The company’s capital-light business model has generated tremendous free cash flow, which management uses to repurchase shares aggressively in recent quarters, along with proceeds from the company’s recent divestiture. The business’s growth has been quite challenging amid the downturn in the commercial real estate market. With that said, the recurring revenue business model does protect earnings from significant volatility. AIF could potentially benefit as the headwind in the real estate market turns into a tailwind amid an interest rate easing cycle. For now, we are maintaining our rating at “B”.

The company’s recent operating results have been quite weak, driven by the company’s high exposure to the housing market in its loan book, weighing on credit performance and interest income. The company also recently went through a significant change in leadership as EQB found a new CEO and CFO. EQB is an above-average operator in the banking industry. The company has solid operating performance over the years, with a decent track record of growing book value per share and dividend by double digits. The near-term weakness in earnings could be just a temporary hit, and given the company’s solid capital position and operating playbook, EQB may eventually recover. That said, to be conservative, we are downgrading our rating by one notch to “B.”

REAL’s management is focused on positioning the company to navigate tough times and ride the next cyclical upturn, with an ambitious long-term operating model aimed at creating meaningful shareholder value. REAL remains a highly cyclical, volatile, high-risk name with meaningful upside potential if management can execute during a recovery. However, given its sensitivity to macro factors and limited visibility into future demand, we are dropping coverage on Real Matters (REAL).