We increased our position in PEXA Group in the Emerging Companies Portfolio this week and with good timing. The property settlements technology company hosted an investor day yesterday which saw the stock rally more than 5%. The company maintained FY24 guidance of exchange margins to be broadly in line with FY23 and group margins to increase as Digital moves into breakeven by the end of the financial year. Reading between the lines of the update though, there looks to be some chance of an upgrade noting improving conditions in October after a slow start in Q1.
Costs have been an issue but the investor day had some good news on that front too, reducing the headcount by ~10% which should reduce the cost base by ~$10m on an upfront cost of $4m. Overall, we were pleased with yesterday’s update, we can see a clear path of 20+% earnings growth in coming years with the risk to the upside on their recent UK acquisition increasing their global reach. We expect property transaction volumes to continue to improve with global rates reaching a peak likely to prove a tailwind for PEXA.
- We took our PXA position to 5%, a level we are comfortable with given the improving operational outlook and macro backdrop.
MM is long and bullish PXA
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