Experts Are Convinced CIT Group Will Rise 95%, But Not Before This Date

While some investors expect CIT Group Inc. CIT to sell its Aerospace business, others believe that other businesses would be sold following this sale.

Macquarie’s Vincent Caintic maintained an Outperform rating on the company, while lowering the price target from $65 to $60.

Ciantic mentioned that investors believe that the company should view going below the $50 billion SIFI threshold as a priority, and that management was aware that investors were unlikely to wait till 2018 for value to be unlocked.

Sale of Leasing Franchises

A deep dive analysis of the sale or spin of CIT Group’s Aerospace and Railcar leasing businesses suggests “a clean tangible book value of $70-$77,” with the company using the proceeds to buyback stock.

However, Ciantic pointed out that this was 63-79 percent below the current 4Q15 book value, excluding the disallowed DTA.

Spin off of the Aerospace business would only be accretive by $42-43, Ciantic stated, while pointing out that “a spin also still requires the sale of other assets to realize the DTA and to de-SIFI.”

95% Upside

Given that the stock is currently trading at 8x the 2017E EPS and 72 percent of 4Q15 the tangible book, excluding the deferred DTA, Ciantic believes that there is significant upside potential of 95 percent within one year.

“The next catalyst is in June 2016E, when the Aerospace auction should be complete. The Rail sale should unlock the remaining upside to $60+ valuation by the end of 2016E / beginning of 2017E,” the analyst stated.