Deutsche Bank has initiated coverage of IG Group Holdings Plc (LSE:IGG) with a barely disguised sigh that the market is missing the point.
The bank starts the stock at 'buy' with a 1,300p target, compared with a 1,135p close, and frames IG as a business whose valuation has drifted away from its fundamentals.
On Deutsche’s numbers, revenue is set to grow 5% a year from 2026 to 2029, EBIT 6% and earnings per share 11%, helped along by steady buybacks.
Dividends are expected to rise 2% a year. All of this sits awkwardly beside a 2026 price-to-earnings multiple of 10 times or nine times once surplus capital is stripped out, and a dividend yield of 4.2%.
The case, as they pitch it, is simple. IG is not one business but five: over-the-counter derivatives, exchange-traded derivatives, stock trading, crypto-related ventures and capital management.
Deutsche argues that the market is valuing only the first two, plus the surplus capital pile, which alone supports today’s share price.
That capital base also allows IG to keep buying back shares, maintain a healthy dividend stream and pursue the occasional bolt-on acquisition.
The upside lies in the parts investors are ignoring. Stock trading, crypto and assorted adjacencies offer potential that is not currently reflected in consensus estimates.
The group’s stakes in Payward, the owner of Kraken, and Zero Hash add a further layer of optionality. In the polite language of broker notes, this is usually code for “the market has stopped paying attention”. Here, Deutsche Bank says it outright: the shares are cheap relative to the outlook.