On Monday, UBS has increased its stock price target for Intermediate Capital Group (LON:ICP:LN) (OTC: ICGUF) to GBP22.50, up from the previous target of GBP19.50. The firm has also reaffirmed its Buy rating on the stock. The adjustment reflects the asset management company's significant growth and positive outlook.
Intermediate Capital Group has seen its Third Party Assets Under Management (AUM) surge from $47 billion as of March 2020 to $83 billion by December 2023. UBS anticipates this growth trajectory will persist, citing several key factors. The sizes of the flagship funds are expected to exceed $10 billion within the next one to two vintages for Europe and SDP, and within three for Strategic Equity.
Moreover, the number of investible strategies at Intermediate Capital Group has doubled over the past decade, now totaling 16. This expansion offers a broad platform for future growth. The client base has also seen significant expansion, growing from 69 in March 2012 to 662 by September 2023.
UBS suggests that Intermediate Capital is well-positioned to capture a larger share of client wallets across an increasing number of strategies and larger fund sizes, without a substantial rise in headcount or platform costs.
UBS forecasts that the operating margin for the Fund Management Company (FMC (NYSE:FMC)) will expand from 55% to 60% in the medium term. The firm has updated its forecasts to incorporate a more optimistic fundraising potential for Intermediate Capital, leading to higher valuation multiples for the FMC's cash flows.
Consequently, UBS's earnings forecasts for FY25E-27E have been adjusted upwards by 2-13%, and the Discounted Cash Flow (DCF) & Sum of the Parts (SOP) price target has been raised by 15%, from 1950p to 2250p.
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