Google Finance
Filing
Jan. 13, 2015
2014 Q3 Data
1.Major Business.
The company is a spin off of Ocwen Financial Corp(NYSE:OCN) at 2009. It is major business is Default management and REO(Real estate owned) asset management. When a mortgage is in default, the lender need to use its service to get some value back from the underline assets. Ocwen is its major customer and account 60% of its revenue currently.
2.Balance sheet.
Recent price is $19. Shares 20.2m+2m options. Market Cap around $400m. Tangible book value < 0. Cash $170m. Debt around $600m.
3.Credit facility.
$590m term loan due 2020. Current interest rate 4.5%.
4.Financial data by years.
5.Insider holding, options, Insider trading info, share buy back.
William C. Erbey: 6.8m including options. around 29.4%
6.Management compensation.
2013 top 3: $3.5m
7.Employee numbers. Revenue/Employee. Compensation/Employee.
As end of 2013, 1800 in US. 5600 in India. It indicate at Jan 2015 that it will cut employee by 800.
8.Industry comparison.
9.Auditor
Deloitte & Touche
10.Major events.
(1)Oct. 2014, it reported to exit the insurance brokerage business which could lower its eps $2.0/share to $2.6/share. Share price dropped a lot.
(2)Dec. 2014, Ocwen settled with New York Dept. of Finance Service(DFS) for $150m, plus Erbey resign from board of all his five companies including Ocwen and ASPS. Share price dropped a lot.
(3)Jan. 2015, California state agency seeking to suspend Ocwen license for one year. Share price dropped a lot.
(4)As a result of all the events above, The share price dropped from high of $170/share to now below $20 as Jan. 13, 2015.
11.Comments.
(1)The main soul of the company is Erbey and he is a incredible business person. Following link explains quite well his work of building Ocwen.
http://www.thestreet.com/story/12083751/1/bill-erbey-made-23b-off-your-underwater-mortgage.html
(2)As many writings about it already on internet. Its major strength is its low cost than competitors by outsourcing to India. Also its very innovative of doing business such as paying people for leaving home or share the lost and profit of home value change. It is able to create a win-win solution for its customer and itself.
(3)Based on gross margin around 35%. Operating margin is around 20%. Net margin is above 15%. Non-Ocwen business revenue is around $400m. Using this number, it could generate $80m operating profict for non-Ocwen business alone. Taking $600*5% as interest expense, it still got $80-$30=$50m before tax income. Taking 10% tax rate, it could still generate $45m/year net income for non-Ocwen business. Clearly current market cap of $400m is really cheap. People are expecting more bad to come or just scared.
(4)I think the main problem with all Erbey's business is 1) It is growing too fast and service quality wasn't able to catch up. The settlement with NYDFS is actually a good thing for them because it would force them to improve service quality. 2) The government don't like them for tax reason or political reason. It pays a very low tax rate which I don't view as a wise move. Also as non-banking loan servicer it doesn't has much influence on politics.
(5)Overall I like this business and I don't view it as an evil company although its service quality could be better. Compare to Ocwen, ASPS is much a safer business and has a higher moat. Given Erbey's big stack on this company, I think he can continue to influence the company in a good way. Even without him, it should still doing well just follow current process. The major risk now is actually the $600m debt which it used to repurchase shares. It should pay down it to a comfort level.
12.Links
Glenn Chan have wrote many articles about it.
https://glennchan.wordpress.com/tag/altisource-asps/
also:
https://oraclefromomaha.wordpress.com/2014/04/29/altisource-portfolio-solutions/
Update
Jan 21, 2015 Recent price $24.5.
The company held a conference at Jan 18th. to update 2015 income outlook of $4/share to $7/share. The stock recovered to over $30 briefly, then trade down again.
Update
May 04, 2015 Recent price $30.
After the company and Ocwen release their Q1 earning. Share price recovered quite well. Q1 earning around just $10m. But real cash flow is around $20m. It also includes over $13m temporary expense on employee termination and $10m data access fee to Ocwen(actually its a kick back based on Glenn Chan's writing) which is ended at Mar. 31. I estimate it could have real earning around $40m for the next 3 quarters. Thus it would have $140m in real earning for 2015. Close to the $136m medium point confirmed by the CEO. Current market cap of $600m is still pretty cheap.
Recently the CEO and CAO bought quite some shares (worth $1.5m) at around $26/share.
Update
July 23, 2015 Recent price $39.
Q2 earning released today. The company reported $2.62/share earning which is really good. Also bought back $1.4m shares. Now total shares should around 18.7m.
It purchased Castleline( an insurance company) for $37m including 495k shares plus cash. After this, the total shares should be around 19.2m.
Sept. 29. 2017
Current price $26.
There are quite some stories with the stock in the past 2 years. The share price up and down quite a lot. However, fundamentally the business wasn't changed that much.
(1) Ocwen battered with regulator continuously. It seems no longer be able to acquire new mortgage rights. At least for now.
(2) Altisource and Ocwen signed a new contract which lowered its fees charged to Ocwen. Later Ocwen sold its mortgage to New Residential Investment (NRZ). Altisource signed a new contract with NRZ even lowered its price. So its earing will be affected quite a bit.
(3) Today Ocwen announced it will gradually move away from RealServcing platform(from Altisource). And no new mortgage will be using RealServcing. This is part of the deal with the regulator.
(4) In my view, today's news is a clear signal that the regulator is targeting the RealServcing platform. I suspect NRZ will be moving away from it as well. Although it takes time, the company will have a bigger issue if no one will use its platform. The platform is very cost effective and both servicer and mortgage investor love it but the regulator hates it because it is not end-user friendly.
(5) I decided to stay away for now for the risk is unclear.
Deloitte & Touche
10.Major events.
(1)Oct. 2014, it reported to exit the insurance brokerage business which could lower its eps $2.0/share to $2.6/share. Share price dropped a lot.
(2)Dec. 2014, Ocwen settled with New York Dept. of Finance Service(DFS) for $150m, plus Erbey resign from board of all his five companies including Ocwen and ASPS. Share price dropped a lot.
(3)Jan. 2015, California state agency seeking to suspend Ocwen license for one year. Share price dropped a lot.
(4)As a result of all the events above, The share price dropped from high of $170/share to now below $20 as Jan. 13, 2015.
11.Comments.
(1)The main soul of the company is Erbey and he is a incredible business person. Following link explains quite well his work of building Ocwen.
http://www.thestreet.com/story/12083751/1/bill-erbey-made-23b-off-your-underwater-mortgage.html
(2)As many writings about it already on internet. Its major strength is its low cost than competitors by outsourcing to India. Also its very innovative of doing business such as paying people for leaving home or share the lost and profit of home value change. It is able to create a win-win solution for its customer and itself.
(3)Based on gross margin around 35%. Operating margin is around 20%. Net margin is above 15%. Non-Ocwen business revenue is around $400m. Using this number, it could generate $80m operating profict for non-Ocwen business alone. Taking $600*5% as interest expense, it still got $80-$30=$50m before tax income. Taking 10% tax rate, it could still generate $45m/year net income for non-Ocwen business. Clearly current market cap of $400m is really cheap. People are expecting more bad to come or just scared.
(4)I think the main problem with all Erbey's business is 1) It is growing too fast and service quality wasn't able to catch up. The settlement with NYDFS is actually a good thing for them because it would force them to improve service quality. 2) The government don't like them for tax reason or political reason. It pays a very low tax rate which I don't view as a wise move. Also as non-banking loan servicer it doesn't has much influence on politics.
(5)Overall I like this business and I don't view it as an evil company although its service quality could be better. Compare to Ocwen, ASPS is much a safer business and has a higher moat. Given Erbey's big stack on this company, I think he can continue to influence the company in a good way. Even without him, it should still doing well just follow current process. The major risk now is actually the $600m debt which it used to repurchase shares. It should pay down it to a comfort level.
12.Links
Glenn Chan have wrote many articles about it.
https://glennchan.wordpress.com/tag/altisource-asps/
also:
https://oraclefromomaha.wordpress.com/2014/04/29/altisource-portfolio-solutions/
Update
Jan 21, 2015 Recent price $24.5.
The company held a conference at Jan 18th. to update 2015 income outlook of $4/share to $7/share. The stock recovered to over $30 briefly, then trade down again.
Update
May 04, 2015 Recent price $30.
After the company and Ocwen release their Q1 earning. Share price recovered quite well. Q1 earning around just $10m. But real cash flow is around $20m. It also includes over $13m temporary expense on employee termination and $10m data access fee to Ocwen(actually its a kick back based on Glenn Chan's writing) which is ended at Mar. 31. I estimate it could have real earning around $40m for the next 3 quarters. Thus it would have $140m in real earning for 2015. Close to the $136m medium point confirmed by the CEO. Current market cap of $600m is still pretty cheap.
Recently the CEO and CAO bought quite some shares (worth $1.5m) at around $26/share.
Update
July 23, 2015 Recent price $39.
Q2 earning released today. The company reported $2.62/share earning which is really good. Also bought back $1.4m shares. Now total shares should around 18.7m.
It purchased Castleline( an insurance company) for $37m including 495k shares plus cash. After this, the total shares should be around 19.2m.
Sept. 29. 2017
Current price $26.
There are quite some stories with the stock in the past 2 years. The share price up and down quite a lot. However, fundamentally the business wasn't changed that much.
(1) Ocwen battered with regulator continuously. It seems no longer be able to acquire new mortgage rights. At least for now.
(2) Altisource and Ocwen signed a new contract which lowered its fees charged to Ocwen. Later Ocwen sold its mortgage to New Residential Investment (NRZ). Altisource signed a new contract with NRZ even lowered its price. So its earing will be affected quite a bit.
(3) Today Ocwen announced it will gradually move away from RealServcing platform(from Altisource). And no new mortgage will be using RealServcing. This is part of the deal with the regulator.
(4) In my view, today's news is a clear signal that the regulator is targeting the RealServcing platform. I suspect NRZ will be moving away from it as well. Although it takes time, the company will have a bigger issue if no one will use its platform. The platform is very cost effective and both servicer and mortgage investor love it but the regulator hates it because it is not end-user friendly.
(5) I decided to stay away for now for the risk is unclear.
