A Dubai-owned ports operator that has weathered slower global growth since the financial crisis has emerged as the Gulf’s star performer in the bond market.
The company stands out in a region where several governments and companies have seen their credit ratings cut over the past two years as they try to adapt to the new reality of oil at about $60 a barrel. DP World, which operates about 80 terminals across more than 100 countries from China to Ecuador, is less dependent on crude prices than some regional companies and has benefited from this year’s pickup in global growth.
DP World’s debt is “one of the few long-duration corporate bonds out of the region with a strong stand-alone credit profile,” said Usman Ahmed, a managing director of investments at Dubai-based Emirates NBD Asset Management Ltd. The securities provide “international investors with an opportunity to gain exposure to the profitable Jebel Ali Port and diversified asset base through a high-quality credit.”
Fitch Ratings in July raised DP World’s credit rating to BBB+, or three steps above junk, its second upgrade in the past two years. The ratings firm commended the company’s stable cash flow and the flexibility generated by its expansion plan. The company is rated Baa2 by Moody’s Investors Service, the second lowest investment grade.
It’s stock, which trades on NASDAQ Dubai, has risen 35 percent so far in 2017, on course of its best year since 2013.
Still, DP World’s expansion plan, including the purchase of sister companies Maritime World and shipyard Drydocks World via a capital injection of $225 million, could hurt its credit profile. In August the company reported a 2.5 percent decline in first-half profit to $543 million while revenue climbed 10 percent to $2.3 billion.
Bond sales from the GCC, which includes the two biggest Arab economies of Saudi Arabia and the United Arab Emirates, climbed to a record $78.9 billion this year as regional governments boosted borrowings to bridge budget deficits. Average GCC bond prices have risen 1 percent, according to JPMorgan Chase & Co. indexes.
DP World’s third-quarter gross container volume grew 13.5 percent year-on-year and the company will outperform Drewry Maritime’s estimate of 5.5 percent industry throughput growth in 2017, it said in a statement on Tuesday. The company is working on a plan to develop Jeddah, Saudi Arabia’s port into a commercial gateway to serve larger markets.
“DP World benefits from its global presence and a solid market position coupled with its strong shareholding structure,” Ahmed said. “The company continues to demonstrate stable cash flow generation and conservative balance sheet management.”