Dubai: Salik’s IPO is off to a good start, with a Dh606 million buy-in from four big investors. These ‘cornerstone’ investors are UAE Strategic Investment Fund (through Emirates NBD AM SPC), Dubai Holding, Shamal Holding and The Abu Dhabi Pension Fund.
And Salik has left open the possibility that it would increase the size of the offering from the current 20 per cent. Earlier, DEWA had done so with its IPO, while Tecom held the line from an increase. (The IPO subscription closes on September 20 for UAE retail investors and a day later for qualified investors.)
The kind of build retail investor interest is having for a Salik share should convince Dubai’s toll-gate operator to go down the ‘road’ of a size increase, market sources suggest. For now, Salik is focussing on the first day of subscriptions opening and plugging into the demand. In other words, buying into Dubai’s own growth story.
“Salik plays a leading role in Dubai’s urban development plans,” said Ibrahim Sultan Al Haddad, CEO. “The growth of the city is in tandem with the growth of Salik, and this offering represents an exciting opportunity for investors to be a part of that journey.
“We are delighted by the strong interest we have received since announcing our intention to float. As a technologically advanced core infrastructure asset positioned to benefit from Dubai’s expansion plans, and given its unique capex-light business model, we believe Salik represents an attractive investment proposition for both institutional and retail investors."
And that's a narrative that should play quite well in the current market environment. "Salik is a defensive story with stable cashflow and tied to the population growth and tourist flows in Dubai," said Aarthi Chandrasekaran, Director, Investments at Shuaa Capital.
Given the current rising interest rate environment and recent IPO performance, we expect Salik's valuation to be more generous, reflecting more than 6 per cent dividend yield.
"Salik is a defensive story with stable cash flow and low single-digit growth and is tied to population growth and tourist flows in Dubai. Given the current rising interest rate environment and recent IPO performance, we expect Salik's valuation to be more generous, reflecting more than 6 per cent dividend yield. For us as fund managers, the new IPOs in the UAE are extremely encouraging as they provide needed sector diversification, away from real estate and banks. Nevertheless, the price of the IPO is a key factor in deciding between an allocation to the primary or secondary market."
"For us as fund managers, the new IPOs in the UAE are extremely encouraging as they provide needed sector diversification, away from real estate and banks. Nevertheless, the price of the IPO is a key factor in deciding between an allocation to the primary or secondary market."
Retail interest for Salik is already strong and we may see the tranche (representing 8% of the offer) being oversubscribed on the first day itself. This indicates a healthy appetite for cashflow yielding assets
Who's eligible under which 'tranche'
• Individual and other investors in the UAE representing ‘First Tranche’ subscribers;
• Certain eligible employees, who make up the ‘Third Tranche’ subscribers; and
• Professional investors and other investors from a number of countries, who make up the ‘Second Tranche’ subscribers.
And then there are the cornerstone buyers. "It’s heartening to see that pension funds from Dubai and Abu Dhabi have been cornerstone investors, indicating that the structure of savings schemes for employees are on a sounder footing with the emphasis on dividends," said Sameer Lakhani, Managing Director at Global Capital Partners. "Retail interest is strong indicating that the small investor has the possibility of getting a healthy allocation. The structure if the financial markets in the UAE is transforming with the capital markets moving to the center of the growth engine."
* 5% will be for the Pensions and Social Security Fund of Local Military Personnel.