Recent research indicates brokers are generally positive on the longer-term outlook for
-Since listing,
-The average target in the FNArena database is materially higher
-Morgan Stanley anticipates long-term outperformance
-Shorter-term property market concerns weigh
-Growth avenues for the PEXA Exchange platform and PEXA Insights
After peaking at
While some doubts are creeping in, brokers have retained positive ratings in recent months, except for Jarden (outside the database), which is sticking with its Underweight assessment.
The company operates the leading digital property settlements platform in
The PEXA Exchange platform connects financial institutions, practitioner firms, the
There's also a PEXA Insights initiative, which aims to develop products and services that leverage the company's property data, together with third party data, to generate property, dare I say, insights.
Back in late October, Morgan Stanley was effusive in its praise for Pexa and initiated coverage with an Overweight rating. In a broad analysis of the Technology, Media and Telecom sector, the broker felt Pexa was one of few stocks that possessed attributes sufficient to qualify as a potential long-term outperformer.
The business is profitable, has a sustainable first-mover advantage and is meaningfully free cash flow positive with a 45% earnings (EBITDA) margin, pointed out the analysts.
The company handles 80-90% of property transactions settled, and Morgan Stanley expects this leadership position will result in greater investment in R&D, as a percentage of sales, to maintain its leadership position.
On the flipside, the broker noted upcoming transaction volumes for FY23-25 may be worse than expected, given falling house prices/listings. However, the business is regarded as only a "shallow cyclical", with transaction volumes varying with the activity levels of the broader property cycle. Longer-term, the total number of transactions in
The analyst also observed running a digital exchange is a highly regulated industry, with attendant risks of change.
At its late-November AGM, Pexa reported "encouraging" first quarter transaction volumes of 963,000 and raised first half guidance to 1.9m.
This guidance was in excess of Macquarie' forecasts though the broker remained under research restriction and didn't provide a target price or rating (previously Outperform). Macquarie anticipated refinance volumes would remain in line with recently elevated levels before normalising in 2024, while transfer volumes would likely continue moderating, before recovering in 2024.
In a circumstance that benefits Pexa, the analyst noted banks were utilising margin benefits from higher rates to compete for new mortgage customers.
More recently, Jarden observed settlement activity in NSW and
Jarden expects near-term pressure on refinancing activity though expects a recovery by the second half of 2023. A wave of mortgage expiries, along with an ongoing shift to external refinancing is expected to provide near-term support.
The broker's Underweight rating is driven by its outlook for the property market, with downside risks to FY23 consensus forecasts expected.
NSW and
Refinancing activity also fell in NSW and
In research released yesterday,
For refinancing activity, the broker noted CoreLogic data suggest ongoing buoyancy, while transfers are -23% lower for the quarter so far.
Growth avenues for the PEXA Exchange platform and PEXA Insights
Via PEXA Insights, the company is targeting
Management continues to work towards a land information total addressable market (TAM) estimated at over
Regarding the PEXA Exchange platform, Morgan Stanley sees expansion opportunities into a few international markets, such as the
The broker points out significant localisation is required for the platform in each new market it hopes to address. As a result,
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