EFG-Hermes increases DP World share price target

Investment bank says company delivered resilient earning amid improved global trade

EFG-Hermes increased its target price for DP World shares by 10 per cent after the world’s fourth-largest port operator last week announced resilient first half 2017 earnings amid improved global trade Charles Crowell / BloombergShow less

EFG-Hermes, the Egyptian investment bank, on Sunday increased its target price for DP World shares by 10 per cent after the world’s fourth-largest port operator last week announced resilient first half 2017 earnings amid improved global trade.

The bank’s Cairo-based brokerage unit increased the target price for the stock to US$27.5 a share and reiterated its “Buy” recommendation on the company. DP World stocks on rose 3.93 per cent to $22.5 on Nasdaq Dubai at the end of trade on Sunday, still a fair discount on the recommended price.

Wafaa Baddour, an analyst with the brokerage, said the lower level of leverage of DP World, better global trade trends, and the company’s more attractive 2018 price-to-earning multiple compared with its peers were the factors behind the target price increase.

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Although the company’s net income of $606 million was flat for the first six-months to June and slightly lower than EFG’s estimates, the like-for-like growth for the period remained strong, she said in a note to institutional investors.

“Despite pressure from the ban of trade with Qatar, we estimate the second-half 2017 volume will be flat or slightly higher half-on-half and assume solid like-for-like growth in 2018,” she said.

The recovery in the global trade in the second quarter reflects positively on the company’s home-port of Jebel Ali. The firm has gained market share in London after signing new agreements and added and ramped up capacity in ports such as London Gateway, Yarimca in Turkey, Rotterdam in Netherlands and JNP Mumbai in India.

DP World's revenue for the first six months of 2017 climbed 9.6 per cent to $2.29 billion. Cash from operating activities for the period also climbed to $1bn, up from $905m recorded in the first half of 2016, it said in bourse filing last week, adding that it was on track to meet full-year market expectations.

“Our balance sheet remains strong and we continue to generate high levels of cash flow, which gives us the ability to invest in the future growth of our current portfolio, and the flexibility to make new investments should the right opportunities arise,” DP World’s group chairman and chief executive, Sultan Ahmed Bin Sulayem said in the statement at the time.