Dubai: Despite a slowdown in global trade over the past year, analysts said they were bullish on the outlook for DP World, the Dubai-based ports operator, citing strong fundamentals and a strong acquisition strategy.
Share prices of the Nasdaq Dubai-listed company have recorded year-to-date returns of 21 per cent, according to Bloomberg data, with analysts expecting prices to rise further this year.
“To be honest, this is one of the names that we really like — it’s one of our conviction names. We like the management, and we see a lot of potential in the future. We are positive on Jebel Ali stabilising this year, and we like that the management is paying a lot of attention to return on capital employed,” said Marwan Haddad, lead portfolio manager at Al Mal Capital.
From an operational perspective, DP World said it handled 16.4 million twenty-foot equivalent units (TEU) across its global portfolio in the first quarter of 2017.
The figure marks a 5.7 per cent increase in gross container volumes compared to the same period in 2016.
DP World’s operations span the Middle East, Africa, Europe, Asia Pacific, India, the Americas, and Australia — a diversification strategy that is expected to help it in generating revenues.
“They’ve expanded in London, and they’re trying to implement the free zone experience there and in India, so we’re positive. Their valuations are also very decent; still cheaper than the global average,” Haddad said.
Challenging environment
According to the company’s latest financial statement, for the full-year 2016, DP World recorded $1.13 billion (Dh4.14 billion) in net profit, marking a 28 per cent jump from the $883 million in profit recorded in 2015.
The port operator said the increase was aided by the acquisition of Jebel Ali Free Zone in the UAE and a terminal acquisition in Canada.
“The environment is challenging, but we believe global trade will always be there because it’s a lifeline for every nation, and [DP World] is well-positioned to capitalise on it, especially in emerging markets. Asian markets are doing really well, and we’ve seen stabilisation in Latin America and Australia,” Haddad said.
From a technical perspective, share prices are likely to reach new highs, according to technical analyst Osama Al Ashry.
“We saw share prices rise from €15 to €19 in the first quarter of this year, and close at a high. Prices have an uptrend outlook,” he said, adding that prices could go to €23.5 possibly in the third quarter of this year.
Al Ashry said DP shares have a ‘buy’ signal, and could reach €25 in the long term.
Despite the bullish outlook, the company is expected to face some operational hurdles this year, with Sultan Bin Sulayem, group chairman and chief executive officer of DP World describing 2017 as another challenging year for global trade.
He added that the company, however, expects to “continue to deliver ahead-of-market volume growth”.
A report published in April by Abu Dhabi Commercial Bank said a risk for the trade sector this year remains a rise in global tensions linked to the new US administration’s policy objectives, especially towards China.
It added, however, that it expects “no major global trade disruption at this point.”
The report also said there are signs of strengthening global trade activity in 2017, and the UAE will likely be a key beneficiary of this trend given its role in both North-South and East-West trade.
