Salik IPO shows change in UAE investment economy

Infrastructure is key to the smooth functioning of a country, something the UAE excels at and is of great interest to. From major international aviation hubs to Etihad Rail, the country has built networks over a period of decades, while most other aviation hubs have been established for much longer.

The indirect benefits of good infrastructure are huge, allowing people, governments and businesses to function smoothly and predictably. Now, the potential to profit directly from these systems, especially the technologically advanced ones, is also on the radar of the government.

On Tuesday, Dubai announced its intention to raise 3 billion dirhams ($817 million) by selling a 20 percent stake in the emirate’s road toll operator, factorand set the issue price at Dh2.

The IPO has raised over AED600 million. Key investors include the UAE Strategic Investment Fund and Abu Dhabi Pension Fund. Many of the early contributors were from the UAE, helping to build a complex domestic-focused investment cycle that could be a key part of the UAE’s economic diversification plan.

Ibrahim Al Haddad, CEO of Tolls, said he was “pleased with the strong interest we have received since we announced our intention to float,” adding that “the city’s development has been in sync with Salik’s, and this offering is a huge plus for investors. It’s an exciting opportunity to be a part of this journey.”

There is substantial evidence to support this assessment.passing traffic Salic’s Between 2013 and 2018, the network of eight toll stations grew at a CAGR of 5.5%. As Covid-19 recovers, Dubai’s economy and population grow, and the business outlook will only get stronger. Its population is expected to grow by 70% over the next 20 years.

Models also have a lot of flexibility. Dynamic pricing offers a way to maximize profits, regulate air pollution levels, limit rush hour traffic and support those who should pay less.

Perhaps more importantly, Salik may soon oversee the new shipping technology. Dubai, for example, is investing heavily in air taxis. In June, electric aircraft company Eve Holding and UAE charter operator Falcon Aviation Services signed a letter of intent to deliver 35 flying taxis from 2026. The city could take an international lead in designing air tolls.

Back on the ground, consultancy Arthur D Little said this week that Emirates was eighth in global readiness to embrace electric travel. The adoption of green technologies such as electric vehicles can be accelerated by reducing tolls.

Additionally, infrastructure stocks have proven to be more reliable, less expensive to maintain and predictable in a global investment market that has experienced significant volatility. Technological advancements may be sweeping the world, but people will still need roads, railroads and buildings.

Published: September 14, 2022 3:00 AM