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On Friday, Morgan Stanley (NYSE:MS) raised the price target on Intermediate Capital Group (LON:ICGIN) (ICP:LN) (OTC: ICGUF) shares to GBP25.40, up from the previous GBP22.50, while maintaining an Overweight rating. The adjustment reflects the firm’s positive outlook on the company’s potential in the private credit and secondaries markets. According to InvestingPro data, ICG maintains a "GREAT" financial health score and trades at a P/E ratio of 12.8x, with a market capitalization of $7.78 billion.
Intermediate Capital Group, known for its investment management and corporate strategies, has been recognized for its strong position in the market. Morgan Stanley’s analyst highlighted ICG’s scalability across its product platform and the secular tailwinds benefiting the private credit and secondaries sectors. The firm’s well-established credentials, including an impressive 32-year track record of consistent dividend payments as noted by InvestingPro, are seen as a significant advantage in capitalizing on these opportunities.
The analyst also pointed to various growth avenues for ICG, including further penetration of Limited Partners (LPs), with a current count of 793 compared to over 2,000 for U.S. players. Product expansion strategies, such as LP-secondaries and Asia Infrastructure funds, as well as cross-selling initiatives, are expected to contribute to the company’s growth. Notably, cross-selling is projected to account for 20% of FY25 fundraising efforts.
Furthermore, ICG is exploring new channels to enhance its growth, including tapping into wealth management through the launch of U.S. evergreen private equity secondaries and leveraging insurance channels with multi-asset mandates. These steps are anticipated to broaden ICG’s investor base and revenue streams. Recent financial data shows promising signs, with a healthy current ratio of 1.83 and revenue growth of 3.01% in the last twelve months.
The analyst’s statement acknowledges the prevailing macroeconomic uncertainties, referring to the current environment as "Navigating Choppy Waters." However, Intermediate Capital Group is considered a preferred option for adding cyclical exposure to investment portfolios. The company is perceived to have a more defensive earnings profile compared to its peers, less dependent on carried interest, and faces fewer fundraising risks. Additionally, the firm’s current valuation is seen as providing a cushion against potential macroeconomic downturns.
In other recent news, BofA Securities has adjusted its outlook on Intermedia Capital Group (ICG), reducing the stock price target from GBP26.00 to GBP25.00 while maintaining a Buy rating. The firm highlighted ICG’s strong performance in private debt and secondaries sectors, which are anticipated to benefit from current macroeconomic conditions. BofA Securities analysts pointed out that ICG could significantly increase private debt deployment, leveraging its $14 billion in available capital. This potential growth is supported by expected opportunities in the secondaries market, which makes up 20% of ICG’s Assets Under Management. The analysts noted that ICG’s lower reliance on performance fees, comprising about 11% of Fund Management Company revenues, serves as a stabilizing factor for its revenue stream. They also emphasized ICG’s valuation, currently at a trough on a 10x FY26E Price Earnings ratio, suggesting that the market may be undervaluing ICG’s balance sheet portfolio. The analysis from BofA Securities indicates confidence in ICG’s ability to navigate the economic landscape effectively, particularly in private debt and secondary investments.
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