Pexa (ASX: PXA) has secured a formal commitment from UK bank NatWest to implement both remortgaging and sale and purchase transactions on its platform. Remortgages are expected to go live in the second half of fiscal 2026, with sale and purchase transactions to follow.

Why it matters: We see this as a significant step to overcoming early adoption hurdles in the UK. NatWest is the first Tier 1 lender in the UK to commit to an implementation program, and we believe this win materially increases the likelihood of more client wins and broader adoption in the region.

  • We are particularly positive about the commitment to implement Pexa’s sale and purchase solutions. Unlike remortgaging, these transactions involve more stakeholders, such as registries and conveyancing firms, making them more conducive to the network effects seen in Australia.
  • We raise our UK success probability to 50%, from 25%, reflecting a clear breakthrough in Pexa’s UK expansion. While we see the UK as a binary outcome, Pexa has a first mover advantage and is now better placed to succeed in the market.

The bottom line: We raise our fair value estimate for wide-moat Pexa by 16% to AUD 20 per share, reflecting a higher assumed probability of success in the UK. We now value the UK expansion at AUD 4.20 per share, while our valuation of the Australian business is little changed at AUD 15.80 per share.

  • Shares screen as undervalued at current prices. We believe the market underappreciates the company on two fronts. First, the margin potential of its moaty Australian exchange businesses, and second, by ascribing a lower probability of success to the UK expansion.
  • Network effects are the key growth driver in exchanges and financial infrastructure. Given UK’s slower, paper-heavy settlements processes, we think that the backing of a major lender materially improves the chances of broader adoption among conveyancers and gaining share from legacy systems.

Leading UK bank commits to Pexa’s remortgaging and sale and purchase solutions

We expect Pexa’s strategic focus for the foreseeable future to be on its overseas expansion into the United Kingdom. Pexa’s exchange business is mostly saturated in Australia, leaving overseas expansion as the primary driver of growth. However, Pexa does not enjoy an equally supportive environment in the UK as it did in Australia. In Australia, the country’s largest banks co-owned it and with a legal mandate from state governments to move to e-conveyancing, this helped drive adoption. Pexa will therefore have to invest heavily into product development, and especially sales and marketing to drive adoption of its platform by sufficient market participants for network effects to kick in.

We don’t expect Pexa’s Australian 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, including from interoperability, which would allow competitors to operate on Pexa’s exchange network. We see Pexa’s wide economic moat well-protected by network effects and switching costs. We therefore expect Pexa to gradually increase its market share to close to 100% of transactions.

Pexa’s other business in Australia, which primarily consists of data-related products, is an area of growth, but it pales in comparison to the UK opportunity.

Pexa bulls say

  • Pexa is a natural monopoly in Australia and 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.
  • Successful overseas expansion has the potential to materially increase Pexa’s addressable market and provide additional operating leverage on product development expenditures.

Pexa bears say

  • Interoperability and regulation may force competition for Pexa’s Australian exchange business.
  • Pexa’s UK expansion may be unsuccessful.
  • Pexa’s expansion into adjacent products and services, including through acquisitions, have not yet delivered notable benefits.