x Abu Dhabi, UAEFriday 19 January 2018

DP World in reverse stock split plan

DP World board proposes one for 20 reverse share buyback to pave way for a London listing.

DP World, the global ports operator based in Dubai, hopes to strengthen its stock through an issue of one new share for each 20 currently held by investors.

The move has no direct effect on the stock market value of the company, which is planning to list on the London Stock Exchange (LSE) by the end of June. But analysts said it could help to bring DP World in line with market practice at other ports and logistics groups.

DP World said: "The board believes that undertaking a one for 20 share consolidation will better position DP World's share price alongside global companies with an earnings per share ratio that better reflects the value of the company."

"It does not change the market capitalisation, but makes the earnings per share (eps) figure more practical," said Redwan Ahmed, an analyst at the Dubai stockbroker EFG-Hermes. "At the moment, eps is 0.0186 cents per share, which is a difficult figure to handle."

A company spokeswoman said the change was not directly connected to the planned LSE listing and had been under consideration for some time.

But industry analysts thought the move should be considered as part of the preparation for the London move. "It sets another milestone for the LSE listing, and gives further reassurance that it will happen," said Vincent Resillot, an analyst at Credit Suisse in London.

"This is neutral for the share price, but it's all part of the pre-marketing for LSE status," he added.

DP World shares closed yesterday at 64 US cents, which equates to $12.94 per new share once the consolidation is formally agreed at the annual meeting next month.

It has not been formally decided in which currency the shares will trade on the LSE, but the DP World spokeswoman said it was "likely" they would be listed in pounds sterling. They currently trade in US dollars on Nasdaq Dubai, where they were floated at $1.20 per share in 2007.

A Dubai analyst, who requested anonymity, said: "Trading in London in pounds would be a smart move, because it would increase the foreign exchange arbitrage possibilities between London and Dubai, and therefore increase liquidity.

"It makes sense to have bigger shares because it avoids the status of being a penny stock, which a company like DPW would see as a disadvantage. But it's purely psychological, purely cosmetic."

Arbitrage is a trading technique that exploits small differences in value in separate markets.

The shares in London will be listed in the form of "depository interests", financial instruments similar in many respects to ordinary equity.

Dubai World, the government conglomerate that owns 80.45 per cent of DP World, is not expected to sell shares in the London listing but may consider selling some of its holding at a later date, depending on the share price performance.