DUG Technology — Awarded material software contract

DUG Technology (ASX: DUG)

Last close As at 02/09/2025

AUD1.96

−0.02 (−1.01%)

Market capitalisation

AUD267m

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Research: TMT

DUG Technology — Awarded material software contract

DUG Technology has been awarded a significant contract with Petronas to provide software and HPCaaS services for a minimum three-year term. After paying a managed services partner to undertake part of the contract, the net minimum contract value of $18.2m is equivalent to c $6m revenue per annum. We have upgraded our forecasts factoring in a small contribution in FY26 before run-rate revenue is reached in FY27.

Katherine Thompson

Written by

Katherine Thompson

Director

Software and comp services

Contract award

3 September 2025

Price AUD1.960
Market cap AUD264m

Net cash/(debt) at end FY25

$(17.4)m

Shares in issue

134.7m
Free float 79.1%
Code DUG
Primary exchange ASX
Secondary exchange N/A
Price Performance
% 1m 3m 12m
Abs 54.1 58.4 (36.7)
52-week high/low AUD3.2 AUD0.9

Business description

DUG Technology provides geoscience data analysis, imaging and interpretation services and software, as well as high-performance computing-as-a-service (HPCaaS).

Next events

Q126 business update

End October

Analyst

Katherine Thompson
+44 (0)20 3077 5700

DUG Technology is a research client of Edison Investment Research Limited

Note: EPS is diluted.

Year end Revenue ($m) EBITDA ($m) PBT ($m) EPS ($) DPS ($) EV/EBITDA (x) P/E (x)
6/24 65.5 16.6 8.0 0.02 0.00 11.4 56.2
6/25e 62.6 15.4 (1.4) (0.03) 0.00 12.3 N/A
6/26e 76.8 25.6 9.0 0.05 0.00 7.4 27.8
6/27e 87.5 31.6 15.6 0.08 0.00 6.0 16.0

Software & HPCaaS contract win with Petronas

DUG has announced that it has signed a letter of award (LoA) with Petronas Digital, a subsidiary of Malaysia’s national energy company. Under the terms of the LoA, DUG will provide Petronas with dedicated compute and storage capacity as well as access to its full DUG Insight processing and imaging software, which includes elastic multi-parameter full waveform inversion imaging. Petronas’s technical teams will be able to use this to perform advanced sub-surface processing and imaging workflows as well as to host third-party applications. DUG is partnered with Cegal, a Norwegian software and consulting services business specialising in the energy sector. Cegal will be responsible for delivering the managed services scope of the contract.

Upgrading forecasts

The LoA has a term of three years with an option to extend for a further two years at Petronas’s discretion. The minimum total contract value is $23.8m with further upside potential once the scope is finalised. Of this, $5.6m will be payable to Cegal. The project is expected to be delivered in phases through the remainder of CY25 and to be fully commissioned around Q1 CY26. This is subject to signing the formal contract, which is expected by the end of the month. The net minimum contract value of $18.2m is equivalent to annual revenue of c $6m over the three-year term. We have upgraded our FY26 revenue forecast by 2.8% and FY27 by 5.9%, resulting in EBITDA upgrades of 8.2% in FY26 and 16.5% in FY27.

Valuation: New contract drives upside

Based on our upgraded forecasts, a WACC of 9.6% and a long-term growth rate of 2%, using a reverse discounted cash flow analysis we estimate the share price is only factoring in modest growth of 4% for FY28–35 and a drop in the EBITDA margin to 31%. Using still conservative growth of 5% for FY28–35 and a margin of 36.1% over the same period (flat versus FY27), we estimate that the valuation would increase to A$2.64 per share (up from A$2.15). This does not include any contribution from DUG Cool (revenue would drop through at a close to 100% margin) or DUG Nomad.

Changes to forecasts

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