I have good reasons why I increased my investement in IFX

Main “Take aways”:

-        You get a good managed company, with a healthy balance sheet, at a fair price.

-        There is more “future” than you can see in the Snowflake.

-        ROE is at 17,5%, Future ROE at 16,2%

-        Future earnings growth rate at 8%, could misguide you.

The balance sheet looks very healthy, basically the company is owned by the share holders (equity €17.2b), only a reasonable low share is held by the “banks” (debt €5.4b). Having that in mind, a ROE of 17,5% is a good result, because it would be easy to raise ROE to higher figure, by the leverage effect of debt: IFX could sell more products by increasing the production capacity, that would lead to more result and this would directly increase ROE. The money for more production capacity could be provided from the “banks”, which leads to more debt. That’s the leverage, more debt (at cost x), significant more result (result at 2-5 times x). But IFX operates very moderate, means with low debt, compared to equity. This leads to a healthy debt to equity ratio of 31,3%.

The Fair values is based on DCF model, which takes the future cash flows into account: Since 2021 IFX can generate a FCF of about €1.5b. Since IFX is investing heavily in new production capacity at Dresden: Smart Power Fab (start of construction 2023, invest €5b), an increase FCF to €3.0b is reasonable, and already considered in the “fair value”.

That’s the reason why I say, there is more future in IFX then reflected in the Snowflake. And the reason is, IFX is already investing heavily, and therefore they use their earnings.

But be aware, since IFX takes the money to invest from the earnings, instead of getting into debt, the earnings show a dip ahead. So keep calm, while others get nervous. You need the mindset of a long-term investor. Hopefully it pays out already end of 2026.

Investing in IFX means investing in a company, which delivers products for megatrends, like renewable energy, electro mobility, energy efficiency, digitalization. IFX sees growing demands ahead, thus IFX is investing strongly makes a lot of sense. And the good thing is, without bringing the well-balanced balance sheet at risk.

With an ROE at 17,5% and Future ROE at 16,2%, my money is working well.