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Dubai’s road-toll operator Salik, whose share price has surged nearly 10% since Wednesday when it revised revenue guidance upwards, looks well-positioned for strong growth in line with Dubai’s robust
GDP expansion, and its favorable payout policy, Al Ramz Investment said.
Salik had revised its revenue growth upwards from 4-6% with EBITDA margin of 67-68% expected, revised upwards from 65-66%. It expects two new gates, Business Bay and Al Safa South, to be operational by the end of November.
The two new gates have a combined valuation of 2.73 billion dirhams ($743 million), as per a concession agreement with Dubai's the Roads and Transport Authority (RTA) .
Salik was granted a 49-year concession for the eight older gates two years ago, prior to the company’s IPO in September 2022. Under the terms of the concession, Salik will pay to the RTA annual instalments of AED 455.7 million in two equal instalments of AED 227.9 million each, every six months.
Salik is expected to pay the instalments using its current cash position and operating cash over the coming years. The company does not plan to take on additional debt.
Al Ramz Investment expects minimal impact on its cash position and overall balance sheet.
"Consequently, our leverage forecast for Salik improves in the near term, as we had previously assumed higher payments for the new gates at the start of the concession agreement or in 2024E. In the medium term, we expect leverage to be broadly unchanged for the company."
Salik is expected to maintain its dividend policy. Al Ramz expects the company to pay a dividend of 19 Fils for 2025E, yielding 4.3%.
It has lowered fair value to AED 4.20 per share, down from AED 4.25. "This new target implies 15% potential upside to the current price, and we therefore maintain our Overweight rating on the stock," Al Ramz said.
The Dubai DFM-listed stock is trading at AED 3.66 on Friday morning according to LSEG data.
(Writing by Brinda Darasha; editing by Seban Scaria)
