Piper Jaffray Gives Company Update On Ocwen Financial; Reiterates OW

Piper Jaffray is designating Ocwen Financial OCN as a top pick in its coverage universe, as it believes OCN's shares offer significant risk-adjusted value with near-term catalysts that could drive earnings power and valuation higher. Key catalysts include: expect solid 1Q servicing earnings due to the HomEq portfolio ramp and seasonal benefits, Piper believes OCN is well positioned to win the bid on the Goldman Sachs servicing portfolio, JV with ASPS that will build flow FHA servicing business. Recent news reports have stated that the Litton Loan portfolio sales process has moved to the second round with OCN and Carrington Holding Co. as bidders. Piper continues to believe that OCN is a very strong bidder for MSRs due to its low-cost operating model, well above average ability to keep loans current and manage advances, and its access to capital. Piper is forecasting solid servicing segment profitability for the 1Q to be driven by an improving revenue yield on the HomEq portfolio and lower advances. It is forecasting servicing pretax income as a % of the UPB to be 27bps in the 1Q. Piper expects OCN to exhibit strong cash flow in 1Q with significant deleveraging. Piper Jaffray has a $14 PT and Overweight rating on OCN OCN closed Monday at $10.62