DUG Technology — Expansion of Petronas contract

DUG Technology (ASX: DUG)

Last close As at 19/09/2025

AUD2.63

0.16 (6.48%)

Market capitalisation

AUD333m

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Research: TMT

DUG Technology — Expansion of Petronas contract

DUG Technology has received the first purchase order associated with the contract award from Petronas earlier this month, for the first year of the three-year contract. The total net value of the contract is now expected to be $12m higher than originally disclosed, at c $30m. We have updated our forecasts to reflect the higher value, with FY26 EPS upgraded by 3.3% and FY27 by 6.0%.

Katherine Thompson

Written by

Katherine Thompson

Director

Software and comp services

Contract details

22 September 2025

Price AUD2.470
Market cap AUD333m

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 83.0 85.0 6.9
52-week high/low AUD2.6 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 14.2 71.7
6/25 62.6 15.4 (1.4) (0.03) 0.00 15.3 N/A
6/26e 79.0 27.5 9.3 0.05 0.00 8.6 34.3
6/27e 92.3 35.8 16.5 0.08 0.00 6.6 19.2

Petronas contract value expansion

On 2 September, DUG announced that it had been awarded a three-year contract with Petronas for an estimated total net value of $18.2m. On 16 September, the company received a purchase order for the first year of the contract for a total value of $14.9m, which includes $0.7m in one-off implementation and training revenue and $4.6m payable to managed services partner Cegal. The company anticipates that years two and three of the contract will be worth $14.2m each or $9.9m on a net basis. This will cover the use of DUG’s Insight software, dedicated compute and storage capacity, and the provision of dedicated geophysicists. We view the contract as a strong endorsement of DUG’s software, which incorporates the latest elastic multi-parameter full waveform inversion imaging.

Upgrading to reflect higher contract value

With a new total net contract value of $30.1m compared to $18.2m when initially awarded, we are upgrading our revenue and EBITDA forecasts. We also assume that the company will invest in additional hardware to support the HPCaaS requirements in the contract. For FY26, we lift revenue by 2.9% and EBITDA by 7.6%. For FY27, when the full run rate is reached, we upgrade revenue by 5.6% and EBITDA by 13.4%. After taking into account higher depreciation from the new hardware, our diluted EPS forecasts increase by 3.3% in FY26 and 6.0% in FY27.

Valuation: Contract expansion supports upside

Based on our upgraded forecasts, a WACC of 9.5% 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 3% and an average EBITDA margin of 37% for FY28–35. Using still conservative growth of 5% for FY28–35 and a margin of 38.8% over the same period (flat versus FY27), we estimate that the valuation would increase to A$3.01 per share (up from A$2.64). 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

We have factored in higher software and HPCaaS revenue, with a small additional element in services to reflect implementation and training at the start of the contract and dedicated geophysicist support for the length of the contract. We increase our capex forecast by $10m in FY26 to reflect additional compute and storage hardware to support the HPCaaS element of the contract. We currently model this is as being funded from cash resources, although we believe it is likely that asset financing will be put in place, as has been the case with previous hardware investments.

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