Undervalued wide moat share may be overlooked

Morning Star AU

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Pexa (ASX.PXA) shares fell 17% in response to its reporting full-year EBITDA growth for continuing operations of 12% to AUD 152 million. This was on a 7% increase in revenue and EBITDA margins ...

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This was on a 7% increase in revenue and EBITDA margins ...</p>\n\n<a href=\"https://www.morningstar.com.au/stocks/undervalued-wide-moat-share-may-be-overlooked\">Source Link</a>\n\n</div>\n","source":"morningstar_stock","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Undervalued wide moat share may be overlooked</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nUndervalued wide moat share may be overlooked\n</h2>\n\n<h4 class=\"meta\">\n\n\n2026-09-02 00:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.morningstar.com.au/stocks/undervalued-wide-moat-share-may-be-overlooked><strong>Morning Star AU</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Pexa (ASX.PXA) shares fell 17% in response to its reporting full-year EBITDA growth for continuing operations of 12% to AUD 152 million. This was on a 7% increase in revenue and EBITDA margins ...</p>\n\n<a href=\"https://www.morningstar.com.au/stocks/undervalued-wide-moat-share-may-be-overlooked\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"GEAR.AU","symbol_name":"BETASHARES GEARED AUS EQTY F","start_time":0,"source_url":"https://www.morningstar.com.au/stocks/undervalued-wide-moat-share-may-be-overlooked","article_id":"2664899279","we_media_id":null,"thumbnails":[],"rights":{"source":"morningstar_stock","url":"https://www.morningstar.com.au/stocks/undervalued-wide-moat-share-may-be-overlooked","rn_cache_url":null,"directOrigin":true},"url":"https://stock-news.laohu8.com/highlight/detail?id=2664899279","pubTimestamp":1788278400,"columns":[],"sourceInfo":{"source_id":"morningstar_stock","name":"Morning Star"},"weMediaInfo":null,"summary":"Pexa (ASX.PXA) shares fell 17% in response to its reporting full-year EBITDA growth for continuing operations of 12% to AUD 152 million. This was on a 7% increase in revenue and EBITDA margins expandi","collect":0,"end_time":0,"defaultTopTitle":"morningstar.com.au","property":[],"viewcount":null,"language":"en","relate_stocks":{"GEAR.AU":"BETASHARES GEARED AUS EQTY F","E200.AU":"SPDR S&P/ASX 200 ESG FUND","GIVE.AU":"PERPETUAL ESG AU SHR EQMF","STW.AU":"SPDR® S&P/ASX 200 ETF","QFN.AU":"BetaShares Australian Fincls Sect ETF","BBOZ.AU":"BETASHARES AUSTRALIAN STRONG BEAR (HEDGE FUND)","QRE.AU":"BetaShares Australian Res Sect ETF","IOZ.AU":"iShares Core S&P/ASX 200","SLF.AU":"SPDR S&P/ASX 200 LISTED PROP","VAP.AU":"VANGUARD AU PROP SEC IDX ETF","ZYAU.AU":"Etfs S&p/asx 300 High Yield Plus Etf","VAS.AU":"VANGUARD AUST SHARES IDX ETF","BEAR.AU":"BETASHARES AUS EQ BEAR HF","DACE.AU":"DIMENSIONAL AUST CORE EQ","OZF.AU":"SPDR S&P/ASX 200 FINANCIALS","XAO.AU":"标普/澳交所 普通股指数","EIGA.AU":"EINVEST INCOME GENERATOR FD","IMLC.AU":"INV MUTUAL CONC AUS SHAR ETF","OZR.AU":"SPDR S&P/ASX 200 RESOURCES F","IIGF.AU":"Intelligent Investor Australian Equity Growth Fund (Managed Fund)","XJO.AU":"标普/澳交所 200指数","XKO.AU":"标普/澳交所 300指数","EMOT":"First Trust S&P 500 Economic Moat ETF","IISV.AU":"INTELL INV SELVAL SHR FD MF"},"translate_title":"被低估的宽护城河份额可能被忽视","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"IIGF.AU":0.6,"DACE.AU":0.6,"BEAR.AU":0.6,"XJO.AU":0.83,"STW.AU":0.6,"OZF.AU":0.6,"GIVE.AU":0.6,"XKO.AU":0.83,"BBOZ.AU":0.6,"VAS.AU":0.6,"EIGA.AU":0.6,"GEAR.AU":0.6,"XAO.AU":0.83,"OZR.AU":0.6,"IISV.AU":0.6,"SLF.AU":0.6,"VAP.AU":0.6,"ZYAU.AU":0.6,"QRE.AU":0.6,"IOZ.AU":0.6,"QFN.AU":0.6,"E200.AU":0.6,"EMOT":1.5,"IMLC.AU":0.6},"content_text":"Pexa (ASX.PXA) shares fell 17% in response to its reporting full-year EBITDA growth for continuing operations of 12% to AUD 152 million. This was on a 7% increase in revenue and EBITDA margins expanding by 2 percentage points. Free cash flow was up 39%.Why it matters: The company guided for a sharp deceleration in transfer volumes for fiscal 2027 of between 10% and 15%. The company is reluctant to change its operating expenses, resulting in the company expecting EBITDA of AUD 130 million at the guidance midpoint, a 14% decline from last year.We agree partially with the forecast. The housing market is coming off a period of elevated activity following the expansion of the 5% deposit scheme for first-time homebuyers. And changes to investment taxation and rising interest rates are hurting demand, especially from investors.We were forecasting a 5% decline in volumes and are downgrading this to 8% in the near term. But we don’t think this sets a new transfer volume baseline. We expect a volume recovery to the prior baseline by fiscal 2030, reflecting a property correction of similar duration as we saw in New Zealand.The bottom line: We maintain our fair value estimate of $10.50 for wide-moat Pexa. Shares screen as materially undervalued, hit by three negative narratives: a regulated fee decrease, lower transfer volumes, and a struggling UK business.We think the risks from each are well captured in our model and valuation. We have incorporated the expected fee decrease. But we continue to expect minor concessions from the regulator, given the compelling case Pexa has put forward that its cost base is not calculated appropriately.We also don’t think transfer volumes face a structurally lower baseline and expect the company to exit the UK by fiscal 2029 given insufficient traction.Between the lines: Pexa expects the sharp decline in transfer volumes it is guiding to will have to be incorporated by the regulator in its pricing decision.Structural transfer volume baseline is unchanged for PexaWe expect Pexa’s strategic focus in the near term will be on convincing the regulator to allow it to earn a return on a larger capital base than is currently proposed by the Independent Pricing and Regulatory Tribunal of New South Wales. Ipart has suggested Pexa may only earn a return on a capital base of less than AUD 400 million, which we believe is half of what is a reasonable assessment of Pexa’s asset base. Specifically, we believe Ipart unduly discards setup costs related to the technological infrastructure and onboarding of market participants.As a result of the regulatory intervention, we think Pexa will also be forced to abandon its overseas expansion into the United Kingdom in the near term. We think the company does not have sufficient financial resources and cash flow from the Australian exchange business to continue absorbing the required setup costs there.We don’t expect the operation of Pexa’s Australian exchange business to require much ongoing strategic focus. Pexa’s Australian exchange business is used for the settlement and lodgment of around 90% of property transactions in Australia, with the balance consisting nearly exclusively of transactions that are still paper-based in some of Australia’s smaller jurisdictions and functional niches. We don’t see competitive threats to this business. We see Pexa’s wide economic moat as well protected by network effects and switching costs. We therefore expect Pexa to gradually increase its market share to close to 100% of transactions.Bulls SayPexa is a natural monopoly in Australia and is well protected by a wide economic moat.Despite heavy investment today, Pexa’s Australian exchange business, like other exchange and financial infrastructure businesses, has the potential for high margins.Following regulatory intervention on pricing, we see no latent risk of new entrants coming in, given they are now unlikely to be able to undercut Pexa’s fees.Bears SayRegulation changes may result in lower prices or limit price increases for Pexa’s Australian exchange business.Pexa’s UK expansion will likely be unsuccessful.Pexa’s expansion into adjacent products and services, including through acquisitions, has not delivered notable benefits and has been discontinued. The company lacks noteworthy growth prospects.Subscribe to get Morningstar insights in your inbox","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":false,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"isVideo":false,"video":null,"symbols":[],"gpt_button":0,"need_auth":false,"need_login_tip":false,"code":"91000000","status":"200"}}}