Online conveyancing platform Property Exchange Australia could become a listed company in five years’ time after expanding its services and revenue under private ownership, new owner Link Group managing director John McMurtrie says.
Link, which took ownership of PEXA this month in a $1.6 billion deal with CBA and Morgan Stanley, may look to spin it out through an initial public offering after building it up into a company with revenue of $200 million-$250 million, compared with $39 million last year, Mr McMurtrie said on Friday.
“There might be a time when it is right to IPO,” Mr McMurtrie told AFR Weekend after the company’s annual meeting.
“Over time, three, four, five years ahead, PEXA will emerge to be doing other things in that broad property ecosystem. Many of the things PEXA’s able to do would have been probably more difficult to roll out in a public environment. Now we’ve got three long-term patient investors who are not too fussed about how long this takes.”
PEXA’s previous owners, which included Link, had been progressing towards a float but abandoned that plan on October 25. Mr McMurtrie, whose company is the largest shareholder in PEXA with a 44.2 per cent stake, said the original valuation of PEXA was too high, notwithstanding the “choppy” financial markets that prevailed at the time of the attempted bookbuild.
“Had it come on the market at, say an original value of $1.8 billion to $2.1 billion, our assessment was that was a bit rich, even in a heady bull market,” Mr McMurtrie said.
Link, of course, played the weaker market to its advantage in the race for PEXA, by tipping half of its pre-existing stake in the company into the planned IPO, making the fundraising target required by brokers Morgan Stanley and Macquarie Capital too large for the weak market to support.
“We paid fair value at this point in time but we see good ongoing growth,” he said.
No ‘hard landing’
Mr McMurtrie said he did not think ongoing weakness in the residential property market would affect PEXA’s revenue as the proportion of transactions as a share of housing stock – apart from the brief period of 1990-91 when interest rates soared to 18 per cent – was historically constant.
“Even if property is going to be a bit soft, then you’ve got first home owners more able to buy now than there have been in the last five years,” he said.
“We don’t expect there to be a hard landing and we expect that transaction volumes will continue pretty much at the current level.”
PEXA’s new owner also took a swing at NSW Finance Minister Victor Dominello’s demand this week for interoperability between the platform and other rival services that may come along.
Mr McMurtrie said the property transaction chain was different from allowing consumers to transfer their mobile number between telephone providers.
“I don’t have a clue what the minister means about interoperability in the context of PEXA,” he said, when asked about Mr Dominello’s comments. “If we had some idea I could help you.”
At the AGM on Friday, Link said chief financial officer John Hawkins was retiring but would remain its representative on the PEXA board.
The registry services company suffered a 17 per cent vote against its remuneration report, after proxy advisers criticised the earnings per share hurdles set in the long-term incentive scheme for being too soft.
Mr McMurtrie dismissed the complaints. “We felt very strongly the technical arguments were not well-thought through and 83 per cent of our shareholders took the same view,” he said.