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30 January 2020

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Intermediate Capital Group – Q3 Trading Update 

Share Price 1720p

Mkt Cap £4,995m

Conflict Disclosure: No Holding

  • Update AUM is up 4% in the 3 months to September while third party AUM is up 5% over the quarter. Performance fees, which are weighted to the end of a fund’s life are expected to grow over time and are expected to add 10-15% to management fees currently. The balance sheet portfolio was £2.3bn.
  • Estimates A significant increase (47%) in PBT is expected in the current year on the back of last year’s 29% increase in AUM. This is forecast to reduce to 9% growth to March 2021 which looks highly likely to be too low given AUM are up 15% over the first 9 months of this year.
  • Valuation PER 18.6X yield 3%. The NAV is £1.4bn delivering an 18% ROE so the shares trade at 3.5X book value.
  • Culture Highly paid and highly incentivised. It gets highly reviewed on glassdoor at 4.4 with 100% approval of CEO.
  • Conclusion I have always been nervous of the highly paid culture but the company is delivering and looks set to continue to deliver while it is inexpensive.  Looks like an effective compounder.