Icade stock poised for gains with ‘significant upside’ and c20% yield

On Monday, Citi upgraded the stock rating of Icade (ICAD:FP) (OTC: CDMGF), a French real estate investment company, from Sell to Buy, adjusting its price target to EUR40.50 from the previous EUR22.80. This change by the firm indicates a potential significant upside for the stock, along with an expected high dividend yield of approximately 20%.

The upgrade is based on a combination of factors, including reaching the trough in revised estimates, an anticipated return to cyclical growth, and an increase in dividends. The expected dividend includes proceeds from the sale of Icade’s healthcare real estate portfolio, which is projected to return more than 50% of the stock’s current share price in cash to investors over the next three years.

Citi’s analysis suggests that the adjusted price target reflects a “net” investment cost of around EUR12 per share. This valuation is equivalent to approximately four times the price-to-earnings ratio (PE), which is a significant decrease from the circa 15 times PE observed from 2014 to 2019.

Furthermore, the target implies a discount to the net asset value (NAV) of -79%, compared to the circa -16% from 2014 to 2019, based on projections for 2026 excluding the healthcare segment.

The current market price of Icade’s shares indicates investor concerns about the completion of the Healthcare transaction and whether the company will retain any cash raised from it. However, Citi notes the potential for increased market activity as interest rates decline and Icade’s recent commitment to its dividend for the fiscal year 2023.

The firm also mentions that retaining the cash could benefit Icade by improving debt metrics and providing a stronger balance sheet to support future growth strategies in the anticipated upward real estate cycle starting from 2026.

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