June 1 LSElisting to boost DP World stock in short term.
DUBAI A MOVE by Dubai-based ports operator DP World to list shares on the London Stock Exchange may give its stock price a much needed fillip and also provide some short-term arbitrage opportunities, but any long term upside is likely to be capped by valuation concerns, traders say.
The government-controlled company said on Wednesday it expects to list shares on the LSE on June 1, in a bid to lift its international profile and boost liquidity.
"DP World's listing on the LSE will definitely improve the stock's profile and visibility for the UAE internationally," said Sachin Mohindra, a senior fund manager at Abu Dhabi-based Invest AD.
Mohindra also sees some arbitrage opportunities that might arise from the dual listing, but expects the pricespread to eventually close.
DP World's senior management acknowledged the arbitrage factor but said it doesn't concern them.
"There would be a natural currency arbitrage between dollar and sterling but we are not concerned.
This is pretty standard," DP World's chief financial officer told reporters in a conference call Wednesday.
Arbitrage allows an investor to take advantage of the difference in price of a security between two or more markets, striking deals that capitalize on the imbalance.
Many analysts reckon that while arbitrage opportunities will exist initially, these transactions will eventually be capped due to the lack of traded volumes on the stock.
"DP World's traded volumes on Nasdaq Dubai are nothing to talk about and its listing on LSE will not change much in that sense," said a Dubai-based equities trader at an international bank.
DP World's total number of outstanding shares decreased to 830 million from 16,600 million after a 1 for 20 shares consolidation earlier this month.
The ports operator had issued shares at $1.30 each in its near $5 billion initial public offering in 2007.
Many of the investors who bought shares in the IPO have had no option but to hold onto them, especially given the stock's hefty slide since its debut, traders say.
After the share consolidation, its IPO price (value) shoots up to $26, a long way from Thursday's closing level of $13.33.
Volumes, say traders, will therefore continue to be capped until the share price improves, but this may still be some way off given the view of many analysts that at current levels, the stock is fairly valued.
The shares afterall trade on a P/E of 30.53, according to Zawya.com.
Investment bank EFG Hermes this week cut DP World to neutral, from a buy rating previously, saying the stock offered limited upside to its fair value of $15 after a recent rally.
Analysts at NBK Capital also have a hold recommendation on the DP World stock with a fair value of $13.40.
DP World shares have risen about 30% in the past three months, after hitting a near-six-month low of $10.1 on February22, with the ports operator riding the coattails of a rebound in global container traffic, due mostly to an improving global economic backdrop.
The company on May 11 said container volumes grew 12% on year in the first quarter, and it remains confident of delivering a better performance in 2011 compared with last year.
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|Publication:||Qatar Tribune (Doha, Qatar)|
|Date:||May 27, 2011|
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