Advertising. Germany’s semiconductor leader has reached a new dimension in the middle of the crisis year 2020. In April, the long-planned takeover of US competitor Cypress Semiconductor, which had been subject to regulatory hurdles, was completed. As a result, Infineon has risen to the top ten of the largest chip manufacturers in the world, while the largest acquisition in the company’s history, according to analysts, was “practically incidentally”. In the field of automotive electronics, Infineon is even striving for a top position worldwide. Analysts consider the takeover to be strategically sensible and promising.
According to an analyst assessment, Infineon has impressively demonstrated the robustness of its business model in the difficult 2019/20 financial year. The twelve-month period ended on September 30, 2020 with a final spurt. The brightening in the automotive business in particular helped the leap into profitability. The car market and other target markets of the chip manufacturer have recovered better than expected since the summer, explained the CEO Reinhard Ploss. In addition, there is the accelerated structural change towards electromobility. In the fourth business quarter from July to September, Infineon was back in the black, while sales rose by 15 percent compared to the previous quarter to EUR 2.49 billion. In operational terms, the semiconductor manufacturer earned almost three quarters more than in the three-month period before and exceeded the average analyst forecasts with its segment result of 379 million euros. The bottom line was that consolidated net income jumped to 109 million euros after the previous quarter had ended with a loss. Including Cypress Semiconductor, the entire fiscal year brought a net profit of 368 million euros, around 58 percent below the previous year’s level. The dividend is now to be reduced from 27 cents to 22 cents per share.
In the new 2020/21 financial year, management is aiming for sales of around EUR 10.5 billion, which could exceed the previous year’s level (EUR 8.57 billion) by more than a fifth. The return on sales should increase to 16.5 percent based on the segment result. In the current reporting period from October to December, sales between 2.4 and 2.7 billion euros and a margin of 16 percent are forecast. According to analysts, the chip manufacturer is benefiting from the demand for electric vehicles and is likely to be able to continue on its growth path despite the current economic situation. The outlook for the current quarter allows positive conclusions to be drawn for the entire 2020/21 financial year. However, the current share price already anticipates a positive development, which is why Infineon is only classified as a holding candidate.
After the sharp price slump during the Corona crash in spring 2020, the Infineon share recovered extensively and even surpassed the highs of 2019. The implied volatilities have indeed decreased in the course of the calming down, but in the standard value index DAX the Infineon share is considered to be more volatile. This aspect favors the conditions of investment alternatives such as reverse convertible bonds. This opens up opportunities for investors who generally share a positive assessment of Infineon and would like to implement their strategy with a fixed interest rate and a bullet buffer.
4.20 percent p.a. Fixed rate and 20 percent bullet buffer after one year
The DekaBank 4.20% Infineon Reverse Convertible 01/2022 (WKN DK0YTM) pays a fixed interest rate of 4.20% p.a. when due after one year. based on the nominal amount (1,000.00 euros). In order for the repayment to be made at the nominal amount, the Infineon share must close at least at or above the base price (80.00 percent of the starting value) on the valuation date (January 13, 2022).
Otherwise, there is a risk of losses on repayment, since Infineon shares that have fallen in value are transferred to the investor at 80.00 percent of the starting value instead of the nominal amount. In addition, like any bond, the reverse convertible is subject to the issuer risk. Accordingly, in the event of DekaBank’s insolvency, there would be a risk of losses up to the total loss of the nominal amount invested.
The subscription runs from December 21, 2020 to January 15, 2021, subject to an extension or shortening.
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As Head of Private Banking and Product Management at the Deka Group, Hussam Masri is responsible for product development and product management of mutual securities funds, asset management and pension products, certificates and private banking.