LONDON: DP World, the world’s third-largest port operator, is set to benefit in the long term from its presence in regions that have been less hit by the economic downturn and from investments in its existing and new facilities, Credit Suisse said.
The brokerage upgraded DP World to "outperform" from "neutral," and said it expects a softer slowdown of global container volumes growth.
DP — which is relying on its emerging markets’ focus to offset a potential economic slowdown — is geographically hedged as growth has resumed at most of its markets, including the United Arab Emirates and Latin America, which saw milder downturns, analyst Vincent Resillot said.
In 2015, DP will see the advantages of investing in cheap capacity in its existing facilities in modern ports, as they will increasingly benefit from the industry shift towards large boats, the analyst said.
The completion of work at DP’s existing facilities such as Jebel Ali Terminal 3 or new ones like London Gateway will mark a peak in the capital expenditure cycle of the company, analyst Resillot said.
"Jebel Ali is one of the very few major ports globally to be able to handle the largest container ships being currently delivered to shipping lines and this competitive advantage could keep pricing power on the side of DP," the analyst said.
According to Thomson Reuters’ Starmine data, Resillot is a three-star rated analyst for the accuracy of his earnings estimate on DP World, one of the more profitable assets of debt-laden Dubai World.
He raised his price target on DP shares to $14.70 from $12.48.