This unknown Canadian tech inventory is a purchase, analyst says

In a March 26 report, Ventum Capital Markets analyst Amr Ezzat maintained his “Purchase” ranking on Pc Modelling Group (Pc Modelling Group Inventory Quote, Chart, Information, Analysts, Financials TSX:CMG) and raised his goal value to C$6.75 from C$6.50 after the corporate introduced the acquisition of Rose Subsurface Evaluation, a Houston-based supplier of probabilistic subsurface danger evaluation software program, coaching and consortium companies.

Ezzat stated the US$9.8-million upfront deal, with a possible earn-out of as much as US$2.5-million, seems strategically coherent as a result of it pushes CMG additional upstream within the exploration and manufacturing workflow. Rose generated about US$6.8-million in trailing-12-month income, greater than half of it recurring, implying a purchase order a number of of about 1.4x gross sales, or roughly 1.8x together with the earn-out. On a professional forma foundation, he stated the acquisition provides about 7% to eight% to CMG’s roughly $125-million income base.

Ezzat stated the deal suits CMG’s broader M&A playbook of shopping for technically adjoining, recurring-revenue belongings at affordable valuations. He stated Rose fills a front-end hole in CMG’s rising subsurface software program stack, extending the corporate’s workflow from danger evaluation by means of seismic information and AI, interpretation and reservoir simulation.

“Whereas modest in measurement, it is a strategically coherent transfer,” Ezzat stated. “Rose expands CMG additional upstream within the E&P workflow, filling a spot on the entrance finish of its subsurface software program stack.”

He additionally highlighted Rose’s consortium construction as a key differentiator, noting that a few of its operator consortiums have run for greater than 20 years and embrace greater than 30 members contributing information and taking part in benchmarking workout routines. In Ezzat’s view, that creates a sticky, institutional income base and a proprietary calibration dataset constructed over many years. He stated that makes Rose greater than a typical consulting enterprise and offers CMG a extra sturdy platform for monetization over time.

On valuation, Ezzat stated the acquisition is being accomplished at a reduction to CMG’s personal buying and selling a number of of roughly 2.2x gross sales, suggesting income accretion from day one. Whereas profitability metrics weren’t disclosed, he estimated Rose’s EBITDA margins are probably within the mid-teens, broadly in keeping with the entry level for prior acquisitions. He stated the bigger alternative is in combine shift, as coaching and consulting relationships transfer towards higher-margin software program adoption and create room for margin enlargement over time.

Ezzat stated Rose’s roughly $9.3-million in income is financially small however strategically additive, with the upfront consideration representing lower than 5 per cent of CMG’s market capitalization. He added that CMG exited the third quarter of fiscal 2026 with about $23.7-million in money and an undrawn $100-million credit score facility, leaving the steadiness sheet able to proceed executing on acquisitions.

He stated the transaction reinforces CMG’s M&A story, however just isn’t the principle near-term catalyst for the inventory. As a substitute, he pointed to the anticipated Shell transition on the finish of This fall/F26 because the extra necessary occasion, with the potential to drive a step-change in recurring income and margins.

“Close to time period, the affect is modest, and there could also be some margin dilution given the probably beginning profile of the enterprise,” Ezzat stated. “Long run, the chance is extra compelling.”

For fiscal 2027, Ezzat stated he’s rising his income estimate by about $10.0-million and his EBITDA estimate by about $1.5-million to mirror the contribution from Rose, whereas arguing that this probably represents solely a baseline contribution as a result of the upside from cross-selling and higher-margin software program adoption just isn’t but absolutely captured in his forecasts.

Ezzat stated that CMG ought to publish $34.6-million in Adjusted EBITDA on income of $124.9-million in fiscal 2026. he stated these numbers will enhance/deteriorate to $36.3-million on income of $134.2-million in fiscal 2027.

Pc Modelling Group, integrated in 1996 and headquartered in Calgary, develops and licenses reservoir simulation software program utilized by oil and gasoline producers to enhance hydrocarbon restoration. The corporate has about 550 purchasers in 60 international locations and roughly 300 workers.

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