Altisource ($ASPS)

Default servicing company that should pick-up during recession times. But will it make it till the time comes?

Executive summary:

- Unhealthy debt position with net debt at $180m

- CF from operations is $-10m every Q over last years

- Diluted the equity with 25% (selling 4m shares at $5) just to repay $20m debt during Q1 ‘23. More dilution possible ($100m equity raise was approved)

+ / - Activities (i.e. default servicing) are counter-cyclical, but until recently default uptick was very low thanks to gvmt stimulus / student loan forgiveness / strong wage increases by inflation / strong labour market

+ Recent renogations with its lenders to prolong its debt maturity till 2025 (and option to prolong till 2026)

Conclusion: This company has a tremendous upside potential (when credit default cycle kicks in), but is exposed with its weak balance sheet. If the credit cycle keeps on prolonging its start, ASPS 0.00%↑ might not even make it. Potential downside is too large, will wait till next quarter(s) report and see clear signs of credit defaults increasing before stepping in.

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Analysis:

See investor relations website of the company