Falcon Student Investment Fund

SALIK COMPANY PJSC (DFM: SALIK)

BUY - TP: 6.58AED (~11.9% UPSIDE)

FARIS ZEIDAN | RAYYAN ALMAAZMI | MOHAMMED IBRAHIM

Group 4

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Analyst Disclaimer

This communication has been prepared by students at NYUAD for the sole and educational purpose of the Falcon Student Investment Fund (FSIF).

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General Disclaimer

The information presented in this pitch does not constitute investment, financial, legal, or professional advice. FSIF and all contributing members disclaim any and all liability for providing this recommendation and accept no responsibility for any direct, indirect, or consequential loss that may arise from its use.

DISCLAIMER

TABLE OF CONTENT

1. Revenue Breakdown
2. Investment Thesis
3. Revenue Breakdown
4. Theses
5. Valuation
6. Risks & Mitigants
7. Conclusion
8. Appendices

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REVENUE BREAKDOWN

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Company Overview

Operates Dubai’s entire tolling system under a 49-year concession with the Dubai’s RTA, gaining full rights to operate, maintain, and collect toll revenues (asset-light model).

100% of net profit distributed as dividends (semi annual payouts).

Listed on DFM in 2022. 24.9% public float; 75.1% owned by Dubai Investment Fund.

- Launched in 2007 as Dubai’s exclusive road toll system

- Listed on DFM in July 2022. 24.9% public float; 75.1% owned by Dubai Investment Fund

- 5% reserved for Emirates Investment Authority

- 5% reserved for Pensions and Social Security Fund for Local Military Personnel

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- Operates Dubai’s entire tolling system under a 49-year concession with the Dubai’s RTA, gaining full rights to operate, maintain, and collect toll revenues

- Debt stems from the concession agreement (3,994mn AED) and RTA

gate-transfer payments (2,015mn AED), yet leverage remains a healthy

2.61x EBITDA

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- Nearly zero CapEx; RTA reimburses Salik’s for construction of toll gates plus 10% markup

- 22.5% of all toll gate revenue goes to RTA

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- 100% of net profit distributed as dividends (semi annual payouts)

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Revenue Segments

1. Operation of two new gates; Business Bay and Al Safa South gates.

2. Variable Pricing introduced February 1, 2025.

3. Stock Rally after H1 Performance

8 Operational Gates

10 Operational Gates

The Story Thus Far

Financials

Variable Pricing

9M 2025

+41.5% YoY Growth

(1,422.2mn → 2,012.1mn)

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- Directly proportional with Dubai population growth

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Toll Usage Fees

Ancillary Revenue

Partnerships:

Pricing Segments Q2 2025

+55.3% YoY Growth

(13.8mn → 21.4mn)

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- Driven by digital partnerships

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- Aims to account 5% of topline by 2030

Increase in peak hour toll price did not alter driver behavior (inelastic routine)

Apr 2024

Jul 2024

Oct 2024

Jan 2025

Apr 2025

Jul 2025

Oct 2025

Apr 2024

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Jul 2024

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Oct 2024

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Jan 2025

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Apr 2025

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Jul 2025

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Oct 2025

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INVESTMENT THESIS

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9M 2025

Diversified revenues and efficient deployment keep EBITDA margins above 68 percent mid-term. The business model scales without capex pressure, keeping free cash flow and dividend capacity intact as the network expands.

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As Dubai densifies toward its 2040 population plan, congestion during peak windows becomes more intense. This gives future variable pricing adjustments an even stronger demand floor, allowing Salik to monetise future peak periods without risking meaningful substitution.

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Customers pay in advance through top-ups and accounts. Salik thus carries minimal receivables and negative net working capital. This accelerates cash conversion and supports the 100 percent payout ratio without external funding pressure.

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Pricing can scale with city congestion

Protected Profitability

Negative NWC

Variable Pricing

Raised the average fees without reducing trips; peak share stayed stable and drivers absorbed the AED 2 increase

Higher Avg. Income Per Vehicle

More Tolling Expected

Operating Structure

Elasticity Fears are Overstated

Pricing Can Scale With City Congestion

Negligible shift in Dubai travel routines from peak to off-peak, which keeps traffic steady and supports the revenue uplift

Inevitably stronger peak-hour demands as congestion grows towards 2040, giving Salik room for future price increases without losing drivers

Population growth of more than 70 percent by 2040 drives new roads and new urban areas, creating the need for additional tolling points

Gate Expansion is Tied to Dubai’s Long-Term Urban Plan

Protected Profitability

SALIK placed early in road-planning, due to the long concession and close work with RTA, creating tolling opportunities in new dense districts, east-west links, and coastal projects

Margins held above 68 percent due to low spending needs and growing income streams, supporting strong free cash flow and dividends as the network expands

Dubai Population Density Map

RTA reimbursements cover required upgrades, keeping margins steady and removing surprise costs for shareholders

Government Reimbursement Protects Financial Flexibility

Low Capex Unlocks High Free Cash Flow

Negative Net Working Capital

Low upkeep costs and RTA-funded gates mean most earnings drop straight into free cash flow

Prepaid driver accounts keep receivables low and speed up cash collection, which supports the full dividend payout

Before Variable Pricing vs After Variable Pricing

SALIK Cost Breakdowns

Coordination with RTA Strengthens Expansion Visibility

DISCOUNTED CASH FLOW MODEL

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Exit Multiple

Perpetuity Growth

SENSITIVITY ANALYSIS

FINANCIAL MODEL

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DCF Summary

DCF Summary

WACC (8.75%)

Dubai GDP ~ 4-5%

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Management guides to 34-36% for FY25 and a normalized 4-6% run rate for FY26.

We anchor near the upper bound of long-run growth drivers:

Revenue Growth: 7.5%

Traffic Historically +6-8%

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Population +3-4%

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Variable Pricing (4.58AED/vehicle)

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Growing ancillary revenue base

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Full year impact of new gates

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EBITDA Margin: 68-69%

Reflects a structural outcome of the model. Salik’s asset-light, fixed-cost concession creates stable operating leverage, and bottom-up COGS/G&A/BDA inputs naturally hold EBITDA in the 68-69% band

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Gordon Growth Method: 3.5% TGR

Yields a terminal value of AED 79.8bn (AED 6.59/sh, +10.5%), anchored by durable mobility demand and Salik’s monopoly pricing power

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Exit Multiple Method: 21x EV/EBITDA

Prices in a terminal value of AED 91.7bn (AED 7.27/sh, +22%), using a premium toll-road multiple that reflects Salik’s long-dated concession, regulated cash flows, and high-margin profile.

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Rf: 4.86%

ERP: 4.94%

• Rf (4.86%)

Obtained from the most recent UAE 10-year government bond issuance as its the most reliable long-term AED benchmark.

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• ERP(4.94%)

Sourced from Damodaran’s UAE/MENA ERP and global industry datasets to reflect the UAE’s developed-market risk profile

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• Beta (0.86)

Derived by re-levering the 0.80 unlevered transportation beta (Damodaran global dataset) using Salik’s actual capital structure, reflecting its concession-like cash-flow profile..

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• Kd (0.39%, after tax):

Value based on Salik’s weighted average interest rate adjusted for the 9% UAE corporate tax.

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• Ke(8.36%)

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• UAE Corporate Tax rate (9%)

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• Terminal Growth Rate (3.5%)

Supported by Dubai’s long-run mobility expansion ( GDP ~4–5%), population trending toward 5.8m by 2040, and rising vehicle density.

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Beta: 0.86

Kd: 0.39% (after tax)

Derived by re-levering the 0.80 unlevered transportation beta (Damodaran global dataset) using Salik’s actual capital structure

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Value based on Salik’s weighted average interest rate adjusted for the 9% UAE corporate tax

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Ke: 8.36%

UAE Corporate Tax Rate: 9%

Terminal Growth Rate: 3.5%

Derived using CAPM based on UAE 10-yr Rf (4.86%), Damodaran ERP (4.94%), and Salik’s re-levered beta (0.86)

Effective for financial years starting on June 1, 2023

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Sourced from Damodaran’s UAE/MENA ERP and global industry datasets

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Obtained from the most recent UAE 10-year government bond issuance.

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Supported by Dubai’s long-run mobility expansion (GDP 4-5%), population trending toward 5.8m by 2040, rising vehicle density

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CASES

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Base Case

Trips grow mid-high single digits, in line with historical 4-5% CAGR and Dubai’s structural mobility expansion

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Management guides to 36-36% for FY25 and a normalized 4-6% run rate for FY26.

We anchor near the upper bound of long-run growth drivers:

Steady-state execution with no surprises

Bear Case

Bull Case

Captures full upside from traffic, pricing, and adjacencies

Captures downside from weaker mobility, softer pricing, and slower adjacencies

AED 6 / AED 4 pricing fully absorbed, lifting ARPU with limited elasticity given Salik’s monopoly routing

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Revenue remains toll-led (85-90%), with diversified incomes scaling but not altering the core earnings engine

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Trips run ahead of trend, supported by stronger mobility, tourism, and population inflows

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Peak pricing fully monetised, with AED 6 tariffs absorbed and ARPU lifting toward the high end

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Adjacency revenues scale cleanly (parking, tags, insurance, data) ; high-margin, low-capex uplift

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Trips soften, driven by higher WFH adoption and rising self-sufficiency in neighbouring emirates, reducing peak commuter flows into Dubai

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Operating leverage turns negative as lower volumes slow prepaid revenue recognition while fixed tag and concession costs raise COGS as a % of revenue

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Monetisation lags, with higher elasticity to variable pricing and slower update of ancillary streams

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Regulatory & tariff dependence� With ~75% state ownership, toll pricing, exemptions, gate additions, and operating parameters are policy-driven; outcomes may prioritise congestion or affordability over revenue optimisation.�

Traffic volume sensitivity� Revenue is fully volume-linked. A macro slowdown, higher WFH adoption, route diversions, or increased public-transport uptake can reduce peak commuter flows and pressure trip counts.�

Structural growth constraints� Gate expansion and tariff adjustments require government approval, limiting long-term upside and giving Salik the profile of a mature, regulated utility rather than a scalable growth platform.�

Governance overlap & single-city concentration� Regulator–operator proximity creates inherent COI exposure, and with all operations concentrated in Dubai, any local economic or mobility disruption flows directly into earnings.

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• Stable, commercially rational regulation� Dubai has maintained consistent toll-road policy for 15+ years, and with ~75% state ownership, incentives are aligned toward preserving concession value and recurring cash flows.�
• Essential-use, structurally supported traffic base� Private cars drive ~80% of daily mobility; usage is non-discretionary and supported by population growth, rising vehicle density, and sustained economic activity.�
• Exceptional cash conversion + minimal reinvestment needs� Converts 80–85% of EBITDA to FCF, supported by prepaid balances and near-zero capex (~0.2% of revenue). A-/A3 ratings reflect strong coverage and refinancing headroom.�
• Government alignment + long-term economic tailwinds� Majority state ownership reduces concession risk, while Dubai’s D33 agenda (doubling economic output by 2033) underpins long-run mobility expansion and supports Salik’s volume-linked revenue model.

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Primary strategic risk: Equity drifts toward a bond-proxy if pricing power underdelivers, gate additions stay limited, or traffic normalises hence capping capital appreciation.�

Downside cushion: Essential-use mobility demand, a 49-year concession, and high dividend payouts support a stable cash-yield profile even if growth optionality fades.

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RISKS

MITIGANTS

BOTTOM LINE

RISKS AND MITIGANTS

Risks

Dependance of tolling revenue on trip counts leaves earnings exposed to weaker commuter flows.

Mitigants

Bottom Line

Commuter Flow

Bureaucracy

Government Policy Goals

Local Risks

Need for approvals for gate additions and tariff changes could limit long-term upside

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State control drives pricing and gate decisions, which may prioritise policy goals over revenue.

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Regulator-operator overlap and Dubai-focused operations increase exposure to local risks.

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Dubai’s long-standing toll policy and state ownership keep incentives aligned and cash flows predictable.

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Stable Regulation

Structurally Supported Traffic Base

Exceptional Cash Conversion

Private cars dominate mobility, making usage non-discretionary and reinforced by population and vehicle growth.

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High prepaid inflows and near-zero capex convert most earnings directly into free cash flow.

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State ownership lowers concession risk, while Dubai’s growth agenda supports long-run traffic and revenue.

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Becomes a bond-proxy if pricing, gates, or traffic underperform.

Primary strategic risk

Downside cushion

Essential use and high dividends keep yields steady even if growth fades.

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Government Alignment

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APPENDIX 1: ASSUMPTIONS

1. Revenue: FY25 AED 3.09bn; long-run growth 7.5%

4. Terminal: g = 3.5%, Exit 21x

3. WACC: 8.75% (Risk-free 4.86%, ERP 4.94%, Beta 0.86)

2. Margins: Gross margin 74–75%; G&A 2%; bad debt 1.5%

5. FCF Drivers: NWC = 20% of revenue; CapEx = 0.2% revenue; D&A = 4%

APPENDIX 2: CHARTS

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APPENDIX 3: FOOTBALL FIELD ANALYSIS

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Salik Football Field Analysis

APPENDIX 4: KEY OPERATING INDICATORS

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APPENDIX 5: ANNUAL QUARTERLY TRIPS

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¹ New gates became operational on 24 November 2024.

² Taxi trips are reported separately because data is provided by taxi operators in aggregate form.

³ Variable pricing was introduced on 31 January 2025. All revenue-generating trips from 1–30 January 2025 (within Q1 2025) are classified as off-peak, as the AED 4 flat tariff remained in effect until implementation.

⁴ Q2 2025 represents the first full quarter under the variable pricing regime.

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MOBILITY HIGHLIGHTS

APPENDIX 6: MOBILITY HIGHLIGHTS

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¹ The implementation of variable pricing began on January 31, 2025. Therefore, all revenue-generating trips conducted between January 1 and January 30, 2025 in the Q1 2025 period, are categorized in the above table as off-peak trips, as the fare during that period remained fixed at AED 4 per trip. Q2 2025 represents the first full quarter since the implementation of variable pricing.

APPENDIX 7: ADDITION OF NEW GATES

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APPENDIX 8: PRICE INCREASE MECHANISM

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APPENDIX 9: Salik Share Price

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