Agility, the Kuwaiti storage and logistics provider, looks well positioned to capitalise on growth in emerging markets, according to Rasmala Investment Bank, based in Dubai.
"The strength of the logistics industry is significantly affected by economic growth," said Daniel Abood and Aly Mansour in a note to clients. "Agility's competitive advantage lies in its emerging-market platform, which we expect to experience high growth in the future," the analysts said.
A report from the UN Conference on Trade and Development said developed economies were expected to post growth rates of up to 2 per cent this year. Emerging markets, however, were expected to have much stronger growth, at more than 6 per cent.
Agility has two business lines. Its commercial segment, headquartered in Switzerland, provides supply chain management services that include freight forwarding, contract, chemical and project logistics.
The business has made significant investments in building its infrastructure in the Middle East, South East Asia, Africa and South America, which are expected to drive growth.
"We estimate that the business will contribute about 90 per cent of the company's revenues in the forecast period from 2012 to 2016," the analysts said.
Agility's second business line, the defence and government business, has suffered after a legal dispute dating back to November 2009 with the US justice department having accused the company of overcharging the US army at least US$68 million for food supplies in Iraq and Kuwait from 2003 to last year.
"The market, in our view, has already priced in the loss of Agility's defence operations and a fine larger than we estimate, $750m in a bear-case scenario, " the analysts said.
Agility was initiated with a "buy" rating and share price estimate set at 470 fils. The stock traded 2.5 per cent higher at 355 fils on the Kuwait Stock Exchange yesterday.
The company paid a cash dividend of 0.04 Kuwaiti dinars, a yield of 11.6 per cent, for last year.