Prior to Russel Cohen assuming the role of PEXA (ASX: PEX) CEO and MD on the 28/2/25 he stated in an ASX release: “PEXA has significant opportunities ahead to leverage its core strength as a platform and digital solutions business. My ambition is to create sustainable value for shareholders, customers, employees and other stakeholders through disciplined strategic execution and clear focus on returns.”

The article below explains what this statement by Mr Cohen means in practice.  (Below article thanks to Ivor Ries and the Rampart website. Dishonourably reproduced by Scoonie without permission).

PEXA simpli Unstoppable

By Ivor Ries 

There are Monopolies and then there is PEXA.

Australia's residential property market is one of the most largest and most liquid and most efficient the developed world with more than 600,000 dwellings worth hundreds of billions changing hands each year and a transaction failure rate too small to calculate. The foundation stones of Torrens Title registration system and a national electronic title transfer delivers transaction speeds and certainty that are the best.

The only problem with this picture is the original vision for a competitive market place in title transfers – with multiple competing property exchanges – has run into a brick wall. That brick wall is a company called PEXA Group Ltd, which now accounts for 90% of all property transactions in Australia and 100% all of electronic transfers.

PEXA is a monopoly and over the past few years it has done an excellent job of using lobbying cajoling and lawfare to prevent any other player from cracking into the electronic transfer market.  By any other player I mean Simpli the only potential challenger which is owned by Christian Beck’s legal software ATI group (50.1%) and the ASX (49.9%). Since it started in 2018 Simpli is has racked up losses of more than $120 million and is yet to execute more than a few small trial transactions. The property conveyance industry desperately wants a viable competitor to PEXA as they fear that overtime the monopolistic PEXA  will nickel and dime away their already slender profit margins, one fee increase at a time.

Not that you will find many property conveyances who will stick their heads up and publicly take on PEXA. PEXA is fond of sending threatening legal letters to anyone who might criticise it stand in its way or look at it sideways like Al Capone PEXA has many enemies but none will testify against it for competition to work electronic title transfers rival exchanges called electronic lodgement network operators or ELNOs, must be able to talk to each other seamlessly which in industry speak is called interoperability.  Interoperability is essential if a property buyer is using one ELNO is to make a binding deal with a seller using arrival ELNO. If the wires get crossed between the two different ELNO's a transaction would be stuffed up and a manual work around would be required

In 2020 after several years of delays State and Federal ministers who oversee property transactions got together and stated that PEXA and Simpli had agreed to work together to have an agreed interoperability standard by March 2021. Four years later we are no closer to an interoperability standard.

Blocking and Delaying Tactics

The new regulatory deadline for interoperability is December 2025 . Like all earlier deadlines this one will pass with PEXA executives rolling around on the floor laughing. Delays and road blocks work very much in PEXA’s favour. PEXA knows that eventually Simpli shareholders will abandon their quest for a piece of the transfer market and PEXA will be king of the conveyancing world into the end of time. And for the production of delays and road-blocks PEXA takes the gold medal with a rich history of blocking and delaying tactics. Some of the recent ones take the cake. Last year PEXA sent legal notices to the major banks advising them not to participate in industry workshops where lawyers conveyances and the banks met to discuss progressing for interoperability as would this would breach PEXA’s intellectual property.

In December 2023 PEXA’s lawyers, Arnold Bloch Liebler sent a warning shot to ARNEC the Federal-State body charged with making interoperability work. After listing a number of reasons why PEXA did not feel bound by the joint Federal and State laws that regulate the industry, the letter argued that interoperability would allow Simpli to copy PEXA’s intellectual property.  ABL partner Justin Vaastra wrote that: “PEXA is duty bound to protect its intellectual property and other property rights in the PEXA platform and the interests of its shareholders and stakeholders. If the interoperability model pursued by ARNEC and the IOP (interoperability programme) scope threatens to jeopardise those interests, PEXA will need to take steps to protect its rights”.   In other words if you the Government Regulator want to impose the interoperability required under the Federal and State laws we will sue you. The lawfare strategy as intended scared the bejesus out of the banks and everyone else. Workshop sessions were delayed - and the big banks who's buy-in for this is required for the interoperability to work - refused to attend the workshop’s body charged with making interoperability work.

PEXA also sent letters to the NSW Registrar General and to the NSW Minister for Customer Service and Digital Government Jihad Dib, saying that they reserved the right to take legal action against the NSW Government if it kept pursuing interoperability. Perhaps it has happened before, but I certainly cannot recall a company threatening to sue a Minister and a Government for attempting to enforce a law impacted by parliament. This super ballsy and then there's PEXA ballsy.

As the website ARNECC makes clear, “Under Section 18A(1) of the National Law a person approved as an ELNO under section 15 of the National Law must, in accordance with the operating requirements establish and maintain interoperability between ELN operated by the ELNO and each ELN operated by another ELNO”.  PEXA clearly regards Section 18A(1) as optional.

Phalanx of Lobbyists

To further throw sand in the gears of potential competition, PEXA employs of phalanx of lobbyists and consultants these include former NSW premier Morris Imma who mentored the current NSW premier Chris Minns and was an early backer of the current Labor member for the seat of Lakemba, one Jihad Dib. So on one hand PEXA lobbyists are there giving out how to vote cards for PEXA’s responsible Minister at NSW elections, and on the other hand PEXA’s Melbourne lawyers are sending him threatening letters. Some people might see this as a kind of a good-cop bad-cop strategy, but I would not stoop so low.

NSW is a critical state to win for PEXA as both Victoria and Queensland have granted PEXA formal waivers from having to comply with 18a.  NSW is not only the largest property market in Australia it could make life difficult for PEXA if it enforced 18A, or perhaps banned any further price rises until PEXA allowed interoperability. One of the lines of argument that PEXA lobbyists used to bamboozle politicians and bureaucrats is that interoperability (competition) would cause chaos as tens of thousands of property settlements were stuffed up by two different software systems talking to each other. A system crash would turn into a political nightmare PEXA spinners argue as voters blame their elected representatives for undermining the integrity of the property market. This argument is of course complete poppycock. My learned geek friends who use artificial intelligence to build code for Fortune 500 companies reckon it would take less than three months coding to build a system that allowed PEXA and Simpli systems to communicate with each other.

Other influence peddlers on the PEXA teat include former Grattan institute CEO John Daley and Australia's largest lobbying firm TG Public Relations owned by law firm Thompson Gear, the home of ALP luminaries Stephen Conroy and Kim Beazley. TG is so far up the Victoria NSW Labor Party leadership you can barely see the soles of their highly renumerated consultants shoes. 

Also on board the PEXA dark-ops team other quintessential Sydney spinners for hire Sue Cater and Clive Matheson plus Claire Gil the formula Regulatory Affairs Director of the Seven and Nine networks. If there is any State of Federal minister or backbencher interested in property settlements that hasn't been soiled by contact with one of PEXA arm twisters it's because they've been hiding under a rock. PEXA is so confident that is killed off competition completely in its latest market update it wrote off a sum of $14m, the amount it claimed to have spent on the interoperability system. If PEXA accounts are to be believed, interoperability has gone the way of Monty Python's Norwegian blue parrot. Farcically PEXA’s right down announcement included the statement that it would: “continue to engage constructively with regulators”.

The politicians have presided over this mess are now doing what politicians always do when they want to buy time and avoid responsibility. The NSW parliament has called an inquiry which submissions close on September 26. There is talk of reinvigorating the Senate inquiry into the issue of PEXA’s dominance, but a date is yet to be set. PEXA is also busily developing new commercial strategies to defeat Simpli. Even if the states do miraculously enforce interoperability the company is working on a series of add-ons to its systems including anti money laundering module and a real estate agent portal that will render Simpli’s offering obsolete. Long before it attempts to sign up its first customers PEXA has reportedly been working in partnership with Austrac and the AML module. 

If PEXA follows the US tech giant broligarch business model it will eventually have dozens of add on apps and features that will mean anyone in the property industry will need up PEXA terminal on their desk just to stay in business. It's called client capture. Frustrated with four years of going nowhere representative of Simpli's leadership and shareholders have been visiting state government ministers and senior bureaucrats trying to work out the lay of the land. If those meetings revealed that PEXA has the state sewn up they'll probably pull the pin. Neither the ASX nor Chris Beck want to spend the rest of their days investing in a market entry that will never come. 

The Australian share market is betting on the PEXA monopoly being confirmed. PEXA share price is up 25% this year and the company now trades on an EV/EBIT multiple of almost 59 times. Consensus forecasts predicted the companies EBITA margin will grow from 31% this year to just a whisker under 40 % by 2028. As far as the stock market is concerned Simpli and any chance of competition is already dead.

 There must be among our Elites an unwritten Marquis of Queensberry rule that for the PEXA participants goes something like this: “Under no circumstances are retail shareholders, conveyancers, solicitors, members of the public or any other dumb f%&kers out there to have any clue as to what is really going on. It is just the way of the world that us sharks to tear each other to pieces and only a very few of us will emerge on top.  However these shit-fights must always be done so deep down it cannot be seen. And under no circumstances are any participants to ever break the water’s surface.”   

In an odd way it is kinda reassuring to know our politicians past and present, and their fellow travelers are out there doing what they have always done and do best - looking after themselves.  I mean it would be unsettling if we found out any of these pricks actually had the interests of Australia foremost. Like Premier Lang said many years ago: “Always back the horse called self-interest, at least you know it is trying”.

All up, PEXA may well be a very good long-term investment.

Last of the companies I own reported today and the numbers for PXA were messy and underwhelming. Somehow I always think the stragglers are going to produce a poor result.

Revenue of $393.6m was below market expectations of $400m

EBITDA of $134.4m below market of $140m though I read some analysts has EBITDA as high as $158m

NPATA of $41.1m with statutory NPAT of ($76.1m) affected by impairments.

Numbers themselves aren't too important to me in the short term as my thesis for holding was based on the probability of success in the UK as they already practically have a monopoly in Aust esp after Sympli, the last of PXA's e-conveyancing competitors put up the white flag earlier this year. 

More importantly for me the UK expansion is starting to gain traction with the following points

• NatWest engagement progressed in 2H25, written commitment received in July 2025

 • Engagement with other Tier 1 lenders is now considered commercial in confidence 

• Launch of PEXA UK platform imminent 

• Key platform APIs have been built, opening connections across market ecosystems 

• Undergoing beta-testing with select conveyancers in advance of the broader launch.

Stock currently down appropriately 10.11% at $15.21 though was as low as $14.33.

ASX Announcement: PXA 11 August 2025

PEXA Group announces strategic review of Digital Solutions business and update to guidance Melbourne, Australia - PEXA Group Limited (ASX: PXA) (“PEXA” or “Group”) announces that it has commenced a strategic review of the Digital Solutions businesses. In addition, PEXA today provides an update on specified Items, depreciation & amortisation, income tax expense and changes to its Profit and Loss disclosure ahead of its full year (FY25) results announcement on 29th August 2025. The FY25 results, including the items noted below, remain subject to finalisation of accounts and audit procedures by the Group’s external auditor.

Strategic review of Digital Solutions

Russell Cohen, CEO and Group Managing Director of PEXA, undertook an initial assessment of the Group and its businesses when he joined PEXA at the end of March 2025. One outcome of this assessment has been a realignment to PEXA’s capital allocation strategy, taking a more targeted approach and no longer investing in non-core digital products or investments. Following this assessment and in collaboration with the broader team at PEXA, it was deemed necessary to undertake a strategic review of the Digital Solutions business to assess its fit within the broader PEXA Group. A number of outcomes of the strategic review are being considered, including the review of divestment opportunities of selected majority and minority investments, as well as the need to contribute further investment in an underlying business to maximise profitable growth. The strategic review has made some progress to date, with the decision taken to exit some select noncore, minority investments within the Digital Solutions business. Further updates on the progress of the strategic review will be provided to the market with the release of the FY25 results.

Specified item guidance revised to $66m to $70m for FY25 (from $35m to $40m)

As a result of Mr Cohen’s initial assessment of PEXA and as the Group adapts to changing market conditions, the difficult decision was made to recognise a non-cash impairment charge of between $31 million to $35 million in PEXA’s second half FY25 results. This impact, along with other minor movements, results in revised guidance for specified items of $66m to $70m. The non-cash impairment charge largely relates to the following groups of assets:

• Interoperability intangible software (approx. $14m): since the Interoperability Program (“Program”) was paused by ARNECC in June 2024, the interoperability asset sat idle for 12 months, leading to parts of the Interoperability software to become outdated technology. Further, the remaining uncertainty around the next steps in the Program means this asset no longer meets the accounting criteria required to continue to hold this asset on the balance sheet. PEXA will seek to recover interoperability costs and continue to engage constructively with regulators on the Program, noting that any recommencement of the Program will require additional investment and product development.

• Digital Solutions investments and related products ($14m-$18m): As mentioned above and as part of PEXA’s ongoing portfolio review processes and changing market conditions, a decision has been made to exit some non-core minority investments which operated within the Digital Solutions segment of the Group, prompting a non-cash impairment charge of $2m-$4m to the underlying assets. In addition, PEXA generated minor revenues from products adjacent to thExchange which were previously recognised within the Digital Solutions business. These products now require additional investment to re-platform and modernise the technology. Given evolving market dynamics, this investment profile does not meet our more targeted capital allocation approach, and a decision has been made to withdraw from these products.

• Other assets (approx. $3m): consistent with the Group’s routine impairment review processes, several other less material intangible assets have been impaired due to changing market conditions in which the assets operate or changes in business strategy. 

Depreciation & Amortisation guidance revised to $103m-$105m (from $98m-$102m)

During a routine review of tangible assets, a decision was made to accelerate the amortisation of certain assets due to the expectation of these assets being re-platformed or retired earlier than previously expected. This decision has led to our depreciation expenses falling above the range previously provided.

Income tax expense guidance revised to $36m-$37m (from $40m-$45m)

The Group’s income tax expense forecast has been revised downwards as the Group finalises its FY25 results. 

Changes to Profit and Loss disclosure

To provide additional transparency to investors, minor changes to the presentation of the Profit and Loss account will be made in the Investor Presentation and the operating & financial review within the Annual Report. These modest changes include the reallocation of interest revenue earned by Optima Legal from Business Revenue to Interest Income, as well as a change in disclosure of PEXA’s reported share of loss from associates out of Specified items due to its recurring nature. 

Russell Cohen, CEO and Group Managing Director of PEXA, commented:

“During my initial review of the businesses within our Group, we took a critical look at all our operating businesses and assets, assessing their fit as well as the capital required for each to thrive. It became apparent that we would benefit from a deeper dive into the Digital Solutions business to ensure we are focusing on our core strengths. Importantly, the existing teams, quality of technology and customer relationships is strong in our Digital Solutions assets, and we will continue to invest in these businesses as needed to ensure we maximise their potential while the review is underway. In relation to the change in our specified item guidance, the decision to recognise a non-cash impairment charge was not taken lightly and we have undergone a thorough review of the underlying items, mindful of their impact on shareholders and the broader business. We are confident that we are taking the necessary steps to strengthen the business for future profitable growth, allocating capital where we see the best opportunity for outstanding shareholder returns.” Further details will be shared with the release of the FY25 results on 29th August 2025.

PEXA receives formal commitment from leading UK bank NatWest for implementation program Melbourne, Australia

PEXA Group Limited (ASX: PXA) is pleased to announce that its UK subsidiary, Digital Completion UK Ltd, trading as PEXA (“PEXA”) and National Westminster Bank Plc (“NatWest”) have formally committed to an implementation program to facilitate future remortgage and Sale & Purchase transactions by NatWest on PEXA’s platform. This engagement marks a key milestone in the strategic partnership between PEXA and NatWest and represents an important step in PEXA’s journey towards executing on its strategic goals in the UK. A successful implementation program will support NatWest to expand its existing service offering, assisting with increased speed and certainty for digital remortgage transactions to UK homeowners and allowing NatWest to offer a wider range of digital property transactions through the sale & purchase functionality. Subject to successful implementation for NatWest, their remortgage transactions are expected to go live in the first half of calendar year 2026 (CY26), with their Sale & Purchase transactions intended to follow. The commencement of transactions is subject to completion of industry standard due diligence procedures and the execution of final Terms and Conditions. PEXA also plans to launch its broader Sale & Purchase solution to the wider market prior to the end of CY25, with the capability to support over 70% of property transaction types in England and Wales.  

Russell Cohen, CEO and Group Managing Director of PEXA, commented on the event: “We are delighted to formally advance our partnership with NatWest, the first Tier 1 Lender in the UK to commit to an implementation program with PEXA. In this next step of our partnership, we look forward to working with them to digitise the property transaction process to deliver an enhanced customer experience. “This important milestone strengthens our collaboration with leading UK bank NatWest. I would like to thank the PEXA UK team and the broader PEXA Group for their dedication and hard work towards digitising the property transaction process for the UK market, as currently enjoyed by our customers in Australia.” This release was authorised by the CEO and Group Managing Director of PEXA Group Limited.

- Ends - 

Management Bios

Russell Cohen - Chief Executive Officer and Group Managing Director

Russell Cohen is a seasoned technology executive with more than 20 years of experience driving growth in the mobile, telecom and software industries across Asia Pacific. Prior to PEXA, Mr Cohen was the Group Managing Director of Operations at multinational technology company Grab, leading business performance, operations, platform safety, market expansion and a team of 3000 across seven countries. He also played a pivotal role in that company’s strategic growth throughout the region. Before joining Grab, Mr Cohen served as Board Director and Vice President of Business Development & Corporate Strategy at SoftBank C&S in Tokyo, a role he assumed after SoftBank’s acquisition of Brightstar Corp. At Brightstar, he was Regional Managing Director for Asia, overseeing nine markets, and founded the company’s Greater China operations in Hong Kong. He holds a Master of Information Technology from the University of Melbourne and a Bachelor of Commerce (Accounting & Finance) from Monash University.

Mark Joiner - Independent Chairperson

Mark is an experienced director of listed companies, currently serving as a non-executive director of Latitude Financial Services and Chairman of QBE Insurance Group Limited’s Australian and New Zealand subsidiaries. He has also held multiple directorships at NAB Group subsidiaries, including Clydesdale Bank Plc and JBWere. Mark served as Executive Director of Finance for NAB Group; CFO and Head of Strategy and M&A for Citigroup’s global wealth management business in New York; and Associate Director of Australian Ratings (now Standard & Poor’s). He also has 15 years of experience as a management consultant at Boston Consulting Group including as Senior Vice President, Global Head of Corporate Development. Mark is a Chartered Accountant and holds an MBA from the Melbourne Business School.

Helen Silver AO - Independent Non-Executive Director 

Helen Silver has extensive experience as a non-executive director covering ASX listed, private company, not for profit and Government boards. As well as serving as a director of PEXA, Helen is currently an independent director of Crown Melbourne Limited, Deputy Chair of the Victorian Managed Insurance Authority and Chair of the Australian Children’s Television Foundation. In addition to her corporate success, Helen has worked at the highest levels of Commonwealth Government with the Productivity Commission, and Victorian Government in roles primarily in the Premier’s and Treasury portfolios, including as Secretary of the Victorian Department of Premier and Cabinet from 2008 to 2013. Ms Silver holds a Bachelor of Economics with Honours, Master of Economics and Honorary Doctor of Laws, all from Monash University.

Melanie Willis - Independent Non-Executive Director

Melanie has extensive experience as a non-executive director, including Challenger Limited since December 2017, Southern Cross Austereo since May 2016 and the Australia Pacific division of QBE Insurance Group Ltd since September 2020. Melanie was previously a non-executive director of Mantra Group and Pepper Group, Chief Executive Women and Chair of the Education Committee of the 30% Club. Melanie also serves as a non-executive director of PayPal Australia. Melanie has held executive roles as CEO of NRMA Investments (and head of strategy and innovation), CEO of a financial services start-up and director of Deutsche Bank, and has previously worked in corporate finance at Bankers Trust and Westpac. Melanie previously chaired the audit and risk committee at Mantra and was a member of the audit committee at Pepper Group. She currently chairs the risk committee and is a member of the audit committee at Challenger, chairs the audit committee and remuneration committee at PayPal Australia, chairs the risk committee at QBE AusPac, and chairs the audit and risk committee at Southern Cross Austereo. Melanie has a Bachelor of Economics from the University of Western Australia and Masters of Taxation from Melbourne University

Vivek Bhatia - Independent Non-Executive Director

Vivek is the current Managing Director and Chief Executive Officer of the Link Group.Vivek has over 20 years of experience in financial services, government and management consulting. Prior to joining Link Group, Vivek was Chief Executive Officer of the Australia Pacific division of QBE Insurance Group Ltd, and the inaugural Chief Executive Officer and Managing Director of iCare (Insurance and Care NSW). Prior to this, Vivek co-led the Restructuring and Transformation (RTS) practice at McKinsey & Company across Asia Pacific and held senior executive roles at Wesfarmers Insurance, including responsibility for leading the Australian underwriting businesses of Lumley, WFI and Coles Insurance as CEO, Wesfarmers General Insurance Limited (WGIL). Vivek holds an undergraduate degree in engineering, a post graduate degree in business administration and is a CFA (ICFAI).

Paul Rickard - Non-Executive Director and Commonwealth Bank of Australia Nominee Director

Paul served as a non-executive Director of PEXA from November 2011 to November 2018, joining the Board about twelve months after the company’s formation. Paul is an experienced director of listed companies, currently serving as a non-executive director of Tyro Payments Limited and WCM Global Growth Limited. At Tyro, he is the Chair of the Audit Committee and the Chair of the Risk Committee. He has more than 30 years’ experience in the financial service industry. He was a senior executive with the Commonwealth Bank of Australia for over 15 years, and was the founding managing director of CommSec. Paul was named ‘Stockbroker of the Year’ and admitted to the Industry Hall of Fame in 2005. Paul holds a Bachelor of Science degree in Mathematics and Computer Science from the University of Sydney, and a Diploma in Financial Planning from RMIT University. 

Jeffrey Smith - Independent Non-Executive Director

Jeffrey Smith is an experienced executive who has worked at the highest level in the technology and digital transformation space. Jeffrey is currently an Independent Non-Executive Director at ANZ Group Holdings Ltd (ASX: ANZ) and serves as a member of several board committees, including its Digital Business and Technology Committee, Risk Committee, Human Resources Committee, and Nominations and Board Operations Committee. He is also a Director of Sonrai Security Inc. Prior to this, Jeffrey was a senior executive within global and technology organisations including Telstra, Honeywell, Toyota, IBM, Suncorp and World Fuel Services Corporation.

Georgina Lynch - Independent Non-Executive Director

Georgina Lynch has over 30 years combined executive and board experience in the property and financial services sectors, including significant experience across all classes of property and in corporate transactions, capital raisings, initial public offerings, funds management, corporate strategy, and mergers and acquisitions. Georgina is currently: Chair of Cbus Property and a member of its Audit, Risk, Compliance & ESG Committee and Remuneration Committee; Chair of Waypoint REIT and Chair of its Nominations Committee; an Independent Non-Executive Director of Vicinity Centres and a member of its Audit & Risk Committee and Remuneration Committee; and a Non-Executive Director of Evolve Housing, a community housing provider, and a member of its Audit and Risk Committee. She was previously on the Boards of Tassal Group (from 2018 to 2022) and Irongate Group (from 2019 to 2022) until their takeovers. Georgina holds a Bachelor of Arts and Bachelor of Laws degree, BA,LLB; Grad Dip Legal Practice

Sympli, the ASX-backed property settlement provider that has fought for years to connect with the banks and break a PEXA monopoly on conveyancing services, has conceded that this is unlikely and proposed giving up that business and work with its larger rival instead.

.....

Governments had wanted PEXA to open up to interoperability by December 2021. That was delayed, and planning eventually stopped last year.

“The interoperability system is more complex and expensive to deliver than first expected, and timelines and costs are continuing to blow out,” PEXA wrote in a submission to a parliamentary inquiry in March. “Interoperability will not promote greater innovation because it has emerged that standardisation is essential to the effectiveness of back end functionality.”

In response to Sympli’s push to set aside the interoperability plan for now and focus on the practitioner first mode, a PEXA spokesman said it was “not the role of competitors to engage in discussions about the regulatory structure of an industry which would have commercial implications for both businesses”. “If the regulator or any state government seek to consult on alternative models, we would be happy to engage,” he said.

Many in the industry remain supportive of Sympli, and are hoping state governments continue to push for full interoperability.

“The Law Council of Australia is in favour of competition between electronic lodgement network operators and considers interoperability to be a non-negotiable feature of the e-conveyancing market,” said the council’s president Juliana Warner. “Interoperability as part of true competition will unlock solutions to the practical impediments to lower cost conveyancing.”

Warner said competition between Sympli and PEXA would, in her view, put pressure on prices and “stimulate innovation”.

Similarly, Shakila Maclean, the president of the Australian Institute of Conveyancers’ Victorian division, said allowing Sympli to compete with PEXA would help lower costs for consumers, “similar to how opening up the telecommunications industry in the 1990s led to better prices and services”.

“It’s time for government to put practitioners first and enable choice for the industry while also safeguarding registry concerns around cybersecurity.”

In its parliamentary inquiry submission, PEXA claimed full interoperability would only deliver a $10 million benefit every year, “a very small return”.

Others, like the NSW productivity commissioner Peter Achterstraat, disagree. Achterstraat, a former auditor-general, last year described “the lack of competition in the e-conveyancing sector is one of the most important issues that government can still correct”.

Some thoughts on PEXA, as I at least have some experience with it and I’m not intelligent (or yet confident enough) to attempt a valuation that might withstand even meagre scrutiny.

My experience is from Queensland, potentially and probably differing from other states, and any terms like “monopoly” are in reference to such.

I have recently been admitted to the legal profession and have had a couple of years experience as a law clerk in different firms. Rather often, I will be pondering investment opportunities at my desk (he says, also pondering his own career choice) and have considered some of the companies that appear to be the dominant players in the legal space.

LEAP and Infotrack are both privately owned by some wealthy individual, I believe. For those who don’t know, LEAP is basically the home app for your law firm - storing all the matter info, client details, documents, correspondence - literally anything and everything. Infotrack, from my understanding, is just a data seller (if you can imagine an ASX type company that sells up-to-date info at a premium) - absolutely essential if you need to get an accurate title or business address, for example.

I would absolutely love to get a piece of them, considering LEAP is pretty much a monopoly here already, as far as I can tell, and you need to pay Infotrack all the time for property searches, company searches, etc. Ultimately, if you want to run an effective and competitive firm, then these are essential. But alas, they are off the public picnic table.

Hence, my thoughts lead me to PEXA. Pretty much every firm I have ever encountered uses PEXA for their property settlements. I have heard of other platforms, however, I have never seen them in operation.

“Conveyancing” is basically the legal term for facilitating the purchase and sale of a property. Conveyancing was once a completely in-person experience but has recently moved digital. Unless you’ve done a private paper sale, if you’ve bought or sold property recently, then your agent/lawyer has probably used PEXA.

My area is not conveyancing, but I have seen it in action over the years. As far as I can tell, PEXA pretty much acts as the middle-man platform between the buyer and seller, then clips the ticket for the transactions that it facilitates, meaning you’re probably paying their fee as the seller/purchaser - a bit like those pesky real estate agents @Strawman

Could be wrong here, but that means its success is tied more to the amount of property transactions, as opposed to whether the property market overall does “well”. 

This kind of business feels like the type that could become (for better or worse) extremely entrenched in “the system”. Everything is moving digital. I cannot for the life of me understand it, but the courts are only just now starting to think about rolling out electronic filing for District and Supreme Court matters. 

At this stage, if you want to file documents in anything above the Magistrate’s Court (small matters court), you must physically take the physical paper documents into the court to file. Or, if you live hours away from the Supreme Court, like me, you pay a Process Server to file it for you - a business model which ultimately looks destined to die with further digital inclusion. The court will not accept electronic filing as of yet, but it seems inevitable.

Anyway, back to PEXA, no one does paper settlements anymore in practice. You might do them out of necessity, but it’s just not very practical or efficient, ever, unless you wind up in a firm that is primarily hard-copy, which do still exist, believe it or not. I don’t know the numbers, but I imagine the majority of settlements now are done through PEXA in Australia. 

It seems like PEXA could become a very stable business. Again, don’t know why, but the “higher tier” jobs - doctors, lawyers, etc. seem to be the most resistant and sluggish in adopting new technologies/processes. If a firm has spent considerable resources training and implementing PEXA into their system, then they will probably keep it on so long as it works.

It’s one of the only, and most popular, electronic settlement platforms that is historically proven and government trusted - so why change?

You would change - if the competitor’s product was many magnitudes greater/cheaper - but they aren’t, and I doubt they will be any time soon (could very well be wrong).

However, it seems rather difficult to improve much further here, considering all PEXA has done is take the required physical property settlement and move it digital. If the intermediary is always required to facilitate a property transaction, then the next logical evolution is … maybe metaverse/neural-link residential property settlements…?

What a time to be alive.

This leads me to my main question/concern - the potential growth of the business. 

If this business is already (which I would humbly argue it is) the winner (at least in AUS and UK) then is there much growth left remaining? Does this business seem likely to have an international scale potential? One thing to keep in mind also, this kind of business will likely only have any sort of “interoperability” with markets that share, or are similar to, the Australian legal system. Probably why the UK market and AUS market have been so successful - because Australia’s legal system is basically derived from English law.

I don’t think it would be possible for PEXA to ever expand into countries that have a differing notion of property rights, as the systems simply would not mesh well. Ultimately, this could likely even rule out countries like the U.S. that, although share our general political sentiments, have an entirely different system of law. Perhaps this means PEXA’s total growth is limited to only Commonwealth countries (and probably far fewer than that)? Either way, there is a certain extent to its growth, given the differences in human political ideology.

A final note, I would have thought the increased adoption and almost monopoly of this business would’ve equated to an increase in share price. Not yet. Listing back in 2021, down roughly 20%. Is this because of the lofty valuation in beginning, lack of attention at present, future growth already priced in, something else…?

For a quick summary:

• For anyone to buy/sell property they have to adhere to legal considerations (regarding the actual transfer process) and PEXA basically handles this.

• PEXA seems to profit from property transactions - irrespective of whether the property market does poorly or well (the main point I am very uncertain about).

• From my own personal and professional experience, PEXA seems to be the dominant (and arguably essential) provider of electronic settlement services.

• Does this dominance come from any sustained competitive advantage or is it simply the sluggishness of government and the legal system. Further, if the sluggishness of the legal system is something we can count on - is this not good for PEXA?

• Can PEXA continue to grow into other jurisdictions and, if not-
• -does this make the company unappealing or simply less attractive for its future prospects?

• (rambling final) Is this just some strange combination of a less than mediocre business with network effects (by virtue of everyone using the service) and switching costs (by virtue of the industry that they are in) - making it like a bastardised double positive, wherein it actually becomes a negative, because both of these moats are simply a result of uninspired coopetition and regulatory advantage? In other words, what PEXA has is great, however, anyone could do it and the only reason they are winning is because they moved first and in correct manner (but may not necessarily have any sustainable edge).

I suppose I just wanted to see if anyone else has had any personal experience with PEXA as few seem to cover it despite its widespread usage in practice.

Ultimately, if I bought some shares in this thing and held it until I had grandkids, I would think it somewhat likely that the business survives in some form, considering the stickiness of the industry … but is there enough growth left or will it simply become a potential dividend payout depending on the amount of property transactions that happen year to year?

Would very much appreciate a discussion on PEXA as my understanding of it as a business/financial metrics is relatively limited.

Cheers.

Forgive me if this has been covered here previously.

For some time there has been a push to encourage those operating in the electronic conveyancing lodgement arena to get together and make sure their systems can interact in what I understand might be similar to how the banks work together, when their customers transfer funds. This is referred to as "interoperability".

The Australian Registrars’ National Electronic Conveyancing Council (ARNECC) has been charged with this task. They have conducted test runs and were due to roll out in QLD & NSW. My reading of this is that the implementation of this interoperability was designed to encourage competition in the market. Giving other Electronic lodgement network operators (ELNOs), companies like Sympli and Lextech Pty Ltd, a greater opportunity to participate alongside Pexa.

Then on 26 June 2024 in an ann. to the ASX Pexa advise:

"ARNECC advised industry that the interoperability program has been paused, and they are in the

process of standing down their project team."

This reads to me as: The powers that be, are throwing out the interoperability plans and Pexa's near monopoly status remains intact. Competition will not be fostered, at least using this mechanism.

For those who have been following PXA is that a fair assessment of the situation?

Pexa is an interesting company, I started my initial research and documented the current situation: https://www.growthgauge.com.au/p/pexas-asx-pxa-strategic-position

Will do follow up after FY24 result.

The Australian - PEXA back on radar for private equity including Thoma Bravo | The Australian

Property Exchange Australia is once again back in focus for technology investors, with US private equity firm Thoma Bravo said to have been assessing the business for a potential takeover play.

It is understood PEXA has been on Thoma Bravo’s radar as executives look at a range of opportunities in Australia. It has also been eyeing other targets such as Iress.

Pexa’s share price has come off the boil of late, down to $11.42, with its market value at $2.1bn after the stock traded over $13 a month ago. When Pexa listed in 2021, its share price was around $17.

Thoma Bravo is understood to count Jarden as its adviser as it assesses a number of tech companies listed on the local market.

The digital real estate settlements business PEXA has caught the attention of suitors off and on over the years, with the company receiving calls from investment bankers on behalf of clients interested in an acquisition of the business.

A year ago when buyers were around the hoop, it was considered expensive at over $13. When a sale process was run for a stake in PEXA during 2021, there were 17 parties that signed nondisclosure agreements to enter a data room to buy the assets.

Kohlberg Kravis Roberts offered more than $3bn for the business, including debt, but it was instead listed with a $3.3bn value.

PEXA was also earmarked for a float in 2018 before it was purchased by Link Administration and its backers, its value was $1.8bn or $2.2bn including debt.

PEXA could be considered a monopoly asset, largely dominating the online property conveyancing market, and private equity firms and infrastructure investors are always on the lookout for such opportunities.

Along with Thoma Bravo, groups such as KKR and EQT Infrastructure are the typical candidates to move on such companies.

I stumbled across Pexa in one of those many fund manager recommendations on Livewire and decided to do some research. To my great surprise the company wasn’t covered at all on Strawman, although since I started this research note I see that @momo3173 has beaten me to it. 

(I am indebted to the AFR for much of this research.)

What does Pexa do?

PEXA (Property Exchange Australia Ltd.) is an Electronic Lodgment Network Operator (ELNO). ELNOs provide the means for transacting parties or their representatives to do away with the manual, labour- and paper- intensive property conveyancing process. The national electronic conveyancing system in Australia  is a world first and allows legal practitioners, conveyancers and financial institutions to electronically prepare and lodge land property dealings with title registries. Practitioners and financial institutions can also transmit settlement funds and pay associated duties and tax, removing the need to physically attend property settlements.

ELNOs are approved by the registrar in each state and territory to operate in that jurisdiction.

The e-conveyancing market has annual revenue of $270 million in Australia, and PEXA has an 80% share of this market. It is in a near monopoly position (but that is about to change).

Transaction revenues are expected to increase in mid-single digits each year.

The core product is PEXA Exchange.

“The majority of land transactions in Australia now occur on the PEXA Exchange”.

“COVID-19 has brought renewed focus and urgency to the digitisation of property settlements”.

PEXA Exchange is integrated with the State Revenue Office and Land Registry in each state, and also with the RBA. It is used by 9400+ practitioners and 160+ financial institutions. Doubtless in recognition that the Australian market growth is going to be anaemic going forward, and that competition may start to steal market share, PEXA is developing a new product to support property settlement in international markets, starting with the UK. This will require integration with the Land Registry and the Bank of England, as well as onboarding UK financial institutions, so it will probably be 2023 before PEXA is able to tick all the boxes with these government agencies and start earning revenue. The UK market is three times as big as Australia, so to build a business the same size as the Australian exchange PEXA would only need to capture a third of the market share. By its own admission, PEXA doesn’t expect to start building significant transaction volumes in the UK until 2024.

PEXA has 350+ employees across Australia and the UK.

History and ownership

PEXA was established in 2010 after a COAG meeting of state governments and territories pledged to move from paper-based property settlements to an electronic system. PEXA entered development in 2011 (assisted by Accenture) and processed its first full property settlement in partnership with the Commonwealth Bank in 2014. Electronic settlement became so successful that by 2018 all states made the use of PEXA Exchange compulsory for conveyancers and lawyers.

PEXA joined the ASX on 1st July 2021 after an IPO which raised $1.174 billion at a price of $17.13 per share. Prior to this the ownership was split between Morgan Stanley Infrastructure, Link and CBA.

In the IPO, CBA increased its stake to 24% ownership, Link reduced its ownership from 44% to 42.8%, and Morgan Stanley sold out altogether.

Where does the revenue come from?

The primary revenue source is from land and property sales (81%), followed by property refinancing (13%). PEXA earns an average of $66 per transaction, and incurs a cost of $9 per transaction (mostly for fees paid to state land registries), resulting in a gross margin of 87%. Although PEXA offers a variety of other tools and apps to enable participants in property transactions to track progress, these seem to be part of the overall value proposition and do not attract additional revenues.

What about the management?

The PEXA CEO is former National Australia Bank executive Glenn King. He joined PEXA 2 years ago, after 7 years as a senior public servant in the NSW government. The COO Simon Smith joined a year later - he worked for 24 years in the NSW government so doubtless was well known to Glenn King. Richard Moore joined as CFO a few months after Simon Smith, and was previously CFO at MYOB. The new chairperson Mark Joiner joined in May this year, and also has a background working for NAB. James Ruddock the Chief Product & Digital Experience Officer is an old hand having been with PEXA for 9 years. John Natsioulas the GM of Technology is also an old hand of nearly 8 years, and has a background in performance testing rather than software development. There used to be a CTO but that position seems to have been retired.

Competition and interoperability

Sympli, jointly owned by stock exchange operator ASX Ltd and Infotrack, is the most advanced rival to PEXA. However, although it has been approved as an ELNO it is still in a pilot phase.

PEXA has had a multi-year headstart on competition and currently offers the best functionality and customer experience. This is evident from its Net promoter score of +55 and brand trust score of 8.7 – both industry-leading. Additionally, the company is able to process more transfers than any other competitor.

However the days of this monopolistic position appear to be numbered, with pressure from industry bodies and the ACCC to allow multiple ELNOs to interoperate, so that a buyer’s conveyancer might use PEXA for example whilst the seller’s conveyancer might use Sympli. This is not possible today.

PEXA now appear to be vocal supporters of interoperability, on the basis that what is good for the industry is good for them. However 3 years ago in a different political environment the company was still fighting hard to preserve its monopoly:

" We doubt it will be feasible or efficient for consumers to complete transactions across more than one ELNO, and there would be many practical and legal obstacles that would be extremely difficult to overcome.  The legal framework governing ELNOs, the liability models in place, and the critical security requirements for the $7 trillion residential property assets nationally, are not compatible with this approach."

The target for implementation of the interoperability model is the end of 2021, but it seems like most observers expect it to be the end of 2022 before other ELNOs can operate on a level playing field with PEXA.

Rather astutely, PEXA has used it's experience as the dominant ELNO to propose how the interoperability model should work, and this proposal has been signed off by state and federal governments. In this model PEXA retains a key role as a hub which controls the exchange of data with state records offices, financial institutions and the RBA.

Financials

2021 results:

Revenue $221m (+42%)

EBITDA $102m (+124%)

NPAT -$12m (+600%)

Adjusted loss $5m

3.3m property transactions (+37%)

After taking into account research & development expenses, free cash flow (FCF) is $85m.

The large difference between EBITDA and NPAT seems to be due mostly due to repayment of some shareholder loans ($36m) and amortisation of ‘acquired intangibles’ ($57m).

General and Administration is the largest cost item at $53m (+43%), followed by product development at $24.5m (+13%) and sales and marketing at $20m (-10%). 

Revenue forecast for FY22 is $247m (+12%) - this seems to be very conservative given revenue growth of 42% in FY21. EBITDA forecast is $108m (+6%) and NPAT forecast is  -$2.5m.

Growth Drivers

There are three growth drivers called out by the company:

• Expansion into other markets (with the UK - England and Wales - being the first cab off the rank);
• Providing data insights - developing products and services to generate data insights for real estate agents, conveyancers, vendors and home buyers;
• Incubating new ‘digital property products and services’.

The latter two sound rather fanciful - expansion of the core property exchange platform into new markets is the most likely source of growth in the medium term (2-3 years).

Risks

• Perhaps the biggest risk is that once interoperability becomes a reality,  Sympli will steal market share by undercutting PEXA. Sympli claims their pricing is ‘15% to 50%’ lower than other ELNOs - and PEXA is the only other ELNO. However, the fees charged to use an e-conveyancing platform are paid by real estate buyers and sellers rather than the firms which choose and use the platform on their behalf. This means price-based competition is unlikely to impact the choice of platform. Australia’s largest mortgage provider, the Commonwealth Bank, is PEXA’s second largest investor with a 24 per cent stake and is unlikely to defect from its platform.
• Expansion into the UK could fail to deliver profits. It requires substantial uptake of e-conveyancing in the UK, where it is not mandated by the government, and previous attempts to introduce a digital property exchange in the UK have failed, twice. When the Land Registry piloted an e-conveyancing platform in 2006, for example, it eventually dropped the scheme after failing to get enough take-up. The Law Society had a go in 2015, but its scheme foundered too.
• PEXA appears to be a technology company, but is it really? The Exchange platform was developed with the help of Accenture, and the international platform is being built with the help of ThoughtWorks in the UK . It sounds like there isn't a strong development capability in-house. 
• There seems to have been a clear out of senior management leading up to the IPO, and I find the fact that the CEO, COO and chair all have form with NAB a bit disconcerting. NAB are well known for their disastrous foray into the UK.

Comparables

ASX would seem to be the most similar company to PEXA on the ASX.

PXA Enterprise value $3.15b, revenue $221m, EV/revenue 14.25

ASX Enterprise value $10b, revenue $962m, EV/revenue 10.4

Conclusion

PEXA needs to be a technology innovator to experience significant growth, and it just doesn’t feel like it is one to me. I expect the share price to go nowhere for 2-3 years, and there are no dividends in sight either, so I won’t be adding it to my RL or SM portfolio.