Dubai: The Salik IPO has been oversubscribed by more than 49 times, confirming the strong retail and institutional interest in the Dubai toll-gate operator's float. The company had sold its shares at Dh2 apiece and will list on DFM on September 29, marking the third Dubai enterprise to take the journey.
The retail investor tranche alone generated a 119 times over-subscription inflow. The IPO reportedly hit oversubscription on Day 1 of the opening.
On listing, Salik will have a market cap of Dh15 billion ($4.1 billion ). This also sets up the next IPO emerging from within the ranks of Dubai Government owned enterprises, enroute to a market cap of Dh3 trillion for DFM.
Total demand for the IPO - the size of which was increased from 20 per cent earlier - generated more than Dh184.2 billion ($50.2 billion). The 'Qualified Investor' tranche representing institutional investors - attracted demand from 'across the globe' of Dh149.5 billion implying oversubscription of 43x. (Excluding the cornerstone investors, the oversubscription stands at 52x).
The retail offering collected Dh34.7 billion, implying oversubscription levels of 119x. "The overwhelming investor demand underlines the company’s compelling investment proposition as the exclusive toll operator of Dubai," said a statement.
“This reflects the trust and confidence from the global investor community in Dubai’s capital markets and the strong position of the company as Dubai’s exclusive toll gate operator, in addition to its effective regulatory framework and robust business model, which will enable the Company to continue to remain at the heart of expansion plans in the road and transport sector, in support of the Emirate’s economic growth," said Mattar Al Tayer, Chairman.
With gross demand of Dh184.2 billion, the IPO's success is a huge win for the UAE markets
Of course, the mention of all of the profits being set aside for dividends was another heavy scoring opportunity. And raising the issue size to 24.9 per cent added fuel to the need for investors to get in.
The retail investor tranche was oversubscribed 119 times - and that tells the whole story. By itself.
"With gross demand of Dh184.2 billion, the IPO's success is a huge win for the UAE markets," said Vijay Valecha, Chief Investment Officer at Century Financial. "One of the primary reasons for such a response is the entire legacy and brand value behind Salik. The company is at the heart of the city's economic expansion plans.
"Financially also, the company has shown a historical EBITDA margin of 82 per cent. Other factors that make this IPO attractive include 100 per cent payout ratio and also the scope and power to raise prices."
Widening the revenue stream
The company, going forward, intends to add new revenue creating ways, including deploying vehicle user data to provide targetted promotions from third-party entities. Another way would be to use Salik's extensive knowhow through the years in helping other cities in the region plan their own road toll operations.
Plus, organically, the road infrastructure within Dubai itself is growing and so will the number of vehicles on the road. More toll gates, subject to government approval, and higher tariffs - through 'surge pricing' at peak usage times - too would be part of the future revenue mix.
“This listing is a key step in Dubai’s privatisation programme and its broader plans to attract foreign investment," said Ibrahim Al Haddad, CEO of Salik. "Having kept Dubai moving for 15 years, Salik is at the heart of the city’s economic expansion plans. The IPO builds on the company’s legacy, and we are pleased to have seen strong demand for Salik shares both from local and international investors.”
After initially planning a 20 per cent float, Salik raised the size to 24.9 per cent totalling 1.86 billion at Dh2 apiece.
The Dubai Government will retain 75.1% of Salik’s post-IPO capital.
The UAE Strategic Investment Fund (through Emirates NBD AM SPC), Dubai Holding, Shamal Holding, and Abu Dhabi Pension Fund represent the cornerstone investors”. They collectively subscribed to 16.2% of the offer.
These cornerstone investors’ shares must go through a 180-day lock-up arrangement, following the listing on September 29.
In accordance with the Companies Law and Dubai Law, 5 per cent was reserved for to Emirates Investment Authority, and another 5 per cent to the Pensions and Social Security Fund of Local Military Personnel.