Pexa Earnings: Focus on Loss-Making UK Distracts From the Highly Profitable Exchange Business

We raise our fair value for wide-moat Pexa by 15% to AUD 17.25 per share. The company provided additional disclosure on a revenue stream that previously flew under the radar and provided updated disclosures around capital expenditures in its exchange business. After incorporating this in our valuation, we raise our stand-alone valuation for the exchange business to AUD 15.50 per share from AUD 13 per share. We ascribe a further AUD 1.75 per share value to the business from Pexa’s international business, based on a 25% probability of success. We do not ascribe value to Pexa’s digital growth business. We think the shares screen as materially undervalued as the market is overly focused on the loss-making UK business.