PEXA Group (PXA) - Time to settle

PEXA Group Limited operates a digital property settlements platform in Australia. The company operates through three segments: Exchange, International, and Digital Solutions.

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Pexa reported first-half FY25 earnings comfortably above our expectations. The result was boosted by an 11% surge in earnings from its property registry and settlement division, and an in-line performance from digital solutions that compensated for a weak showing from its international business. The company also launched a $50 million share buyback program. Guidance for the full year was reiterated – Pexa is targeting growth in group revenue in the range of 13–19% and a group earnings margin of more than 34%.

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The UK operations are progressing albeit at a slower pace than anticipated. Ord Minnett notes that Pexa has released more details on the UK business ramp-up, which we see as a positive.

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In our view, the broader market is not factoring in any value for the UK arm (the lead part of the international business strategy), but in the medium term we see strong potential as negotiations with the top-tier British banks and testing with the Bank of England continues. We also expect the cash burn rate to slow significantly. Further out, there is potential value in using its technology in other markets, such as Canada. We raised our target price on the stock to $17.40 from$16.70, and our recommendation was upgraded to Buy from Accumulate on valuation grounds.

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