Bonus enhanced note
Here is another example of bonus enhanced note:
Underlying: Celgene + Softbank
Tenor: 6 months
Put strike: 88%
Digital strike: 100%
Flat coupon: 16.71%
Notional: USD
Flat coupon 16.71% for 6 months means annualised return is 33.42%.
Client will earn absolute return of 16.71% if both underlying stocks are at or above entry price.
Risk is converting to worst performing stock at strike 88%.
• Celgene
- Shares currently trade at less than 12 times expected earnings.
- But Celgene fully expects to generate adjusted earnings-per-share growth over the next three years of 19.5%.
- That translates to a price-to-earnings-to-growth (PEG) ratio of less than 1.00 that's hard to beat, especially in the biopharmaceutical world.
- 12 months return potential according to consensus: 15%.
• Softbank
- Softbank is much more than a telecom company.
- The real attraction is its $100 billion tech-focused Vision Fund, which is backed by $28 billion of Softbank's own cash, about $60 billion from Saudi Arabia and Abu Dhabi's wealth funds, and other big investors like Apple, Qualcomm, Foxconn, and Larry Ellison's family office.
- Softbank earns up to 1% in management fees from the fund, along with hefty performance-based fees. Analysts estimate that those fees could boost Softbank's annual operating profits by 7%.
- On its own, Softbank owns chip designer ARM Holdings (which the fund also holds a stake in), a 30% stake in Chinese e-commerce giant Alibaba, and a $5 billion stake in Didi Chuxing, China's top ride-hailing service. Softbank is also trying to buy a big stake in Uber at a steep discount.
- Simply put, Softbank is investing heavily in a wide range of future technologies, which throttles its short-term earnings growth but could pay off handsomely over the next few decades.
- That's why Bernstein analyst Chris Lane recently called Softbank a "tech-focused Berkshire Hathaway."
- 12 months return potential according to consensus: 42%.
Underlying: Celgene + Softbank
Tenor: 6 months
Put strike: 88%
Digital strike: 100%
Flat coupon: 16.71%
Notional: USD
Flat coupon 16.71% for 6 months means annualised return is 33.42%.
Client will earn absolute return of 16.71% if both underlying stocks are at or above entry price.
Risk is converting to worst performing stock at strike 88%.
• Celgene
- Shares currently trade at less than 12 times expected earnings.
- But Celgene fully expects to generate adjusted earnings-per-share growth over the next three years of 19.5%.
- That translates to a price-to-earnings-to-growth (PEG) ratio of less than 1.00 that's hard to beat, especially in the biopharmaceutical world.
- 12 months return potential according to consensus: 15%.
• Softbank
- Softbank is much more than a telecom company.
- The real attraction is its $100 billion tech-focused Vision Fund, which is backed by $28 billion of Softbank's own cash, about $60 billion from Saudi Arabia and Abu Dhabi's wealth funds, and other big investors like Apple, Qualcomm, Foxconn, and Larry Ellison's family office.
- Softbank earns up to 1% in management fees from the fund, along with hefty performance-based fees. Analysts estimate that those fees could boost Softbank's annual operating profits by 7%.
- On its own, Softbank owns chip designer ARM Holdings (which the fund also holds a stake in), a 30% stake in Chinese e-commerce giant Alibaba, and a $5 billion stake in Didi Chuxing, China's top ride-hailing service. Softbank is also trying to buy a big stake in Uber at a steep discount.
- Simply put, Softbank is investing heavily in a wide range of future technologies, which throttles its short-term earnings growth but could pay off handsomely over the next few decades.
- That's why Bernstein analyst Chris Lane recently called Softbank a "tech-focused Berkshire Hathaway."
- 12 months return potential according to consensus: 42%.
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