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Abu Dhabi, UAEMonday 17 December 2018

DP World top of the tree in GCC bond market

Dubai-based global ports operator outperforms with stellar returns of 21 per cent so far this year

Twenty free zones in the UAE - including Jebel Ali Port in Dubai - will be exempt from VAT. Pawan Singh / The National
Twenty free zones in the UAE - including Jebel Ali Port in Dubai - will be exempt from VAT. Pawan Singh / The National

DP World has weathered slower global growth since the financial crisis and has now emerged as the Arabian Gulf’s star performer in the bond market.

Buoyed by steadily improving finances and a credit-rating upgrade, Dubai-based DP World’s debt due in 2037 have handed investors a 21 per cent return this year as of Friday. It is the best performer among dollar-denominated bonds of US$1 billion and more in theGCC.

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 pick-up 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 Emirates NBD Asset Management. 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”,

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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 per cent 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 impact its credit profile. In August the company reported a 2.5 per cent decline in first-half profit to $543m while revenue climbed 10 per cent to $2.3bn.

Bond sales from the GCC climbed to a record $78.9bn this year as regional governments boosted borrowings to bridge budget deficits. Average GCC bond prices have risen 1 per cent, according to JPMorgan indexes.

DP World’s third-quarter gross container volume grew 13.5 per cent year-on-year and the company will outperform Drewry Maritime’s estimate of 5.5 per cent industry throughput growth in 2017, it said 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,” Mr Ahmed said. “The company continues to demonstrate stable cash flow generation and conservative balance sheet management.”