Shares of Salik, Dubai's toll operator, surged as much as 21 per cent as the company made its debut on the Dubai Financial Market on Thursday.
The company, which started trading under the ticker symbol “SALIK”, saw its shares jump to Dh2.41 in early trading on the DFM, giving it a market value of about Dh17.3 billion ($4.7bn).
Shares of the company settled 11 per cent above the listing price to Dh2.22 at the close of trading on Thursday.
Dubai's government sold more than 1.867 billion shares in the company, or 24.9 per cent, and had set its offering price at Dh2 a share, giving it an initial valuation of Dh15bn. The Dubai government retains 75.1 per cent of Salik’s existing share capital.
Salik raised Dh3.735 billion ($1.017bn) from its initial public offering this month and is the third listing in Dubai in 2022. The IPO was more than 49 times oversubscribed across all tranches, with total gross demand at Dh184.2bn.
The UAE Strategic Investment Fund, Dubai Holding, Shamal Holding and the Abu Dhabi Pension Fund are cornerstone investors in the IPO, with a total commitment of Dh606 million, representing 16.2 per cent of the offering. Cornerstone Investors’ shares are subject to a 180-day lock-up arrangement, following the listing.
"The overwhelming demand that we witnessed for the IPO is testament to Salik’s robust business model, as well as the fundamentals underpinning Dubai’s capital markets," said Ibrahim Al Haddad, chief executive of Salik.
Salik's offering is part of Dubai's plans to list 10 state-owned companies to increase the size of its financial market to about Dh3 trillion.
The emirate also plans to set up a Dh2bn market maker fund to encourage the listing of more private companies from sectors such as energy, logistics and retail.
Earlier this year, the Dubai Water and Electricity Authority raised Dh22.41bn from its IPO, making it the largest public float in the Middle East and Europe since Saudi Aramco went public in 2019.
Tecom, the operator of business districts in the emirate, also made its debut on the DFM in early July, having raised Dh1.7bn from its IPO a month earlier.
Salik is Dubai’s sole toll operator and currently has eight toll gates that use radio frequency identification technology throughout the emirate, where more than 60 per cent of commuters use privately owned vehicles.
Salik’s net toll traffic from 2013 to 2019 grew at a compound annual rate of 5.5 per cent, driven by Dubai’s expanding economy and population.
As of April 30, Salik had 3.6 million vehicles registered, of which 1.8 million were Dubai vehicles.
Dubai, home to 3.5 million permanent residents and with a daytime population of 4.5 million as of December, forecasts that its population will grow by more than 70 per cent from 2020 to 2040. The emirate expects to host 25 million visitors by 2025.
Salik expects to start paying dividends twice annually, in April and October of each fiscal year.
The company will pay a first dividend for the second half of 2022 by April 2023. It plans to pay 100 per cent of its net profit as dividends, after setting aside statutory reserves required by law.
Salik's revenue in the first half of 2022 increased 19 per cent to Dh944.9 million from the same period a year earlier.
Profit for the first six months of this year rose 26 per cent to Dh796.7m, from the same period a year ago.
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Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
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UAE currency: the story behind the money in your pockets
Profile of MoneyFellows
Founder: Ahmed Wadi
Launched: 2016
Employees: 76
Financing stage: Series A ($4 million)
Investors: Partech, Sawari Ventures, 500 Startups, Dubai Angel Investors, Phoenician Fund
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Company Profile
Name: Thndr
Started: 2019
Co-founders: Ahmad Hammouda and Seif Amr
Sector: FinTech
Headquarters: Egypt
UAE base: Hub71, Abu Dhabi
Current number of staff: More than 150
Funds raised: $22 million
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What is a robo-adviser?
Robo-advisers use an online sign-up process to gauge an investor’s risk tolerance by feeding information such as their age, income, saving goals and investment history into an algorithm, which then assigns them an investment portfolio, ranging from more conservative to higher risk ones.
These portfolios are made up of exchange traded funds (ETFs) with exposure to indices such as US and global equities, fixed-income products like bonds, though exposure to real estate, commodity ETFs or gold is also possible.
Investing in ETFs allows robo-advisers to offer fees far lower than traditional investments, such as actively managed mutual funds bought through a bank or broker. Investors can buy ETFs directly via a brokerage, but with robo-advisers they benefit from investment portfolios matched to their risk tolerance as well as being user friendly.
Many robo-advisers charge what are called wrap fees, meaning there are no additional fees such as subscription or withdrawal fees, success fees or fees for rebalancing.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
