Research Paper on Investments: Bayer AG Company. The SIX Corporate Bonds.

Date:  2021-04-15 15:37:39
6 pages  (1626 words)
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University/College: 
University of Richmond
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Research paper
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This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Organization Overview

Bayer AG Pharmaceuticals is a firm that was established in 1863 by Friedrich Bayer. The company's primary proficiencies lies in the health care and agriculture fields, with its foremost agenda being to augment its facilities and sales of its established medicines that offer momentous curative benefits and values. The firm's products are generated and delivered to the clients based on development research and through marketing strategies to enable it to compete with its business contenders. As one of its stable branch, the pharmaceutical division of Bayer AG entails the clinical facilities, specifically the cardiology and the women healthcare aspects as well as therapeutics in the Ophthalmology, oncology and hematology domains. Reflecting on its consumer health merchandise collection, the company offers dermatology, palliatives, abdominal, allergy, fever, foot care sun protection and cardiovascular threat prevention products, aimed at improving healthiness and averting critical illnesses. It also involves the radiology business, which markets diagnostic imaging paraphernalia together with the obligatory contrast agents.

Bayer AG is a life science company that specializes in pharmaceuticals, consumer health, animal health and covestro products. The pharmaceutical segment mainly focuses on the drug prescription products for women healthcare (cardiology) and other therapeutics products in areas of oncology, hematology, ophthalmology as well as the radiology business. However, the financial statements of Bayer AG as a consolidated company is based on the principle of the historical cost of acquisition, production or construction taking into the account the exception of items that constitute fair value and their derivatives.

With the growing and advancement of the population, there is an amplified need for nutrients and medical attention, as a means of curbing detriments that might come along with it. Bayer AG Pharmaceuticals, thus, strive to enhance these sectors through enhanced comprehension of biochemical processes in living organisms, as a way to address these menaces. The company's business goal is to uphold and preserve prominence and control in the pharmaceutical and agricultural markets, through creating value to their customers, shareholders and also to the company's workers, and therefore strengthening its revenue generation power. Additionally, the Bayer AG Pharmaceuticals is strongly devoted to justifiable operations and observing its social and ethical accountabilities. The company's main strategy is bound at attaining an economic triumph that is parallel to its accomplishments in the environment and society spheres. The apparent development is quantified on aspiring group targets within the value chain. Moreover, these targets lie on facets of advancements and productivity, invention, sustainability, and personnel. Through this, the company can cope and tackle its main challenges of facing obstacles in acknowledging its primary business idealism in contextualizing bearable development as well as pinpointing unceasing enhancements the company is committed to.

Share ratings and prices

The performance of Bayer AG Company stands at a net profit margin of 9.75% as at the end of the fiscal year 2016, with a 15.62% of return on investment. The daily quotes of the price per share stands at a ranging figure of 106.20 having a registered a -0.05% valuation change from the previous amount of the share five years ago (2012) with a market cap of 88.07B. By tracking the Bayer AG Pharmaceuticals bonds and stock investments, the company had accrued bonds with a nominal value of 6,567 million at the end of 2016, a total of 7,067 million on 2015 and 2014. On the years 2013 and 2012, the bonds accrued to 1,817 million and 2,817 million respectively. The last five years of Bayer AG Pharmaceuticals' operation has been varying, though growing, regarding bond investments. In 2016, the company conducted cash dividends payment amounting to $ 2.8675. In 2015, cash dividends summed up to $ 2.4611, in 2014, similar payment of $ 2.8854 were made. In the year 2013 and 2012, cash dividends of $ 2.451 and $ 2.1187 were paid respectively. Additionally, the Bayer AG Supervisory Board announced dividend payments of 2.70 for the year 2016 as compared to 2.50 per share for the year 2015. Subsequently, similar cash amounts were paid, at 2.25 in 2014, 2.10 in 2013 and 1.90 in the year 2012.

Dividends for the last 5 years

The five year dividend history for the company stands as follows;

12/2012 12/2013 12/2014 12/2015 12/2016

Dividend amount-$ 2.12 2.45 2.89 2.46 2.87

Year-end Yield % 2.21 1.73 2.11 1.97 2.75

BAYRY Dividend History for the Past Five Fiscal Years

The dividend amount is calculated using the ex-dividend date. For instance, the ex-dividend date for FY2016 is 04/27/2016

Declaration date is 04/04/2016

Record date is 04/29/2016

Payable date is 05/12/2016

Cash dividends = $2.8675

Historical Return on Investments

The statement of discounted cash flows of Bayer group illustrates the cash inflows and outflows that affected the cash equivalents of the company during the fiscal years 2013 and 2014. For instance, an amount of 119 million Euros for the financial year 2013 had a limited availability as a result of foreign exchange restrictions. The restrictions, however, have been shown of short durations for the past experiences. With the exception of cash and cash equivalents, the cash flows reported by Bayer Group outside the eurozone translated to an average monthly rate exchange rates. However, the reported change in cash and cash equivalents as a result of the exchange rate movements is reported in a separate line item.

For the financial year 2013, the dividends payments made were 1574 million Euros. In the subsequent year 2014, the dividends payment increased to 1739 million Euros. On the other hand, the net cash flows provided by investment activities amounted to 2581 million Euros in the 2013 fiscal year.

12/2012 12/2013 12/2014 12/2015 12/2016

ROE 12.62% 16.16% 17.27% 18.30% 18.41%

BAYRY Return on Equity (TTM) Range past Five Fiscal years

From the above data, the Bayer Group registered a minimum of 12.62% of return on investments by December 2012 and a maximum of 20.06% by December 2016 totaling to an average of 16.47%. The high increasing return on investments registered by Bayer group is suitable for investors who are mostly interested in the increasing investments funds to generate growth.

Conclusion

The return on investments measures the rate of return on all the cash invested by the common shareholders of Bayer Group as retained by the company. Therefore, the computed return of investments demonstrates the companys ability to generate profits from the stock owners equity. The importance of Bayers return on investment amounts helps in comparing of the profitability of the company within the sector.

Part II

Bonds are debt obligations or basically loans with a stated interest rates and fixed due dates that are issued by corporations or government entities. Although bondholders do not claim ownership rights, they however, have a standard commitment of repayment period that is issued by the corporate. Bonds are therefore, the popular way for most entities to raise capital for companies and government agencies. In this regard, investors who purchase bonds do not own a stake in the equity capital.

The SIX Corporate Bonds

SIX Corporate bonds is a corporate bond structure that allows credit traders to efficiently source liquidity in large-sized firms providing minimal information leakage to the larger market. The SIX Corporate bonds is a dealer-dealer trading model that is designed in consultation with head credit traders. The complimenting D2D trading model exist in large international investment banks that automate the search for liquidity as well as optimizing the opportunities for timely and efficient market matching.

Additionally, the corporation is equally a multilateral exchange-like corporate bond that has its marketing platform domiciled in different states. While using the SIX Corporate Bonds, the estimated return for lending money is beneficial to the investor because it does not call for payment of interest on an annual basis. Therefore, the bond compensates the investor in form of a lower price issue (typical example of a zero bond).

The creditworthiness that the SIX Corporate Bond offer is dependable on the issuers solvency ratio which may fluctuate according to the capital market conditions. In this case, the bond allows for the borrowers to pay the full nominal amount of the bond back into the lenders account at the end of the period. However, in cases where the bond is sold on the stock exchange market prior to the end of the repayment period, the pay normally go to the owner of the bond.

Why pick the SIX Corporate Bond

However, the SIX Corporate Bonds has several advantages. To begin with, the SIX Corporate bonds seek to have its participants in the stock exchange market anonymously submit their indications of Interests (IOIs) to the companys platform that internalizes the clients orders. Therefore, the SIX Corporate bonds offers a platform that ensures alternative sources of liquidity while ascertain the relevance of the participants statements of financial position.

Secondly, the trading corporation also seeks to anonymously match its trading interests against the active indications of Interests from other participants. Therefore, I would prefer to hold the SIX Corporate bonds to maturity due to its matching historical trade that is searched to identify potential contra-interest. In terms of trade, the SIX Corporate bonds seeks to identifying the potential matching opportunities of which the indications of interest parties are anonymously invited to negotiate the size as well as price of the trade. As a result of a successful conclusion of the trading exercise, then the other participants in the interest with the interest in the trading instrument to add volume for execution.

Lastly, the SIX Corporate bonds is essential in the efficiency optimization where the current dealer-dealer search for liquidity is continuously and systematically determined. Therefore, when searching for the historic trading opportunities, participants are ensured to get timely notification of opportunities across all the platforms in regard to the trading positions that they hold in the market structure.

Conclusion

The SIX Corporate bonds is one of those corporate entity bonds that provide the participants with the requisite and alternative sources of liquidity. The importance of using the SIX Corporate bonds to maturity is wide and advantageous.

Bibliography

Abraham, S. The Efficiency of Bonds: Implications for Determining the Ratings of Corporate Bonds. SSRN Electronic Journal.

Bayer AG and Bayer Corporation v. Schein Pharmaceuticals, Inc., Danbury Pharmacal, Inc., and Reddy-Cheminor, Inc., and Mylan Pharmaceuticals, Inc. and Mylan Laboratories Inc. (2003). Biotechnology Law Report, 22(1), 51-67.

Wei, J., & Zhou, X. (2016). Informed Trading in Corporate Bonds Prior to Earnings Announcements. Financial Management, 45(3), 641-674.

 

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