Dubai’s newly-launched company Parkin, which will create, plan, design, operate, and manage public and private parking in the emirate, is most likely to take the IPO route, which would garner “substantial attention and interest” from investors, say analysts.
Hani Abuagla, senior market analyst at XTB Mena, said the creation of Parkin could be a step towards preparing for an IPO as Dubai authorities have been very keen to develop the local stock market in terms of variety, liquidity, and trading volumes.
“On that note, Dubai’s strategy has been very successful in attracting investors and saw oversubscriptions in many of its IPOs. Investors have been expecting the government and its entities to announce new IPOs over the course of the coming months and years. If effective, Parkin’s IPO could happen in the coming months and could follow in the footsteps of Dubai Taxi and could raise comparable amounts,” Abuagla told Khaleej Times.
His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, issued the law on Wednesday to establish Parkin. The new firm is empowered to act independently and will have complete control over its finances, administration, and legal matters.
The Road and Transport Authority (RTA) is set to delegate some of its duties related to public and private parking to Parkin under a franchise agreement.
Individuals can obtain permits from the company through which they can subscribe to public parking spots and reserve parking spaces per the terms of the franchise contract.
Parkin will also be engaged in investments in associated business activities. The law permits individuals to own shares in the company through public or private subscription.
Vijay Valecha, chief investment officer, Century Financial, said that currently all of Parkin’s shares are owned by the Government of Dubai. However, Parkin is likely to partake in an IPO in the future.
“This is apparent from the RTA’s strategic plan to monetise its assets as well as the Dubai government’s efforts to bolster privatisation as it drives economic growth and profitability,” he said.
As per the law, the proportionate holdings of the Government of Dubai in Parkin must not fall below 60 per cent of the company’s capital as and when it sells shares to the public.
“The decision to go public hinges heavily on the swiftness with which a company establishes itself after inception. Consistent financial performance, public demand, capital requirements, and regulatory approvals are some of the many considerations that dictate the timing of an offering. Nonetheless, a successful IPO for Parkin will require a minimum of one year of operating history to establish a track record and generate investor interest,” he said.
Strong demand for IPO
Prior to Parkin, the government spun off toll operator Salik and Dubai Taxi Company and sold its shares through the IPO as part of its announcement to list 10 public sector entities on the Dubai Financial Market in order to raise the market capitalisation of the bourse to Dh3 trillion.
Both the IPOs – Salik and Dubai Taxi – witnessed strong responses from both institutional and retail investors, recording massive oversubscription.
Salik IPO was oversubscribed 49 times in 2022, raking in Dh184.2 billion ($50.2 billion) while Dubai Taxi IPO was oversubscribed 130 times as well.
Vijay Valecha said tremendous interest and frenzy surrounding the IPOs of Salik and Dubai Taxi are a testament to investor confidence in the region’s companies. “Thus, it is safe to assume Parkin’s IPO in the future will also garner substantial attention and interest.”
Hani Abuagla added that the strong interest and higher appetite for risk could create a strong demand for an IPO from Parkin and for others in the future.
“A new IPO could help raise the profile of the stock market and could help extend the gains it has been recording during the last few weeks and eventually surpassing its 2023 peak,” added Abuagla.
Valuation
According to the latest data released by the RTA in December 2023, there are about 125,719 parking spaces in Dubai, and the charges per hour for parking spaces in Zones A, B, C, and D are Dh3, Dh4, Dh2, and Dh2, respectively.
“Using a conservative approach that assumes parking charges of Dh3 per hour on average and, roughly 12 hours of parking occupancy per day, and around 300 paid parking days in a year, it would bring Parkin’s total full-year revenue to around Dh1.357 billion. By comparison, Salik’s full-year revenue stands at approximately Dh2.036 billion and it attracted proceeds worth Dh1 billion (roughly 50 per cent of its revenue). Thus, we can expect Parkin to attract a valuation of around Dh650 million to Dh700 million,” added Valecha.