DP World's offering could trigger more IPOs

Dubai: Port operator DP World's decision to launch a public share sale is set to generate huge investor interest and could trigger more initial public offerings (IPOs), analysts said.

The IPO opens on November 4 and will be in the form of a 20 per cent sale of shares by DP World's sole shareholder, Port and Free Zone World, a government-owned entity, which will retain majority ownership.

"DP World is not seen as a local company. Investors are looking for participating in the IPO of a multinational company. It is being seen as a long-term blue chip investment," said P. Krishnamurty, chief executive officer of Dubai International Securities.

The IPO may also tempt some investors to sell holdings in other companies to buy DP World shares. "We have seen that happening in big IPOs in the region. In the UAE market, a lot of day traders are going to square up their positions during the last week of the IPO," said Krishnamurty.

EFG Hermes senior research analyst Fahd Iqbal believes sell-offs by retail investors would not have a "major sustained impact" on local stocks. "We expect a great deal of interest in the DP World IPO to come from institutional investors, particularly Western," he said.

The IPO's impact will be keenly watched by large Dubai government companies like Nakheel, Emirates and Dubal, which have been mentioned as potential IPO candidates.

"They will be watching the outcome of this IPO, especially since it will be conducted through a book-building process," he said.

Speculation

Although DP World officials have not said how much they intend to raise, the forthcoming IPO will be one of the biggest in the region. It has been speculated that the IPO will value the company at $20 billion.

DP World's shares will be listed on the Dubai International Financial Exchange (DIFX) in late November.

The company said it generated $2.076 billion in revenues in 2006 and $1.209 billion in the first six months of 2007.

Moody's Investors Service said yesterday the announced IPO would have no impact on the company's A1 credit ratings and its outlook also remains stable.

The agency said it views DP World as a government-related issuer.

It said DP World is strategic to Dubai and the wider region, given its operatorship of the Jebel Ali Port, the largest in the Middle East, and the key role DP World plays in facilitating Dubai's maritime transportation and trade sectors.

"The reduction in the government's stake in the company does not fundamentally change this argument," Moody's said.

The company is one of the most geographically diversified port operators, with management of 42 terminals in 22 countries. It handled 36.8 million TEUs (twenty-foot equivalent container units) in 2006 and its terminals had a total capacity of 48.6 TEUs.