Pexa Preparing For A Big Year Ahead

Australia | 11:10 AM

Pexa Group substantially beat first half forecasts and analysts laud pending growth opportunities both in Australia and the UK.

•  consensus first half forecastsPexa Group substantially beat
• Australia performed strongly, but focus is on the UK
• NatWest deal opens the door to rapid growth
• New Australian compliance regulations provide another opportunity

By Greg Peel

Pexa Group ((PXA)) operates an electronic lodgement network; a cloud-based platform that enables the lodgement and settlement of property transactions through an integrated digital platform, as well as facilitating the collaboration between customers across the property ecosystem to enable the transfer and settlement of transactions in real property.

The company also provides data insights and digital services for developing, buying and selling, settling, owning, and servicing of properties, as well as property-related analytics and digital solutions; and digitalised property registration and settlement, and related services. 

During the first half FY26, Pexa exited its Digital Solutions division. The division was a failed strategy of previous management, Morgan Stanley notes; a portfolio of businesses that were loss-making, sub-scale, and providing dis-synergies.

Pexa’s first half earnings came in some 120% above consensus forecasts, but Macquarie points out consensus failed to strip out the Digital Solutions exit, which provided a 50% tailwind. Earnings beat Macquarie’s forecast by 60%.

While 1H26 profit comparisons are complicated by Digital Solutions shifting to “discontinued operations”, UBS estimates core operating earnings were 22% ahead of consensus,  with core profit 40% ahead, benefiting from lower D&A.

Stronger core earnings were largely driven by the Australian business which lifted 15% year on year due to record transaction volumes (up 7.7%) and cost efficiencies (opex down -2.6%).

International earnings were flat year on year --a better-than anticipated outcome, UBS notes-- assisted by stronger UK remortgage activity and improved market share for Smoove S&P (UK platform acquired in 2023).

Investing to Grow

While Pexa's first half results were well ahead of expectations, unchanged FY26 guidance suggests to UBS much of this will be reinvested into delivering stronger longer-term growth.

Domestically, elevated first half Australian Exchange earnings margins (58%) will likely moderate with investment into PEXA Clear, ahead of an initial revenue contribution in FY27.

Pexa Clear is a purpose-built solution that will be launched in July to simplify Anti-Money Laundering and Counter-Terrorism Funding (AML/CTF) checks, strengthening compliance confidence for property professionals in Australia.

Conveyancers and real estate agents are required to comply with AML/CTF laws from July. Pexa launched its Pexa Clear solution in January. Macquarie estimates the AML/ CTF total addressable market at some $90m, representing upside risk of 5% to Pexa’s FY27 Australian earnings assuming 20% market share and 50% margins.

Internationally, UBS thinks opex will continue to rise into the second half, supporting the NatWest remortgage launch alongside further investment into attracting/onboarding additional lenders and conveyancers. Last year major UK bank NatWest formally committed to an implementation program to facilitate future remortgage and Sale & Purchase transactions by NatWest on Pexa’s platform. 

While this higher second half cost base tempers UBS’ earnings outlook slightly, capitalising on the critical UK roll-out should support longer-term value upside.

NatWest onboarding volumes to date provide significant incentives for other Tier 1 lenders to also onboard, with Pexa's CEO confirming "the launch of NatWest will be a sea change".

Macquarie expects other Tier 1 lenders to sign with Pexa in 2026, and estimates the UK total addressable market at circa $530m in FY27, adjusting for published UK pricing and current turnover activity.

Importantly, notes Morgans, the key UK catalyst of the NatWest remortgage implementation is expected to commence slightly ahead of schedule, now early in the June quarter rather than the end of the June quarter as previously expected.

While not much new colour was given on the UK expansion, Jarden notes conveyancer adoption has been progressing with Pexa aiming to reaching a "critical mass nationally". Jarden still views Pexa as being able to gain meaningful market share in the UK long term.

Additionally, ARNECC's (Australian Registrars National Electronic Conveyancing Council) interoperability reviews are looking supportive of Pexa's monopoly and Pexa Clear going live in the first half FY27 should provide additional upside, Jarden suggests.

As a footnote, Morgan Stanley notes Pexa’s share buyback program now ceased, with the company focused on debt reduction, reinvesting in existing assets and exploring profitable long term growth opportunities.

Guidance

Pexa’s FY26 revenue guidance and earnings margins imply earnings 4% ahead of consensus, UBS points out. However, this implies a softer second half earnings outcome, -30% below the first half and -26% below the second half last year.

While softer second half revenues are a seasonal factor, FY26 guidance also suggests earnings margins will pull back in the second half to circa 36% from 40% in the first.

Alongside higher Australian opex ahead of Pexa Clear going live in FY27, this primarily reflects a step-up in UK platform costs, UBS notes, supporting NatWest remortgage launch (due in April), Sale & Purchase roll-out in FY27 and expanded engagement with additional UK Tier 1 lenders and conveyancers - factors which temper UBS’ FY27 outlook.

Morgans suggests, on face value, Pexa’s revised FY26 core profit guidance of $15–25m appears conservative, given Pexa has already delivered $20.8m of profit in the first half. Management also flagged a further $5m of annualised cost savings to be realised in the second half, bringing total FY26 efficiency savings to $10m.

Whilst Morgans acknowledges the headwinds embedded in guidance --including early signs of a slowing property transaction environment in Australia (rate hikes), normal seasonality, and rising investment spend across both Australia and International businesses-- consensus risks seem to the upside in Morgans’ view.

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