Rising Dubai population boosts emirate's stock market

Vijay Valecha, Khaleej Times, November 26, 2024

The stellar rise in Dubai’s population has proved to be a boon for the emirate’s stock market, data shows. Dubai Financial Market’s (DFM) General Index recorded double-digit gains of 10.9 per cent, the biggest in the Gulf Cooperation Council (GCC) region in the first nine months of 2024.

Salik and Parkin, the two Dubai Government-owned entities that are listing on the Dubai Financial Market, have been leading gains in the index, data shows. According to estimates, Parkin is up by nearly 60 per cent since its March listing this year, whereas Salik is up by almost 85 per cent in this year’s trade. The latter is, in fact, the top-performing stock for this year in the DFM index.

Analysts say the IPO listing wave in the UAE has been strongly supported by the stellar rise in Dubai’s resident population, which has increased by nearly 260,000 since January 2023. To put things into perspective, this rise is almost 75 per cent of the entire 4-year population growth of 358,000 taken from 2018 – 2022. “This phenomenal rise in population growth over the last 24 months is also creating positive dynamics for the local stock market sentiment. Perhaps the best visible synergies are observed in the top government auto and utilities-related stocks – Parkin & Salik,” says Vijay Valecha, chief investment officer, Century Financial.

Earnings-wise for Q3, Salik delivered an average beat across all the consensus, with utility operators’ revenue-generating trips showing strong guidance. Meanwhile, for 2025, Salik has given guidance for +25-26 per cent YoY revenue growth, primarily in line with market forecasts. The number of vehicles registered with Salik continued to show a near 10 per cent growth, with the Ebitda margin at 68 per cent. Similarly, for Parkin, the Q3 reports showed a 25 per cent y-o-y revenue growth with a stellar 40 per cent rise in Ebitda. The increase in Dubai’s car population is visible in Parkin’s operational numbers, including public parking revenues and growth from the developer’s parking side. The latter witnessed a 42 per cent growth due to the company’s tie-up with new developers and the phased introduction of spaces in Dubai’s privately developed areas.

A few days back, Dubai’s RTA approved a 5-year internal roads infrastructure development plan worth Dh3.7 billion. The plan will see 634km of new roads built across 12 districts during 2025 -2029. In line with Dubai’s Master Urban Plan Strategy, the plan covers areas with urbanization rates ranging from 30-80 per cent and will be executed in stages over the coming years. It should be noted that these plans correspond to almost 50 per cent of the 2025 ( e ) government budget expenditures that are being earmarked for various infrastructure projects, including roads, bridges, and metro expansion. “These announcements are incredibly favorable for Salik as the increase in the road network will only mean the likely addition of new toll gates. It should be seen with the rise in residential projects across new areas like Dubai’s South District & Jumeirah. In the current wave of new home buying, there is a popular trend of existing families shifting from rental properties to buying their apartments & villas across new Dubai locations. The likely addition of new cars on the road and growth in the driving population is already seen with the current traffic rates,” Valecha says.

For Salik, with the 2024 guidance largely being maintained, the outlook for 2025 is projected to be robust. The company expects next year’s revenue growth to range from 25 per cent to 26 per cent ( in line with market consensus). The additional and incremental revenue from the two new toll gates is expected to equal nearly 5 per cent y-o-y normalized annual growth. The revenue generation trips are expected to grow at a rate of 24 per cent to 25 per cent, with the EBDITA margin expected to remain in the current range of 67 per cent to 69 per cent. With the Dubai Master Urban plan already approved, markets can likely expect the company to announce more new gates to be operational next year in anticipation of traffic demand and new road construction.

For Parkin, the latest earnings release point towards the company meeting its FY24 guidance. “While the company has not officially provided any major forecast range for next year, the market estimates a nearly 7 per cent to 8 per cent constant growth rate in the net operating profit after tax. The total annual revenue growth rate is expected to be 10 per cent to 15 per cent,” Valecha says.

Source

Khaleej Times