By Rebecca Ellis
FRI, FEB 14 2020-theG&BJournal- Structured Product Issue February 2020-90% Capital Protected, USD, 5 years, of Google / Amazon / Alibaba / Samsung
Who is this product for?
-Investors who wish to receive capital appreciation from a basket of technology, streaming and electronics equities
-Investors who wish to protect their capital up to 90%
-Investors who believe the selected equities will go up during the lifetime of the product
Why follow this idea?
China has been the factory of the world for over two decades. With the emergence of The Corona Virus, the country has now caught a serious economic cold. As the virus spreads, we are yet to see what repercussions on the global economy this outbreak is likely to have. The equity markets have already reacted with a general indiscriminate sell off.
The travel industry will suffer immediately and most directly: airlines, hotel chains, amusement parks (Disney closed its park in Shanghai) and retail chains (Starbucks is closing its stores in the affected areas in China).
Gradually, as the repercussion make their way through the economy, we will see how supply chains get disrupted. Who really knew that Wuhan is a major supplier to the automobile industry! As with Sars, there will be a recovery at some stage. For the moment the biggest home working project has got started, which means digital services will be in demand. For clients seeking a contrarian investment idea with capital protection, we would recommend the following structure note:
The Basket & The Chart:
| Underlying : | Worst of Google / Amazon / Alibaba / Samsung |
| Issuer : | TBD |
| Maturity : | 5 years maximum |
| Autocall trigger : | 100% each semester after 6 months |
| Capital Protection at maturity : | 90% |
| Memory coupon : | 4,15% per semester (8,30% p.a.) |
How it works:
At each semester after 6 months:
-If the underlying is below the autocall trigger level, the coupon is not paid but kept in memory.
-If the underlying is at or above the autocall trigger level, the capital is redeemed at 100% plus a 4,15% coupon per elapsed period.
At maturity:
If the underlying decreased more than 10% from the issuance, the capital is redeemed at 90%.
If the underlying decreased less than 10% from the issuance, the capital is redeemed at the performance of the underlying.
If the underlying is at or above the autocall trigger level, the capital is redeemed at 141.5%.
The Companies
Google (Alphabet) provides web-based searches, map, software applications, mobile operating systems, consumer content, e-commerce and hardware products. The company had an awesome finish to 2019. Full-year revenues increased 18% to $161.9 billion, earnings per share increased 12% to $49.16, and free cash flow (revenue less operating and capital expenses, the end-all and be-all bottom-line profits) surged 45% to $30.97 billion. Like Amazon & Microsoft, advertisement revenues represent one of the most important revenue streams and continues to grow strongly year on year. However, other services, notably the cloud is floating up the ladder and has been given credit by establishing its own segment, versus being mashed up in other services. With this additional blockbuster service revenue increasing quarter by quarter, we see 2020 has the potential for Alphabet to have a great year ahead. We would expect a 7-10% growth of it share price within the next 12 months and to reach 1600-1650 per share.
Amazon has long been a big winner, and it is much bigger now than when we first recommended it in 2014 — so big, in fact, that politicians are beginning to ask if it should be broken up. CEO Jeff Bezos has fostered an entrepreneurial culture and a customer-first mindset that have produced a growth runway best measured not in years, but in decades. From cloud-computing mainstay Amazon Web Services to must-have consumer service Amazon Prime to potential expansions into healthcare, cashier-less stores, and more, this is one innovator that has yet to run out of exciting ideas.
Alibaba is Chinese company’s primary line of business is e-commerce. It is the world’s largest online retail market as the Chinese middle class is estimated to be larger than the entire U.S. population which makes it a gold mine. Moreover, China’s e-commerce grew 17% year over year, which helped drive Alibaba’s revenue up by 40% in 2019. Like It’s US counterparts such as Google, 2019 was the first year where cloud computing blossomed, and Alibaba has a market share 47% market share with a profit of 67%. We see with the home working becoming the trend due to the Coronavirus, and once the Chinese market come back into favor, there will be a strong increase on this share value.
Samsung is developing new business lines to support their traditional business of selling mobile handset. Samsung is more affordable & has a strong loyal user. however, being the second place to Apple their vision is on the future.
Samsung will manufacture the chips with its 14nm process and I-Cube (interposed-cube) package solution, which merges a SoC (system on chip) with HBM (high-bandwidth memory) to create a smaller chipset. It will be powered by Baidu’s own XPU neural processor architecture for cloud, edge, and AI tasks.
Baidu and Samsung claim that the new chip will support demanding AI workloads such as search rankings, speech recognition, image processing, deep learning, and autonomous driving. Whereas Apple put their fate into streaming AI is the choice for Samsung. We expect this stock to be depressed due to the virus, which means it’s a great bargain to buy a product following this company today.
If you are interested in participating, drop us a line by getting in contact with Rebecca on her email (rebecca.ellis@pomonawealth.com) or telephone + 41 79 789 5313.
Rebecca Ellis is a Personal investment advisor, based in Zurich|rebecca.ellis@pomonawealth.com|pascal.crepin@pomonawealth.com.
|twitter:@theGBJournal|email: info@govandbusinessjournal.com.ng|
