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Investment Thoughts

04 Jun 2020

What Happened? Procter & Gamble shares rose 2% in extended trading on Tuesday after the company announced that it raised its dividend 6% to 79 cents. The company also said that it is moving up the date for its third-quarter earnings release from April 21 to April 17. Many companies have delayed their earnings releases or withdrawn their financial guidance amid the coronavirus pandemic.
 
UBS View: We think Procter & Gamble (P&G) will continue to benefit from its leaner, more focused product portfolio. Despite higher pricing than its competitors, P&G has been able to expand market share given improvements across its portfolio. We think P&G will continue to see upside with sales momentum driven by its marketing and innovation focus as well as efficiency gains via its cost cutting program. Coca-Cola has one of the best diversified brand portfolios and has a superior top-line growth outlook versus its consumer packaged goods peers‎. Management's value over volume strategy is still in its early innings and continues to drive better ‎alignment across the system.‎
 
Such views can be implemented in many ways, and examples are illustrated below. The examples have not been checked for suitability, to find out more about what may be suitable for you please speak to your client advisor.

Example of how investors can express this view:
Autocallable Reverse Convertible Notes (RCNs) on selected stocks

  • Enhance portfolio yield with 10% p.a. coupon.
  • The potential to buy the stock at a 24.15% discount to the current price.
  • Stock selection is based on UBS Research buy or neutral rating and large market capitalization.

Key Terms*

Tenor

6 months

Currency

USD

Underlying(s)

Costco Wholesale Corporation (COST US) and Walmart Inc. (WMT US)

Strike Level

75.45%

Coupon (p.a.)

10%

Autocall Level

98%

Coupon / Autocall Period Frequency

Monthly

Issuer (Rating)

UBS AG acting through its London branch (S&P:A+/Moody's:Aa3)

Worst-of Underlying

The Underlying with the lowest value of (Spot price / Initial price) at the time of observation

Payoff

Early redemption: The note will be early redeemed at 100% of the denomination with coupon for that period if the worst-of underlying closes at or above the Autocall level at each periodic observation date

At maturity:

  • Case 1: If the worst-of underlying closes at or above its Strike level, the investor will receive the coupon for that period, plus 100% of the denomination
  • Case 2: Otherwise, the investor will receive the coupon for that period, plus physical delivery of the worst-of underlying at Strike level
     

The same RCN structure can be tailored with 1 stock underlying, The Procter & Gamble Company (PG US), with indicative strike at 88.91% holding all other parameters the same.
 
For alternative stock underlyings, kindly refer to the UBS CIO Paper.  

Contact

  • In case of interest please contact your Client Advisor

Key Risks: 

  • Return is limited to the coupon amounts.
  • You will not receive dividends or other income that may be paid on the Underlying(s)
  • A loss can result if the Underlying(s) closes below the Strike Level at maturity
  • Before maturity, the realisable value of the product may fall below the issue price even if the Underlying has appreciated against its initial price.
  • In a worst case scenario, the product becomes worthless and you will lose the capital invested
  • In the event that the product is redeemed early, you may not be able to reinvest the redemption proceeds in another instrument with a comparable return profile.
  • The product is unlisted and there may not be an active or liquid secondary market.
  • You are fully exposed to both the credit risk and the credit default risk of the Issuer. Should the credit rating of the Issuer deteriorate over the life of the investment, the product's value may be affected. Should the Issuer default, you may lose all capital invested and any return that may otherwise be payable/earned

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