Dubai: The privatization move by DP World has been greeted well by investors, given that the Nasdaq Dubai-listed stock had faced alarming declines in recent years.
DP World, the port operator with a market value of about $10 billion as of Monday morning, had nearly halved in value in the past two years after being plagued by uncertainty stemming from the US-China trade war and regional geopolitics. The reasons DP World cites for privatisation move is that the listing has not provided it with the anticipated access to capital – given the overhang on the share price – or other funding flexibility on debt levels expected of a listed business.
It had reported flat growth in its shipping container volumes in 2019.
Investors cheered the Monday announcement with the stock rising 10 per cent after the announcement. Shares of DPW, which operates 48 marine terminals and 13 port developments in more than 30 countries, peaked in late January 2018 at $26.99, and have fallen about 52 per cent since then as of Sunday’s close.
A subtle vote of no-confidence?
Analysts were quick to give voice of how they believed this could hurt wider confidence in trade institutions and UAE’s position as a logistics hub. “It’s a disappointing addition to the decaying public market environment in the region,” said a Dubai-based research analyst. The good news is that DPW cemented its valuation instead of a potentially lower valuation that it would have attained had it remained public, the analyst said.
But adding that it’s still no victory considering it was worth over $20 billion only a few years ago.
Tried and tested
DP World shares were listed on Dubai International Financial Exchange (DIFX) in November 2007, in what was then the Middle East’s largest initial public offering and raised about $5 billion. DIFX was rebranded to Nasdaq Dubai in November 2008.
A dual listing on London Stock Exchange (LSE) followed in June 2011. However, due to weak trading volumes there, DP World delisted in January 2015.
The operator has since diversified its operations to include industrial parks, transportation, and other logistic services assets. It aims to bank on these assets as it pushes for privatization, while hoping to compete among other big players in an industry which the firm said is “the consolidation of the customer base and the vertical integration of several competitors”.
Bad news for regulator?
The development would be bad news for the Nasdaq Dubai, for whom DP World has been a major draw. The Dubai-based exchange, which is worth over $130 billion, declined to comment on the move.
It is a setback for the exchange as DP World carries significant exposure, from Hong Kong to Buenos Aires, while being headquartered at its flagship Jebel Ali Port in Dubai, the Middle East’s biggest transshipment hub.
The news comes as a number of UAE-based companies delist amid a protracted real estate downturn in Dubai. Dubai real estate investment trust ENBD REIT, managed by the asset management unit of Emirates NBD, has been looking to delist because of low trading and a more than 50 per cent discount on its shares versus the net asset value of the fund.
ENBD REIT is one of the two REITs listed on Nasdaq Dubai.
Awtad, a real estate company which got listed in late December 2017, delisted last year after amassing losses during the first-half of the year.