year, with numerous innovations at which guests can marvel. The organizers expect more than 30 new models to make their debut, with the American automotive groups taking center stage. Ford will enter the race with, among other vehicles, the 700-horsepower Shelby GT500 and Fiat-Chrysler will showcase a new Ram Heavy Duty pickup with LED lights. But it’s not just the US brands that want to impress the domestic audience; European manufacturers will also be showing what they have to offer in Detroit. For example, Volkswagen will unveil the US Passat as its latest sedan model.

While VW will be travelling to cold Detroit, its competitors BMW and Daimler prefer to make an appearance at the CES in Las Vegas. Although the Consumer Electronics Show is not really a motor show, an increasing number of car makers are making the journey to the desert city. From January 8–12, the manufacturers will be primarily presenting their technological concepts at the show. While BMW will be showcasing a self-driving motorcycle, Mercedes-Benz will be giving the CLA its world premiere. The model comes equipped with a number of assistance systems, such as gesture controls.
As far as US vehicle sales are concerned, Daimler has recently been in pole position. With 315,959 vehicles sold in 2018, the brand once again took first place among the most sold luxury vehicles in the USA. BMW is not far behind in second place and is catching up: While Daimler experienced a 6.3% decline in the number of cars sold, the Bavarian company recorded an increase of 1.7% (source: Manager Magazin media report, January 4, 2019).

Opportunities: The car world is facing upheaval. This presents risks (billion-dollar investments) as well as opportunities (product innovations). Should you feel that there will be a change in direction in 2019 – the STOXX™ Europe 600 Automobiles & Parts Index fell by 28% last year– you can implement a long strategy with the ETT (symbol: ETAUT).¹ The product offers full participation, taking into account the net distributions of the 16 members. This is a factor not to be underestimated, as the dividend yield of the index stands at 2.5%. There is no annual fee.² With the new IC Kick- In GOAL (symbol: KCZTDU), investments can be made in the index heavyweights BMW, Daimler and VW with an “airbag”. The product has a comfortable risk buffer of 40% and an attractive annual coupon of 10%.

Risks: The aforementioned products do not have capital protection. Should the underlying assets deliver a negative performance, the ETT will incur commensurate losses. If the underlying assets for the Worst of Kick-In GOALS equal or fall below the respective kick-in level (barrier) and the issuer callable feature does not apply, the amount repaid on maturity may be in cash, reflecting the worst performance of the three shares (but not more than nominal value plus coupon). In this case, it is likely that losses will be incurred. Investors in structured products are also exposed to issuer risk, which means that the invested capital may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

STOXX™ Europe 600 Automobiles & Parts NR Index vs. STOXX™ Europe 600 NR Index
(five years, for illustrative purposes only, figures in %)¹

“Nothing gained, nothing lost” – this figure of speech holds true for the five-year trend of the STOXX™ Europe 600 Automobiles & Parts Index. Meanwhile, the broad STOXX™ Europe 600 Index rose by 20%.

Source: UBS AG, Bloomberg

As of 10.01.2019

BMW vs. Daimler vs. Volkswagen VZ
(five years, for illustrative purposes only, figures in %)¹

The shares of BMW, Daimler and Volkswagen are showing clear signs of slowing down in the five-year chart. Over the past two years, the shares in the three German automotive companies have at least moved sideways.

Source: UBS AG, Bloomberg

As of: 10.01.2019

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

ETT on STOXX™ Europe 600 Automobiles & Parts NR Index

Symbol ETAUT
SVSP Name Tracker Certificates
SPVSP Code 1300
Underlying STOXX™ Europe 600 Automobiles & Parts EUR Net Return Index
Currency EUR
Ratio 1:1
Administration fee 0.00% p.a.²
Expiry Open End
Participation 100%
Issuer UBS AG, London
Bid/Ask EUR 812.00 / 816.50
 

10.00% p.a. IC Worst of Kick-In GOAL on BMW / Daimler / Volkswagen

Symbol KCZTDU
SVSP Name Barrier Reverse Convertibl
SPVSP Code 1230 (Callable)
Underlying BMW / Daimler / Volkswagen
Currency EUR
Coupon 10.00% p.a.
Kick-In Level
60%
Expiry 23.07.2020
Issuer UBS AG, London
Subscription until 23.01.2019, 15:00 h
 

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Source: UBS AG, Bloomberg

As of: 10.01.2019

Market overview

Index Quotation Week¹
SMI™ 8’687.71 3.1%
SLI™ 1’342.15 3.6%
S&P 500™ 2’584.96 3.0%
Euro STOXX 50™ 3’070.24 2.6%
S&P™ BRIC 40 3’970.99 5.8%
CMCI™ Compos. 894.73 5.0%
Gold (troy ounce) 1292.00 USD 0.6%

¹ Change based on the closing price of the previous day compared to the closing price a week ago.

SMI™ vs. VSMI™ 1 year

smi vs vsmi

The VSMI™ Index is calculated since 2005. It shows the volatility of the stocks within the SMI™ index. A portfolio which reacts only to changes in volatility instead of volatility itself is relevant for the calculation. Thereby, the VSMI™ methodology uses the squared volatility, known as variance, of the SMI options with remaining time to expiry of 30 days traded at the Eurex.

Source: UBS AG, Bloomberg

As of: 10.01.2019

Biotech sector
Wave of acquisitions set to continue

The new year began with a bang on Wall Street, as pharmaceutical giant Bristol-Myers Squib submitted a USD 74 billion takeover bid for the Celgene biotech group on January 3. And just a few days later, Eli Lilly added to the wave of takeovers in the sector. The American company is courting Loxo Oncology with an USD 8 billion cash offer. In the wake of both deals, the kick-in GOAL (symbol: KCFZDU) on Celgene, Amgen and Johnson & Johnson also experienced a lively start to the year.¹ Notwithstanding the gains, the product offers the prospect of a minimum return of 10.4% p.a. Even with the current worst performer (Celgene), this attractive opportunity comes with a barrier of 37.5%.

Together with Celgene, Bristol-Myers Squib will soon be launching a series of blockbusters on the market. Specifically, six new drugs with a sales potential of more than USD 15 billion are to be launched in the near future. One of the key aspects in the planned merger is cancer immunotherapy. Celgene boosted its expertise in this field of treatment last year with the USD 9 billion acquisition of Juno Therapeutics (source: Thomson Reuters media report, January 3, 2019).

Oncology has always played an important role in Amgen’s business. As recently as in December of last year, the biotech giant announced its strategic collaboration in the field of immunotherapy with Swiss company Molecular Partners. The transatlantic alliance will focus on the clinical development and commercialization of “MP0310”. The aim of this active ingredient is to activate the immune cells in a tumor (source: Thomson Reuters media report, December 19, 2018). Oncology has recently emerged as a growth driver for the Johnson & Johnson healthcare company. One example of this is Zytiga, an active ingredient used to treat prostate cancer. Together with other products, it generated an operating sales growth of 8.2% for the company’s Pharmaceuticals division in the third quarter of 2018 (source: Johnson & Johnson media release, October 16, 2018).

Opportunities: Should the share prices of Amgen, Celgene and Johnson
& Johnson remain more or less stable over the next seven months, a minimum annual yield of 10.4% can be achieved with the Kick-In GOAL (symbol: KCFZDU). This will require that none of the three underlyings touch or fall below the barrier before the maturity date in August. In contrast to when the shares were issued, Celgene currently has the weakest price performance. Nevertheless, the Nasdaq 100™ member still has a safety buffer of 37.5%.

Risks: Kick-In GOALs do not have capital protection. If one of the underlyings equals or falls below the respective kick-in level (barrier) during the term, the amount repaid on the date of maturity may be in cash, reflecting the worst performance of the three shares from the strike price (but not more than nominal value plus coupon). In this case, it is likely that losses will be incurred. Investors in structured products are also exposed to issuer risk, which means that the invested capital may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Amgen vs. Celgene vs. Johnson & Johnson
(five years, for illustrative purposes only, figures in %)¹

Source: UBS AG, Bloomberg

As of: 10.01.2019

6.50% p.a. Kick-In GOAL on Amgen / Celgene / Johnson & Johnson

Symbol KCFZDU
SVSP Name Barrier Reverse Convertible
SPVSP Code 1230
Underlyings Amgen / Celgene Corporation / Johnson & Johnson
Currency USD
Coupon 6.50% p.a.
Sideways return 6.48% (10.38% p.a.)
Kick-In Level (Distance) Amgen: USD 118.704
(41.10%)
Celgene: USD 54.384
(37.45%)
Johnson & Johnson: USD 80.766
(37.50%)
Expiry 22.08.2019
Issuer UBS AG, London
Bid/Ask 96.61% / 97.64%
 

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Source: UBS AG, Bloomberg

As of: 10.01.2019

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

This material has been prepared by UBS AG or one of its affiliates («UBS»). This material is for distribution only as permitted by law. It is not prepared for the needs of any specific recipient. It is published solely for information and is not a solicitation or offer to buy or sell any securities or related financial instruments (“Instruments”). UBS makes no representation or warranty, either express or implied, on the completeness or reliability of the information contained in this document (“Information”) except that concerning UBS AG and its affiliates. The Information should not be regarded by recipients as a substitute for using their own judgment. Any opinions expressed in this material may change without notice and may be contrary to opinions expressed by other business areas of UBS as a result of using different assumptions or criteria. UBS is under no obligation to update the Information. UBS, its officers, employees or clients may have or have had an interest in the Instruments and may at any time transact in them. UBS may have or have had a relationship with entities referred to in the Information. Neither UBS nor any of its affiliates, or their officers or employees, accepts any liability for any loss arising from use of the Information. This presentation is not a basis for entering into a transaction. Any transaction between you and UBS will be subject to the detailed provisions of the term sheet, confirmation or electronic matching systems relating to that transaction. Clients wishing to effect transactions should contact their local sales representative.
This information is communicated by UBS AG and/or its affiliates («UBS»). * (see below) UBS may from time to time, as principal or agent, have positions in, or may buy or sell, or make a market in any securities, currencies, financial instruments or other assets underlying the product to which this website relates (the «Structured Product»). UBS may provide investment banking and other services to and/or have officers who serve as directors of the companies referred to in this website. UBS’s trading and/or hedging activities related to the Structured Product may have an impact on the price of the underlying asset and may affect the likelihood that any relevant barrier or relevant trigger event is crossed or triggered. UBS has policies and procedures designed to minimise the risk that officers and employees are influenced by any conflicting interest or duty and that confidential information is improperly disclosed or made available. UBS may pay or receive brokerage or retrocession fees in connection with the Structured Product described herein. In respect of any Structured Product that is a security, UBS may, in certain circumstances, sell the Structured Product to dealers and other financial institutions at a discount to the issue price or rebate to them for their own account some proportion of the issue price. Further information is available on request. Structured Products are complex and may involve a high risk of loss. Prior to purchasing the Structured Product you should consult with your own legal, regulatory, tax, financial and accounting advisors to the extent you consider it necessary, and make your own investment, hedging and trading decisions (including decisions regarding the suitability of the Structured Product) based upon your own judgement and advice from those advisers you consider necessary. Save as otherwise expressly agreed in writing, UBS is not acting as your financial adviser or fiduciary in relation to the Product. UBS generally hedges its exposure to Structured Products, although it may elect not to hedge or to partially hedge any Structured Product. UBS’s hedging activity may be conducted through transactions in the underlying asset, index or instrument or in options, futures or other derivatives related to the underlying asset, index or instrument on publicly traded markets or otherwise, and may have an impact on the price of the under-lying asset. If a transaction is cash settled, UBS will generally unwind or offset any hedge it has for such Structured Product in close proximity to the relevant valuation time or period. In some cases, this activity may affect the value of the Structured Product. Unless stated otherwise in this document, (i) this document is for information purposes only and should not be construed as an offer, personal recommendation or solicitation to purchase the Structured Product and should not be treated as giving investment advice, and (ii) the terms of any investment in the Structured Product will be exclusively subject to the detailed provisions, including risk considerations, contained in the more detailed legal documentation that relates to the Structured Product (being the confirmation, information memorandum, prospectus or other issuer documentation as relevant). UBS makes no representation or warranty relating to any information herein which is derived from independent sources. This document shall not be copied or reproduced without UBS’s prior written permission. In respect of any Structured Product that is a security, no action has been or will be taken in any jurisdiction that would permit a public offering of the Product, save where explicitly stated in the issuer documentation. The Structured Product must be sold in accordance with all applicable selling restrictions in the jurisdictions in which it is sold.
© UBS 2018. All rights reserved. UBS prohibits the forwarding of this information without the approval of UBS.
Weekly Hits: Automotive industry & Biotech sector2019-02-15T12:11:47+01:00

Weekly Hits: Investment ideas 2019

KeyInvest Weekly Hits

Friday, 21.12.2018

  • Topic 1: Investment idea 2019 I - Dividend stocks
  • Topic 2: Investment idea 2019 II - European Utilities

Investment idea 2019 I
Dividend stocks

On 6 December UBS published its much-respected report “Year Ahead”. Suitably for the current situation on the financial markets, the 2019 outlook is entitled “Turning Points”. In the 76-page publication the experts at the world’s leading wealth manager take a close look at what might happen in the new year. They also, as usual, make specific recommendations. You can find “Year Ahead” at ubs.com/cio. As far as equities as an asset class are concerned, European utilities are among the favorites of UBS CIO GWM – see page 3. They also think dividend stocks are promising. With the Open End PERLES (symbol: SWDIV) on the Dow Jones Switzerland Select Dividend 15 Index™ investors can gain exposure to high-yielding shares in the domestic market at a single stroke. This tracker certificate has been on the market for over seven years, whereas the Open End PERLES (symbol QIXEUU) on the QIX Dividenden Europa Index was launched in mid-2017.

The Chief Investment Office of UBS Global Wealth Management (CIO GWM) expects global economic growth to weaken from 3.8% in the year now ending to 3.6% in 2019. Corporate earnings will also rise more slowly. CIO GWM feels that the prices of many financial assets already reflect the uncertain prospects. UBS Wealth Management is therefore going in 2019 overweight in global equities. Given the advanced stage of the market cycle, though, they recommend diversification and hedging. “Investors should hold on to their positions in global equities, but be braced for market volatility,” is how Mark Haefele, Chief Investment Officer at CIO GWM, summarizes the outlook. (Source: UBS, press release, 06.12.2018)

One argument in favor of equities as an asset class is the dividends. According to CIO GWM, this is particularly the case for the Eurozone and Switzerland, where investors still face low interest rates. The dividend yield on the Swiss Performance Index (SPI™) is currently around 3%. By way of comparison, 10-year Swiss government bonds yield less than zero. The analysts argue that solid corporate balance sheets and profitability indicate the payouts are sustainable. In fact as dividends might be more stable than profits, they say this approach is especially promising when times are uncertain. “Our strategy is based on dividend sustainability, above-average dividend growth and a relatively attractive dividend yield,” says CIO GWM. (Source: UBS, «Year Ahead», 06.12.2018)
The Dow Jones Switzerland Select Dividend 15 Index™ follows an entirely suitable approach. The benchmark systematically searches the Swiss equity market for attractive dividend stocks. So far the approach has worked: the dividend strategy has clearly outperformed the SMI™ (see chart)¹. The QIX Dividenden Europe Index has a relatively short history. The benchmark has a multi-stage selection process that looks at both expected and historic dividend yields. Steadiness of distributions plays a key role.

Opportunities: With Open End PERLES investors can implement the dividend strategy in Switzerland (Symbol: SWDIV) and/or across Europe (symbol: QIXEUU). The products track the Dow Jones Switzerland Select Dividend 15 Index™ and QIX Dividenden Europe Index at a ratio of 10:1 and 100:1 respectively. In line with the investment theme, investors also benefit from the distributions made by the constituents in the underlying. Any dividend payments are reflected in the index calculation.

Risks: Open End PERLES do not have capital protection. Losses will be made if the underlying index declines. The currency risk must also be taken into account, as the trading currency of some index constituents may differ from the trading currency of the certificate shown. Investors in structured products are also exposed to issuer risk, which means that the capital invested may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Dow Jones Switzerland Select Dividend 15 Index™ vs. SMI™ Index (5 years, for illustrative purposes only, figures in %)

The Dow Jones Switzerland Select Dividend 15 Index™ hit an all-time high in January 2018. Although it was unable to stay at this level, it has beaten the SMI™ over five years.

Source: UBS AG, Bloomberg

As of 19.12.2018

QIX Dividenden Europa Index vs. Intel vs. STOXX™ Europe 600 Index (from 3 May 2017, for illustrative purposes only, figures in %)

The QIX Dividenden Europa Index has fallen in a weak market environment since launch. However, the rule-based strategy did slightly better than the STOXX™ Europe 600.

Source: UBS AG, Bloomberg

As of: 19.12.2018

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

Open End PERLES on Dow Jones Switzerland Select Dividend 15 Index™

Symbol SWDIV
SVSP Name Tracker Certificates
SPVSP Code 1300
Underlying Dow Jones Switzerland Select Dividend 15 Index™ Total Return (CHF)
Currency CHF
Ratio 10:1
Administration fee 0.40% p.a.
Expiry Open End
Participation 100%
Issuer UBS AG, London
Bid/Ask CHF 190.30 / 191.50
 

Open End PERLES on QIX Dividenden Europa Index (EUR)

Symbol QIXEUU
SVSP Name Tracker Certificates
SPVSP Code 1300
Underlying QIX Dividenden Europa Net Return Index (EUR)
Currency EUR
Ratio 100:1
Administration fee 1.50% p.a.
Participation
100%
Expiry Open End
Issuer UBS AG, London
Bid/Ask EUR 91.80 /92.10
 

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Source: UBS AG, Bloomberg

As of: 19.12.2018

Market overview

Index Quotation Week¹
SMI™ 8’540.16 -3.6%
SLI™ 1’314.35 -3.5%
S&P 500™ 2’506.96 -5.4%
Euro STOXX 50™ 3’051.38 -1.8%
S&P™ BRIC 40 3’748.10 -3.6%
CMCI™ Compos. 871.43 -2.0%
Gold (troy ounce) 1’256.40 USD 0.5%

¹ Change based on the closing price of the previous day compared to the closing price a week ago.

SMI™ vs. VSMI™ 1 year

smi vs vsmi

The VSMI™ Index is calculated since 2005. It shows the volatility of the stocks within the SMI™ index. A portfolio which reacts only to changes in volatility instead of volatility itself is relevant for the calculation. Thereby, the VSMI™ methodology uses the squared volatility, known as variance, of the SMI options with remaining time to expiry of 30 days traded at the Eurex.

Source: UBS AG, Bloomberg

As of: 19.12.2018

Investment idea 2019 II
European Utilities

The macro-economic picture for 2019 has both light and shade. One sector that is relatively insensitive to a possible global slowdown and the ongoing trade disputes is utilities. In a chaotic year on the markets in 2018 European power companies as measured by the STOXX™ Europe 600 Utilities Index clearly outperformed the broad market.¹ UBS CIO GWM is still positive on the sector: the analysts regard valuations as attractive compared to other non-cyclical sectors such as consumer goods and healthcare. (Source: UBS CIO GWM, European Utilities, 17.12.2018) Investors can literally “electrify” their portfolio with an ETT (symbol: ETUTI) on the STOXX™ Europe 600 Utilities Net Return Index. The product currently has no ongoing management fee and also offers an attractive dividend yield.²

There are good reasons why European utilities have done well: according to UBS CIO GWM they have been driven by companies where the profit prospects benefit from rising wholesale electricity prices. In 2018, tariffs were up 20-40% in Europe. The analysts name EDF, RWE and Fortum as specific beneficiaries of this trend. (Source: UBS CIO GWM, European Utilities, 17.12.2018) When it comes to profits, Iberdrola may also score well in this regard. Operating profit was up 34% in Q3, ahead of market expectations. The Spanish utility boosted revenue by 24%. With an weighting of just under 13%, Iberdrola is currently the heavyweight in the STOXX™ Europe 600 Utilities Index. (Source: STOXX™ Index factsheet, 31.10.2018) The experts at UBS CIO GWM see political and regulatory risks for the sector in 2019, such as Brexit and potential government intervention in the sector in Italy. But the profit outlook for utilities is positive, with an estimated growth rate of 6%. (Source: UBS CIO GWM, European Utilities, 17.12.2018)

Opportunities: All the sector companies mentioned so far are constituents of the STOXX™ Europe 600 Utilities NR Index. Recently the 28 stocks in the index have moved up against a weak market environment.¹ With the ETT (symbol: ETUTI) it is possible to back a continuation of the positive price performance in this “energetic” sector. As the underlying in this case is a net return variant, dividends are reinvested in the index. The current distribution yield is an above-average 4.6%.

Risks: This product does not have capital protection. Should the underlying assets deliver a negative performance, the ETT will incur commensurate losses. Investors in structured products are also exposed to issuer risk, which means that the invested capital may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

STOXX™ Europe 600 Utilities Index vs. STOXX™ Europe 600 Index (5 years, for illustrative purposes only, figures in %)

Source: UBS AG, Bloomberg

As of: 19.12.2018

ETT on STOXX™ Europe 600 Utilities Net Return Index

Symbol ETUTI
SVSP Name Tracker Certifikates
SPVSP Code 1300
Underlyings STOXX™ Europe 600 Utilities Net Return Index
Currency EUR
Ratio 1:1
Administration fee 0.00% p.a.²
Participation 100%
Expiry Open End
Issuer UBS AG, London
Bid/Ask EUR 826.50 / 831.00
 

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Source: UBS AG, Bloomberg

As of: 19.12.2018

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

This material has been prepared by UBS AG or one of its affiliates («UBS»). This material is for distribution only as permitted by law. It is not prepared for the needs of any specific recipient. It is published solely for information and is not a solicitation or offer to buy or sell any securities or related financial instruments (“Instruments”). UBS makes no representation or warranty, either express or implied, on the completeness or reliability of the information contained in this document (“Information”) except that concerning UBS AG and its affiliates. The Information should not be regarded by recipients as a substitute for using their own judgment. Any opinions expressed in this material may change without notice and may be contrary to opinions expressed by other business areas of UBS as a result of using different assumptions or criteria. UBS is under no obligation to update the Information. UBS, its officers, employees or clients may have or have had an interest in the Instruments and may at any time transact in them. UBS may have or have had a relationship with entities referred to in the Information. Neither UBS nor any of its affiliates, or their officers or employees, accepts any liability for any loss arising from use of the Information. This presentation is not a basis for entering into a transaction. Any transaction between you and UBS will be subject to the detailed provisions of the term sheet, confirmation or electronic matching systems relating to that transaction. Clients wishing to effect transactions should contact their local sales representative.
This information is communicated by UBS AG and/or its affiliates («UBS»). * (see below) UBS may from time to time, as principal or agent, have positions in, or may buy or sell, or make a market in any securities, currencies, financial instruments or other assets underlying the product to which this website relates (the «Structured Product»). UBS may provide investment banking and other services to and/or have officers who serve as directors of the companies referred to in this website. UBS’s trading and/or hedging activities related to the Structured Product may have an impact on the price of the underlying asset and may affect the likelihood that any relevant barrier or relevant trigger event is crossed or triggered. UBS has policies and procedures designed to minimise the risk that officers and employees are influenced by any conflicting interest or duty and that confidential information is improperly disclosed or made available. UBS may pay or receive brokerage or retrocession fees in connection with the Structured Product described herein. In respect of any Structured Product that is a security, UBS may, in certain circumstances, sell the Structured Product to dealers and other financial institutions at a discount to the issue price or rebate to them for their own account some proportion of the issue price. Further information is available on request. Structured Products are complex and may involve a high risk of loss. Prior to purchasing the Structured Product you should consult with your own legal, regulatory, tax, financial and accounting advisors to the extent you consider it necessary, and make your own investment, hedging and trading decisions (including decisions regarding the suitability of the Structured Product) based upon your own judgement and advice from those advisers you consider necessary. Save as otherwise expressly agreed in writing, UBS is not acting as your financial adviser or fiduciary in relation to the Product. UBS generally hedges its exposure to Structured Products, although it may elect not to hedge or to partially hedge any Structured Product. UBS’s hedging activity may be conducted through transactions in the underlying asset, index or instrument or in options, futures or other derivatives related to the underlying asset, index or instrument on publicly traded markets or otherwise, and may have an impact on the price of the under-lying asset. If a transaction is cash settled, UBS will generally unwind or offset any hedge it has for such Structured Product in close proximity to the relevant valuation time or period. In some cases, this activity may affect the value of the Structured Product. Unless stated otherwise in this document, (i) this document is for information purposes only and should not be construed as an offer, personal recommendation or solicitation to purchase the Structured Product and should not be treated as giving investment advice, and (ii) the terms of any investment in the Structured Product will be exclusively subject to the detailed provisions, including risk considerations, contained in the more detailed legal documentation that relates to the Structured Product (being the confirmation, information memorandum, prospectus or other issuer documentation as relevant). UBS makes no representation or warranty relating to any information herein which is derived from independent sources. This document shall not be copied or reproduced without UBS’s prior written permission. In respect of any Structured Product that is a security, no action has been or will be taken in any jurisdiction that would permit a public offering of the Product, save where explicitly stated in the issuer documentation. The Structured Product must be sold in accordance with all applicable selling restrictions in the jurisdictions in which it is sold.
© UBS 2018. All rights reserved. UBS prohibits the forwarding of this information without the approval of UBS.
Weekly Hits: Investment ideas 20192019-02-15T12:12:13+01:00

Weekly Hits: Fintech & Airlines

KeyInvest Weekly Hits

Friday, 14.12.2018

  • Topic 1: Fintech - The change goes on
  • Topic 2: Airlines - A turbulent year

Fintech
The change goes on

Equities have fallen right of favor as an asset class in 2018. With little time left to the end of the year, negative numbers predominate all round the world. But there are exceptions. Despite all concerns about a crisis, for example, digitalization moves relentlessly on in all sorts of areas in life and business. Including, and especially, in financial services. So the Solactive FinTech 20 Total Return Index is on the winning side in 2018. Although the innovative benchmark has corrected from its all-time high in early October, it is 8% up since the end of last year in US dollars.¹ UBS passively replicates the Solactive FinTech 20 Total Return Index with an Open End PERLES. This allows investors to invest in the megatrend in a diversified manner with no maturity limitation. The participation product is available in Swiss francs (symbol: FINTE), US dollars (symbol: FINTEU) and euro (symbol: FINTEE).

UBS CIO GWM defines fintech as innovations that make banking and financial services easier. The megatrend also appears in the recent publication “Year Ahead 2019” from the world’s leading wealth manager. In this outlook the CIO GWM ranks fintech as one of the most promising longer term investments (LTI). In the current environment in particular, with growth harder to find, experts see such long-term investments as attractive. The LTIs are thematic ideas based on structural trends like population growth, aging and urbanization. CIO GWM believes such themes can guide investors through the current turbulence on the markets and into the future. It sees several driving factors in favor of fintech. Along with rising urbanization, millennials are driving up demand for digital financial solutions.

This is the generation born between 1982 and 1998 who grew up with digitalization. With regulation supportive too, CIO GWM sees fintech at a turning point: segment revenue could rise from USD 120 billion last year to USD 265 billion by 2025. Capital market professionals recommend taking a diversified position in LTIs to reduce dependence on individual stocks. (source: UBS CIO GWM, “Year Ahead 2019”, 6 December 2018)
A glance at the Solactive FinTech 20 Total Return Index shows that this strategy paid off in 2018, which was a difficult year on the stock market. Five of the 20 constituents, including Swiss banking software specialist Temenos, are down year to date. But one-third of the stocks in the index are in positive territory, including current index heavyweight MarketAxess. The operator of an electronic trading platform has added 7.2% to the benchmark. The equally heavily weighted financial information services provider Thomson Reuters has also gained in 2018 to date.¹ The index, for which only companies with a significant share of their business in fintech qualify, is updated twice a year. Provider Solactive then rebalances, so all constituents are once again equally weighted.

Opportunities: UBS opened the Open End PERLES on the dynamic benchmark back in May 2015. Investors can implement this long-term investment idea without any maturity limitation and in the three index currencies: Swiss francs (symbol: FINTE), US dollars (symbol: FINTEU) and euro (symbol: FINTEE). The management fee is a consistent 0.75% p.a. Any net dividends paid by index companies are reinvested in the underlying stock.

Risks: Open End PERLES do not have capital protection. Losses will be made if the underlying index declines. The currency risk must also be taken into account, as the trading currency of the PERLES shown may differ from the currencies of the index members. Investors in structured products are also exposed to issuer risk, which means that the capital invested may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Solactive FinTech 20 TR Index (USD) vs. MSCI™ World Index (from 30 March 2015, for illustrative purposes only, figures in%)¹

The fintech segment has not been able to avoid the correction on the stock market. The sector index has outperformed the global equity market both since launch in March 2015 and in the current year.

Source: UBS AG, Bloomberg

As of 13.12.2018

Temenos vs. MarketAxess vs. Thomson Reuters vs. Intel (five years, for illustrative purposes only, figures in %)¹

Temenos has weakened considerably from its all-time high. Even so, the banking software specialist has still beaten both MarketAxess and Thomson Reuters over five years.

Source: UBS AG, Bloomberg

As of: 13.12.2018

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

Open End PERLES on Solactive FinTech 20 Total Return Index (CHF)

Symbol FINTE
SVSP Name Tracker Certificates
SPVSP Code 1300
Underlying Solactive FinTech 20 Total Return Index (CHF)
Currency CHF
Ratio 1.0108:1
Administration fee 0.75% p.a.
Expiry Open End
Participation 100%
Issuer UBS AG, London
Bid/Ask CHF 162.60 / 164.30
 

Open End PERLES on Solactive FinTech 20 Total Return Index (USD)

Symbol FINTEU
SVSP Name Tracker Certificates
SPVSP Code 1300
Underlying Solactive FinTech 20 Total Return Index (USD)
Currency USD
Ratio 1:1.013685
Administration fee 0.75% p.a.
Participation
100%
Expiry Open End
Issuer UBS AG, London
Bid/Ask USD 153.20 / 154.80
 

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Source: UBS AG, Bloomberg

As of: 13.12.2018

Market overview

Index Quotation Week¹
SMI™ 8’861.14 -0.9%
SLI™ 1’361.78 -1.1%
S&P 500™ 2’651.07 -1.8%
Euro STOXX 50™ 3’107.97 -1.3%
S&P™ BRIC 40 3’889.01 -2.5%
CMCI™ Compos. 890.00 -1.0%
Gold (troy ounce) 1’250.00 USD 0.6%

¹ Change based on the closing price of the previous day compared to the closing price a week ago.

SMI™ vs. VSMI™ 1 year

smi vs vsmi

The VSMI™ Index is calculated since 2005. It shows the volatility of the stocks within the SMI™ index. A portfolio which reacts only to changes in volatility instead of volatility itself is relevant for the calculation. Thereby, the VSMI™ methodology uses the squared volatility, known as variance, of the SMI options with remaining time to expiry of 30 days traded at the Eurex.

Source: UBS AG, Bloomberg

As of: 13.12.2018

Airlines
A turbulent year

Numerous flight cancellations and delays and a sharp rise in aviation fuel prices have caused problems for airlines in 2018. Industry stocks in Europe in particular have fallen heavily in value. Lufthansa and Air France-KLM have stabilized recently, while US competitor Delta Air Lines continues its 2018 uptrend. The three carriers allow attractive conditions as underlying for a Callable Kick-In GOAL (Symbol: KCKLDU): the product offers a positive minimum return of 16.4% p.a. at maturity. The current worst performer, Lufthansa, has a safety buffer of just under 28%.

Growth in the airline industry remains intact. The group, which includes SWISS, transported around 10.6 million passengers in November, 6.1% more than in the same month the previous year. Between January and November 132.4 million passengers boarded Lufthansa aircraft, a growth rate of 10.3% year on year. (source: Lufthansa press release, 11 December 2018) Air France-KLM has not been able to keep up. Its passenger numbers rose 2% to 78.8 million in the first eleven months. However, the French had not increased capacity as much as their German competitor. (source: Air France-KLM press release, 10 December 2018) Delta Air Lines moved a hefty 177.2 million people around the world between January and November 2018. It was not so much the growth rate as the outlook that went down poorly with the stock market: Delta is expecting revenue per passenger mile to rise 3-5% in the current (fourth) quarter. This forecast is at the lower end of previous expectations. (Source: Thomson Reuters media report, 4 December 2018)

Opportunities: With the Callable Kick-In GOAL (symbol: KCKLDU) investors are counting on the three airline stocks being able to maintain their current “altitude” until final maturity. If this calculation proves correct, the product will pay a return of 16.4% p.a. in September 2020. While Air France-KLM has been largely steady since the product was launched, Lufthansa is well below the initial fixing. There remains just under 28% before the worst performer touches the barrier. The issuer is entitled to terminate the product early for the first time on 19 September 2019, and subsequently every three months thereafter. If it uses the callable function, holders get the full nominal back plus the pro rata coupon.

Risks: This product does not have capital protection. If the underlyings touch or fall below the respective kick-in level (barrier) and the callable feature does not apply, the amount repaid on the date of maturity may be in cash, reflecting the worst performance of the three index shares (but not more than nominal value plus coupon). In this case, it is likely that losses will be incurred. Investors in structured products are also exposed to issuer risk, which means that the capital invested may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Air France-KLM vs. Delta Air Lines vs. Deutsche Lufthansa (five years, for illustrative purposes only, figures in %)¹

Source: UBS AG, Bloomberg

As of: 13.12.2018

11.00% p.a. Callable Kick-In GOAL on Air France-KLM / Delta Air Lines / Lufthansa

Symbol KCKLDU
SVSP Name Barrier Reverse Convertible
SPVSP Code 1230 (Auto-Callable)
Underlyings Air France-KLM / Delta Air Lines / Deutsche Lufthansa
Currency EUR
Coupon 11.00% p.a.
Sideways return 29.70% (15.57% p.a.)
Kick-In Level (Distance) Air France-KLM: EUR 5.4132 (44.40%)
Delta Air Lines: USD 34.74 (38.36%)
Lufthansa: EUR 13.902 (29.38%)
Expiry 21.09.2020
Issuer UBS AG, London
Bid/Ask 90.74% / 91.74%
 

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Source: UBS AG, Bloomberg

As of: 13.12.2018

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

This material has been prepared by UBS AG or one of its affiliates («UBS»). This material is for distribution only as permitted by law. It is not prepared for the needs of any specific recipient. It is published solely for information and is not a solicitation or offer to buy or sell any securities or related financial instruments (“Instruments”). UBS makes no representation or warranty, either express or implied, on the completeness or reliability of the information contained in this document (“Information”) except that concerning UBS AG and its affiliates. The Information should not be regarded by recipients as a substitute for using their own judgment. Any opinions expressed in this material may change without notice and may be contrary to opinions expressed by other business areas of UBS as a result of using different assumptions or criteria. UBS is under no obligation to update the Information. UBS, its officers, employees or clients may have or have had an interest in the Instruments and may at any time transact in them. UBS may have or have had a relationship with entities referred to in the Information. Neither UBS nor any of its affiliates, or their officers or employees, accepts any liability for any loss arising from use of the Information. This presentation is not a basis for entering into a transaction. Any transaction between you and UBS will be subject to the detailed provisions of the term sheet, confirmation or electronic matching systems relating to that transaction. Clients wishing to effect transactions should contact their local sales representative.
This information is communicated by UBS AG and/or its affiliates («UBS»). * (see below) UBS may from time to time, as principal or agent, have positions in, or may buy or sell, or make a market in any securities, currencies, financial instruments or other assets underlying the product to which this website relates (the «Structured Product»). UBS may provide investment banking and other services to and/or have officers who serve as directors of the companies referred to in this website. UBS’s trading and/or hedging activities related to the Structured Product may have an impact on the price of the underlying asset and may affect the likelihood that any relevant barrier or relevant trigger event is crossed or triggered. UBS has policies and procedures designed to minimise the risk that officers and employees are influenced by any conflicting interest or duty and that confidential information is improperly disclosed or made available. UBS may pay or receive brokerage or retrocession fees in connection with the Structured Product described herein. In respect of any Structured Product that is a security, UBS may, in certain circumstances, sell the Structured Product to dealers and other financial institutions at a discount to the issue price or rebate to them for their own account some proportion of the issue price. Further information is available on request. Structured Products are complex and may involve a high risk of loss. Prior to purchasing the Structured Product you should consult with your own legal, regulatory, tax, financial and accounting advisors to the extent you consider it necessary, and make your own investment, hedging and trading decisions (including decisions regarding the suitability of the Structured Product) based upon your own judgement and advice from those advisers you consider necessary. Save as otherwise expressly agreed in writing, UBS is not acting as your financial adviser or fiduciary in relation to the Product. UBS generally hedges its exposure to Structured Products, although it may elect not to hedge or to partially hedge any Structured Product. UBS’s hedging activity may be conducted through transactions in the underlying asset, index or instrument or in options, futures or other derivatives related to the underlying asset, index or instrument on publicly traded markets or otherwise, and may have an impact on the price of the under-lying asset. If a transaction is cash settled, UBS will generally unwind or offset any hedge it has for such Structured Product in close proximity to the relevant valuation time or period. In some cases, this activity may affect the value of the Structured Product. Unless stated otherwise in this document, (i) this document is for information purposes only and should not be construed as an offer, personal recommendation or solicitation to purchase the Structured Product and should not be treated as giving investment advice, and (ii) the terms of any investment in the Structured Product will be exclusively subject to the detailed provisions, including risk considerations, contained in the more detailed legal documentation that relates to the Structured Product (being the confirmation, information memorandum, prospectus or other issuer documentation as relevant). UBS makes no representation or warranty relating to any information herein which is derived from independent sources. This document shall not be copied or reproduced without UBS’s prior written permission. In respect of any Structured Product that is a security, no action has been or will be taken in any jurisdiction that would permit a public offering of the Product, save where explicitly stated in the issuer documentation. The Structured Product must be sold in accordance with all applicable selling restrictions in the jurisdictions in which it is sold.
© UBS 2018. All rights reserved. UBS prohibits the forwarding of this information without the approval of UBS.
Weekly Hits: Fintech & Airlines2019-02-15T12:12:38+01:00

Weekly Hits: Pharma industry & US technology

KeyInvest Weekly Hits

Friday, 07.12.2018

  • Topic 1: The pharma industry - A healthy performance
  • Topic 2: US technology - The battle for supremacy

The pharma industry
A healthy performance

In recent weeks and months, observers of the stock market will have noticed a certain change in investors’ preferred shares. Technology shares, which had been favorites among investors for a long time, have had to make way, as sectors considered defensive gained in popularity. This especially applies to the healthcare industry – the STOXX™ Europe 600 Health Care Net Return (NR) Index rose by 1.9% in November. With an ETT (symbol: ETHEA), investors can add this benchmark with strong momentum to their portfolios in an efficient and cost-effective manner. The Pharmaceutical powerhouses Bayer, GlaxoSmithKline and Novartis form the basis for an Early Redemption (ER) Kick-In GOAL (symbol: KCOCDU). The product is currently showing a positive minimum return of 12.3% p.a. This opportunity comes with a solid safety buffer of 26.5% – even with the current worst performer Bayer.

In view of the hectic stock market environment, the recent rotation in preferred sectors is not without warrant. The healthcare industry can certainly also offer operational momentum. A good example here is Novartis: Since Vasant Narasimhan assumed the position of CEO in February; he has set about repositioning the Basel-based group. The Harvard graduate is focusing on specialized, patient-oriented drugs and new treatment approaches, with the aim of developing platforms for cell therapy, gene therapy and radioligand therapy. Novartis strengthened the latter area in October with the USD 2.1 billion acquisition of Endocyte. The US biotech company is developing a type of nuclear medicine therapy for the treatment of prostate cancer. Narasimhan believes that the drug, which is due to be launched in 2021, will generate peak sales of more than one billion US dollars. New products, such as the heart medication Entresto or Cosentyx for psoriasis, have recently provided a boost to Novartis› business, as the Group recorded currency-adjusted sales growth of 6% in the third quarter of 2018.

As a result, management raised its forecast for the year as a whole. (Source: Thomson Reuters media report, October 18, 2018) Roche, the second-largest Group in terms of weighting in the STOXX™ Europe 600 Health Care Index, is also enjoying a tailwind. On December 4, the company presented positive study data for Venclexta in the treatment of blood cancer. In contrast, GlaxoSmithKline’s (GSK) takeover of US cancer specialist Tesaro was met with little enthusiasm. Obviously, the purchase price of USD 5.1 billion is too high for stock exchange speculators, with the GSK share falling significantly. (Source: Thomson Reuters media report, December 3, 2018).

Opportunities: In spite of this, the STOXX™ Europe 600 Health Care Index is about to break out to the upside of the overriding downward trend. With the ETT (symbol: ETHEA), both a short-term trading strategy and a permanent buy-and-hold approach can be pursued – the product replicates the underlying assets completely. There are thus no management fees for this product.² For the ER Kick-In GOAL (symbol: KCOCDU), a stable performance from Bayer, GSK and Novartis would be enough to realize the positive minimum return of 12.3% p.a. Although the product is listed well below the issue price almost two months after the initial setting of the price, the barrier is still 26.5% – even for Bayer, currently the weakest share among the trio. Due to the integrated Early Redemption function, there is also the opportunity for early redemption plus the accrued coupon with this Kick-In GOAL.

Risks: The aforementioned products do not have capital protection. Should the underlying assets deliver a negative performance; the ETT will incur commensurate losses. If one of the underlyings in a Worst of Kick-In GOAL touches or falls below the respective kick-in level (barrier) and the early redemption feature does not apply, repayment at maturity may be in cash, reflecting the weakest performance of the trio from strike (but no more than nominal value plus coupon). In this case, it is likely that losses will be incurred. Investors in structured products are also exposed to issuer risk, which means that the invested capital may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

STOXX™ Europe 600 Health Care Net Return Index vs. STOXX™ Europe 600 Net Return Index 5 years¹

By mid-year, the STOXX™ Europe 600 Health Care Index had lost its lead over the market. The sector has, however, been outperforming the STOXX™ Europe 600 Index once again recently.

Source: UBS AG, Bloomberg

As of 05.12.2018

Bayer vs. GlaxoSmithKline vs. Novartis
(5 years; for illustrative purposes only; figures in %) ¹

Most recently, Novartis shares outperformed those of both competitors in a five-year comparison. While Bayer is only just below the break-even point, GlaxoSmithKline has been on a downward spiral since June 2017.

Source: UBS AG, Bloomberg

As of: 05.12.2018

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

ETT on STOXX™ Europe 600 Health Care EUR Net Return Index

Symbol ETHEA
SVSP Name Tracker-Zertifikat
SPVSP Code 1300
Underlying STOXX™ Europe 600 Health Care EUR Net Return Index 
Currency EUR
Ratio 1:1
Administration fee 0.00% p.a.²
Expiry Open End
Participation 100%
Issuer UBS AG, London
Bid/Ask EUR 1’1302.00 / 1’310.00
 

7.50% p.a. Early Redemption Kick-In GOAL on Bayer / GlaxoSmithKline / Novartis

Symbol KCOCDU
SVSP Name Barrier Reverse Convertible
SPVSP Code 1230 (Auto-Callable)
Underlying Bayer / GlaxoSmithKline / Novartis
Currency CHF
Coupon 7.50% p.a.
Sideways return 24.50% (12.42% p.a.)
Kick-In Level (Distance)
Bayer: EUR 48.0064 (26.83%)
GSK: GBP 9.495 (34.91%)
Novartis: 54.0928 (40.14%)
Expiry 12.10.2020
Issuer UBS AG, London
Bid/Ask 90.35% / 91.35%
 

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Source: UBS AG, Bloomberg

As of: 05.12.2018

Market overview

Index Quotation Week¹
SMI™ 8’939.96 0.5%
SLI™ 1’377.32 0.0%
S&P 500™ 2’700.06 -1.6%
Euro STOXX 50™ 3’150.27 -0.6%
S&P™ BRIC 40 3’989.49 0.8%
CMCI™ Compos. 898.60 2.0%
Gold (troy ounce) 1’242,60 USD 1.0%

¹ Change based on the closing price of the previous day compared to the closing price a week ago.

SMI™ vs. VSMI™ 1 year

smi vs vsmi

The VSMI™ Index is calculated since 2005. It shows the volatility of the stocks within the SMI™ index. A portfolio which reacts only to changes in volatility instead of volatility itself is relevant for the calculation. Thereby, the VSMI™ methodology uses the squared volatility, known as variance, of the SMI options with remaining time to expiry of 30 days traded at the Eurex.

Source: UBS AG, Bloomberg

As of: 05.12.2018

US technology
The battle for supremacy

The battle for the crown of stock market heavyweight is in full swing. Amazon, Microsoft and Apple have recently been trading the position of most valuable company. The company sitting in fourth place –Alphabet – also has a good chance of stealing this crown. In terms of operations, Microsoft in particular is currently making positive headlines, as the veteran of the computer industry once again exceeded analysts› expectations in the past quarter. With positive growth of around 30% in 2018, the Microsoft share has also performed much more dynamically than its arch-rival Apple.¹ The Early Redemption (ER) Worst of Kick-In GOAL (symbol: KCTKDU) on Alphabet, Apple and Microsoft does not need any share price gains for a return to be delivered. The product issued at the beginning of November is currently offering a potential maximum return of 10.6% p.a. which is partly protected by a risk buffer of more than 30%.

For a long time, Microsoft was regarded as a “digital dinosaur” threatened with extinction. However, the CEO Satya Nadella, who has been in office since 2014, shook the dust off the company founded in 1975 and managed to turn the tide by focusing on the cloud. With its “Azure” cloud solution, the group has now risen to number two behind Amazon and even ahead of the Alphabet subsidiary Google. In the first quarter of the 2018/19 financial year alone, Azure has recorded growth of 76%. The group has also enjoyed success on the stock market. On November 28, Microsoft held the position as the world’s most valuable listed company for the first time since 2000 and at the same time dethroned Apple. Although the iPhone manufacturer is also doing well operationally, concerns have recently arisen on the stock market. Reports from suppliers suggest that sales of the current generation of iPhones are below expectations (source: Handelsblatt media report, December 1, 2018).

Opportunities: Even though the upward trend of tech shares has faltered somewhat recently, the industry giants Alphabet, Apple and Microsoft are still clearly up in comparison with the end of 2017.¹ Should the trio take their foot off the gas again, this would present no problems to the ER Worst of Kick-In GOAL (symbol: KCTKDU). The coupon of 9.50% will be paid out regardless of the performance of the shares. Currently, the maximum return is even higher, as the kick-in GOAL is listed below par. In order to achieve this maximum return, the barrier for the underlying assets must remain intact. Apple currently has the lowest buffer, standing at 31.8%. Should the three shares be at or above their starting price on one of the quarterly observation days (first date: November 7, 2019) the product will mature ahead of schedule due to the ER function.

Risks: ER Kick-In GOALs do not have capital protection. If the underlyings equal or fall below the respective kick-in level (barrier) and the early redemption feature does not apply, the amount repaid on the date of maturity may be in cash, reflecting the worst performance of the three shares (but not more than nominal value plus coupon). In this case, it is likely that losses will be incurred. Investors in structured products are also exposed to issuer risk, which means that the capital invested may be lost if UBS AG becomes insolvent, regardless of the performance of the underlying.

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Alphabet Inc. A vs. Apple vs. Microsoft (5 years)¹

Source: UBS AG, Bloomberg

As of: 05.12.2018

9.50% p.a. ER Worst of Kick-In GOAL on Alphabet / Apple / Micorosoft

Symbol KCTKDU
SVSP Name Barrier Reverse Convertible
SPVSP Code 1230 (Auto-Callable)
Underlyings Alphabet Inc. A /  Apple / Microsoft
Currency USD
Coupon 9.50% p.a.
Sideways return 22.78% (11.40% p.a.)
Kick-In Level (Distance) Alphabet: USD 664.944 (37.42%)
Apple: USD 125.97 (28.71%)
Microsoft: USD 67.176 (38.10%)
Expiry 23.10.2020
Issuer UBS AG, London
Bid/Ask 95.37% / 96.37%
 

More UBS products and further information on the risks and opportunities are available at ubs.com/keyinvest.

Source: UBS AG, Bloomberg

As of: 05.12.2018

¹) Please be aware that past performance does not indicate future results.
²) The conditions of ETTs are reviewed on a yearly basis and can be adjusted with a deadline of 13 months after the announcement.

This material has been prepared by UBS AG or one of its affiliates («UBS»). This material is for distribution only as permitted by law. It is not prepared for the needs of any specific recipient. It is published solely for information and is not a solicitation or offer to buy or sell any securities or related financial instruments (“Instruments”). UBS makes no representation or warranty, either express or implied, on the completeness or reliability of the information contained in this document (“Information”) except that concerning UBS AG and its affiliates. The Information should not be regarded by recipients as a substitute for using their own judgment. Any opinions expressed in this material may change without notice and may be contrary to opinions expressed by other business areas of UBS as a result of using different assumptions or criteria. UBS is under no obligation to update the Information. UBS, its officers, employees or clients may have or have had an interest in the Instruments and may at any time transact in them. UBS may have or have had a relationship with entities referred to in the Information. Neither UBS nor any of its affiliates, or their officers or employees, accepts any liability for any loss arising from use of the Information. This presentation is not a basis for entering into a transaction. Any transaction between you and UBS will be subject to the detailed provisions of the term sheet, confirmation or electronic matching systems relating to that transaction. Clients wishing to effect transactions should contact their local sales representative.
This information is communicated by UBS AG and/or its affiliates («UBS»). * (see below) UBS may from time to time, as principal or agent, have positions in, or may buy or sell, or make a market in any securities, currencies, financial instruments or other assets underlying the product to which this website relates (the «Structured Product»). UBS may provide investment banking and other services to and/or have officers who serve as directors of the companies referred to in this website. UBS’s trading and/or hedging activities related to the Structured Product may have an impact on the price of the underlying asset and may affect the likelihood that any relevant barrier or relevant trigger event is crossed or triggered. UBS has policies and procedures designed to minimise the risk that officers and employees are influenced by any conflicting interest or duty and that confidential information is improperly disclosed or made available. UBS may pay or receive brokerage or retrocession fees in connection with the Structured Product described herein. In respect of any Structured Product that is a security, UBS may, in certain circumstances, sell the Structured Product to dealers and other financial institutions at a discount to the issue price or rebate to them for their own account some proportion of the issue price. Further information is available on request. Structured Products are complex and may involve a high risk of loss. Prior to purchasing the Structured Product you should consult with your own legal, regulatory, tax, financial and accounting advisors to the extent you consider it necessary, and make your own investment, hedging and trading decisions (including decisions regarding the suitability of the Structured Product) based upon your own judgement and advice from those advisers you consider necessary. Save as otherwise expressly agreed in writing, UBS is not acting as your financial adviser or fiduciary in relation to the Product. UBS generally hedges its exposure to Structured Products, although it may elect not to hedge or to partially hedge any Structured Product. UBS’s hedging activity may be conducted through transactions in the underlying asset, index or instrument or in options, futures or other derivatives related to the underlying asset, index or instrument on publicly traded markets or otherwise, and may have an impact on the price of the under-lying asset. If a transaction is cash settled, UBS will generally unwind or offset any hedge it has for such Structured Product in close proximity to the relevant valuation time or period. In some cases, this activity may affect the value of the Structured Product. Unless stated otherwise in this document, (i) this document is for information purposes only and should not be construed as an offer, personal recommendation or solicitation to purchase the Structured Product and should not be treated as giving investment advice, and (ii) the terms of any investment in the Structured Product will be exclusively subject to the detailed provisions, including risk considerations, contained in the more detailed legal documentation that relates to the Structured Product (being the confirmation, information memorandum, prospectus or other issuer documentation as relevant). UBS makes no representation or warranty relating to any information herein which is derived from independent sources. This document shall not be copied or reproduced without UBS’s prior written permission. In respect of any Structured Product that is a security, no action has been or will be taken in any jurisdiction that would permit a public offering of the Product, save where explicitly stated in the issuer documentation. The Structured Product must be sold in accordance with all applicable selling restrictions in the jurisdictions in which it is sold.
© UBS 2018. All rights reserved. UBS prohibits the forwarding of this information without the approval of UBS.
Weekly Hits: Pharma industry & US technology2019-02-15T12:13:12+01:00
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