By Intermediate Capital Group (LON: ICG) share price has done well this year, beating the FTSE 100 index and other companies in the financial services industry. It has soared by over 133% from its lowest point in 2023, giving it a market cap of over £6.71 billion.
A top asset management company
Intermediate Capital Group is one of the leading players in the financial services industry. It operates its business in three areas: corporate, credit, and real assets, which have $70.9 billion, $18.2 billion, and $11.3 billion in assets, respectively.
ICG makes money through administration fees and incentives, which includes a cut on profits in all deals it executes.
The company, like other large players in the industry, has been focusing on the private credit sector, which is seeing remarkable growth. Private credit is a business where the company raises cash and loans them to other businesses.
As I wrote in my article on Blackstone, the industry is growing because of the ongoing tougher regulations in the banking sector. As a result, it has become a large industry with over $1.7 trillion in assets.
Most recently, ICG made headlines in the private credit industry when it raised $17 billion for its flagship direct lending fund, much higher than the initial target of between $11 billion and $12 billion.
The company hopes to use these funds to provide first lien, senior secured loans to companies in Europe. Most of its recipients will be firms owned by private equity companies.
ICG’s performance is in line with that of other companies in the industry like Blackstone, EQT, Carlyle, Apollo Global Management, and Brookfield Asset Management.
ICG strong revenue growth
The most recent financial results showed that Intermediate Capital Group had $98 billion, a figure that has grown following the private credit boom. Its fee-earning assets under management rose by 11% to $70 billion – up from $32 billion in 2019 – while its dry powder was $26 billion. Dry powder refers to funds that have been raised but have not been deployed.
As a result, its fee income rose by 5% to over £505 million while its performance or incentive fees jumped to £74 million. The strong management fees explain why the capital it raises from investors is important.
In addition to its recent private credit fund, ICG has raised over $46 billion in the last two years, much higher than its expectations. Most of these funds came from existing clients, meaning that they are seeing value in the company.
ICG’s profit before tax jumped by 21% to over £375 million while its net asset value per share jumped to 801p.
Interest rate cuts and business growth
Looking ahead, the next catalyst for ICG will be interest rate cuts by the Federal Reserve and other global central banks.
Companies in the private equity, credit, and real estate do well in a low-interest-rate environment in a number of ways.
First, rate cuts make deal-making more attractive. This means that it will deploy its dry powder to acquire companies while realizing some of its long-held investments.
Second, rate cuts often stimulate more investments in alternative assets like private equity and credit. This is notable because investors have allocated trillions of dollars in money market funds where they are earning over 5%. With rates falling, these funds will likely find a home in the stock market and alternative assets.
Third, its real assets business, which houses its real estate and infrastructure businesses will do well when rates fall.
Analysts are optimistic about ICG’s business. The most recent consensus estimates that its assets its fee-earning AUM will get to $76.2 billion this year followed by $82 billion and $89 billion in the next two financial years.
This growth will push its management fees from £569 million in FY25 to over £677 million and its performance fee from £569 million to £677 million.
Its group profit before tax is expected to jump from £567 million to £654 million. These numbers mean that at a current valuation of £6 billion, ICG is not necessarily a cheap company. However, it will need to continue growing to validate this valuation.
Intermediate Capital Group share price analysis
The daily chart shows that the ICG stock price has done well as I predicted in the last article when it was joining the FTSE 100 index.
Most recently, the stock rose and hit the crucial resistance point at 2,378p, its highest swing since May 28.
It has remained above the 50-day and 200-day moving averages, a positive sign. The stock has also formed what looks like a double-top chart pattern, a popular bearish sign.
Therefore, the stock will likely remain in this range for a while. More upsides will only be confirmed if it rises above the double-top pattern level at 2,378p, which I see as its make-or-break level.
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