Analysts predict that Dubai’s recently established Parkin, which will develop, plan, build, run, and oversee both public and private parking around the emirate, will likely choose to go public through an initial public offering (IPO). This would attract “substantial attention and interest” from potential investors.
The establishment of Parkin may be a step toward getting ready for an IPO, according to Hani Abuagla, senior market analyst at XTB Mena. This is because the Dubai government has shown a strong desire to grow the local stock market in terms of variety, liquidity, and trading volume.
“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.
The Honorable The law creating Parkin was released on Wednesday by Sheikh Mohammed bin Rashid Al Maktoum, the ruler of Dubai and the vice president and prime minister of the United Arab Emirates. The new company will have total authority over its finances, operations, and legal affairs in addition to being given the freedom to act freely.
Under a franchise agreement, Parkin will receive certain responsibilities from the Road and Transport Authority (RTA) regarding both private and public parking.
People can subscribe to public parking spots and reserve parking spaces in accordance with the conditions of the franchise contract by obtaining licenses from the corporation.
Additionally, Parkin plans to invest in related company ventures. The law allows people to subscribe publicly or privately for shares in the corporation.
According to Century Financial’s chief investment officer, Vijay Valecha, the Government of Dubai presently owns all of Parkin’s shares. Parkin will probably participate in an IPO eventually, though.
“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.
The law states that when Parkin sells shares to the public, the Government of Dubai’s proportionate shareholding in the firm cannot decrease below 60% of its capital.
“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.
Demand for IPO
Prior to Parkin, the government announced plans to list ten public sector companies on the Dubai Financial Market in an effort to increase the market capitalization of the exchange to Dh3 trillion. As part of this statement, the government spun out toll operator Salik and Dubai Taxi Company and sold its shares through the IPO.
Institutional and retail investors responded favorably to both the Salik and Dubai Taxi initial public offerings (IPOs), which resulted in significant oversubscription.
In 2022, the Salik initial public offering (IPO) saw 49 oversubscriptions, yielding Dh184.2 billion ($50.2 billion), while the Dubai Taxi IPO saw 130 oversubscriptions.
According to Vijay Valecha, investor confidence in the region’s enterprises is demonstrated by the intense attention and fervor around the initial public offerings (IPOs) of Salik and Dubai Taxi. “Therefore, it is reasonable to believe that Parkin’s IPO will attract a significant amount of interest and attention going forward.”
According to Hani Abuagla, there may be significant demand for an IPO from Parkin and other companies in the future due to the increased curiosity and stomach for risk.
“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.
What is the valuation?
There are approximately 125,719 parking spaces in Dubai, according to the most recent statistics from the RTA, which was issued in December 2023. The hourly rates for parking 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.