DP World: Calm Waters or Rocky Seas Ahead?

A recent article in The Economist noted the growing divergence between container and bulk shipping; while container volumes and shipping rates are trending back towards their pre-crisis peaks against the backdrop of projected annualized global trade growth of 8-10 percent in 2011 (though whether said predictions came before the recent oil spike is highly dubious), bulk capacity is expected to double the rise in freight volumes.  Fitch reiterated several of these points while assigning DP World (DPW)–the world’s fourth-largest container terminal operator with the widest geographical spread of any of the leading operators, with operations in Latin America, Africa, the Middle East and Asia (and whose parent finally wrapped up debt restructuring)–its IDR and senior unsecured ‘BBB-‘ rating, while also noting that “export-led growth in the emerging economies” should particularly suit it “given its bias towards emerging markets which account for around 75% of its trading volumes” (to this end, expect further movement on the South American front).  Chief executive Mohammed Sharaf thinks the region’s recent unrest could ultimately bolster business even as the immediate consequence saw the firm’s equity diverge downwards some 8x versus global port peers despite the fact that Middle East and Africa (ex-UAE) represents only 8% of DPW’s gross capacity.  Either way the long-rumored London listing is now back on track (the impetus presumably being the aforementioned debt deal), though Morgan Stanley pointed out that last month that “it is unclear if the free float will increase with Dubai World selling down its stake.”  Moreover, an eyebrow raising piece in the FT Friday noted the “psychology” underpinning the latest exodus of Gulf wealth into Swiss, UK and more safe-haven, liquid assets: “local equity markets are the main victims–as family offices are among the main active investors and traders in listed companies.”  If oil and fear spike again, even container-shipping should pause, and volume-challenged equities would be especially vulnerable.