Pexa: Valuation Unchanged on Proposed Smoove Acquisition

We maintain our AUD 15 per share fair value estimate for wide-moat Pexa, following the proposed acquisition of Smoove. After the market digested the announcement, shares fell over 7% the following day. We attribute the fall to a perception of weakness that comes from seemingly being unable to organically enter the market. However, we believe Pexa’s core exchange business in Australia alone is worth AUD 14 per share, or AUD 12.50 per share when including net debt, and don’t believe expansion into the U.K., successful or not, warrants as much of a discount as the market appears to attribute to it. At current prices, we believe Pexa’s shares are materially undervalued.