DP World share price hit by global market concerns

PRICE BATTERED: Sultan Ahmed bin Sulayem, Chairman of DP World, (pictured) speaks at his company's launch on the DIFX in Nov. Since then, shares have tumbled on global market woes. (Getty Images)

The Dubai International Financial Exchange (DIFX) listing of international ports operator DP World appears to have been hit by turbulent times in the international markets.

Almost three months after its initial public offering, DP World’s share price closed on January 18 at $1.08.

In what was the Middle East’s largest initial public offering, DP World listed on October 26 at a share price of US$1.30 each. This price was the top of the indicative range of $1.00 - $1.30 announced by the company at the start of its pricing process.

The October 26 offering was oversubscribed more than 15 times, and saw DP World valued at $4.96 billion. The company listed 3.818 billion shares, representing 23% of the company.

The drop in share price may have been sparked by foreign investors liquidating their positions in view of the threat of a global recession and credit concerns.

Meanwhile, Dubai-based investment bank Shuaa Capital has a ‘buy’ recommendation based on a target value of $1.47 per share, implying an upside of 36% to the current market price of $1.08 per share.

Kareem Murad, lead analyst for logistics and transportation at Shuaa Capital, believes investors who buy at the current price of $1.08 will be buying at value.

“A price of $1.08 today is fundamentally attractive. Investors like DP World’s business; they like the asset class, they like the DP World story and they know there is substantial potential for growth.

The listing had been intended to encourage other UAE companies to IPO, and he believed the drop in DP World’s share price would not deter other listings.

“We know Emirates Airlines intend to go public and it seems there is a lineup of both private and public owned companies considering going public as well. These listings would be affected more by the performance and success of the market itself than individual share performances.

“The DP World listing was a big test and we believe the DIFX has passed the test. It is well regulated and has a good trading platform. I think the other companies will be encouraged to list on this exchange for global exposure, especially with the coming DIFX-NASDAQ re-branding." he said.

Shuaa Capital expects the port operator to generate an overall trend of strong growth rates, constantly improving margins, and high rates of return over its 10-year forecast period.

According to Murad, DP World is generally well positioned to take advantage of highly favorable developments taking shape in the global container terminal industry.

“Substantial confirmed investment in new capacity over the next ten years will likely almost double total gross capacity of the operator and its market share of available capacity in all major regions, especially in regions that are forecast to witness substantial growth in traffic, and shortage in capacity. We expect both revenues and throughput to grow at a CAGR (Compound Annual Growth Rate) of 13% till 2011. A substantial expansion in profit margins should result in EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) and net profit CAGRs 21% and 30% respectively from pro-forma full-year 2006 levels.

Murad said risks to DP World’s business could include an unanticipated slowdown in global economic growth, geopolitical developments around the Arabian Gulf, inflation in the cost of new concessions, regulatory policy reversals and the resurgence of xenophobia in developed markets globally.

Print | Email | Discuss this article |

READERS' COMMENTS

View all comments (0)

Have your say

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Security Code *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM