I picked up a copy of the IPO prospectus and have been reviewing it. I missed this morning's presentation. The prospectus I picked up is not the same as the longer one available online - it doesn't tell you how many shares are available for example, which left me scratching my head for a while .
Prospectus is available here (PDF pages, 466 pages(!) possibly only from within the UAE), and sample application form here (PDF, 2 pages).
[edit] If download is not possible from there, try the DP World prospectus topic for alternative links [/edit]
Trading symbol: DPW
Total shares offered: 2.822 billion (17% of outstanding shares)
Total outstanding shares in DPW: 16.6 billion
Over-allotment option: 498 million shares
Nominal value: $0.10 per share
Profit figures and estimates from Zawya Dow Jones
2006 Net Profit attributable to shareholders = $191,780,000
2006 EPS = $0.0116
2006 PE at $1.00 per share = 86.6
2007 Net Profit estimate = $354,000,000
2007 EPS estimate = $0.0213
2007 PE estimate at $1.00 per share = 46.9
2008 Net Profit estimate = $545m
2008 PE estimate at $1 per share = 30.5
2009 Net Profit estimate = $627m
2009 PE estimate at $1 per share = 26.5
2010 Net Profit estimate = $763m
2010 PE estimate at $1 per share = 21.8
Bear in mind that PE isn't the only measure of a stock's value, but based on forecast earnings from Zawya Dow Jones article (they didn't say who they got them from), shares at $1 don't look cheap to me.
Of course, those profit forecasts could turn out to be quite wrong. As for a reasonable PE to use to determine a fair value, we could turn to other port operators. There was an article last week about the HHLA Hamburg Port IPO in Germany that carried some PEs of other port operators from Reuters.
Who wrote this:
HHLA 2007 FY PE estimate = 24
Forth Ports (UK) 2007 PE estimate = 38
China Merchants Holdings (International) (China) 2007 PE estimate = 37
Shanghai International Port (Group) Co 2007 PE estimate = 58
DP World (UAE) 2007 PE estimate = 50 (sharewadi, not reuters)
So my earlier estimate wasn't too far off, now it's at 46.9 for 2007.
The Chinese stockmarket is overheated so no surprise there's a high PE there. But is the growth in DP World sufficient to justify paying a PE of close to 50? And that's assuming the shares are $1 each. If they're at the other end of the Offer Price Range, at $1.30, then 2007 PE estimate is up to 61.0. Meantime, average PE for DFM listed shares is still below 20 I think, although there's a handful at much higher levels.
So are you going to buy into the DP World IPO? Vote in the DPW poll set up last week .
Reuters 04 November 2007 wrote:
Largest Mideast IPO values DP World at $21.6 bln
DUBAI - Dubai will raise as much as $4.32 billion by selling 20 percent of DP World (DPW) in the Middle East’s largest initial public offering from Sunday, valuing the world’s fourth-biggest container port business at up to $21.6 billion.
The state-owned firm, which handled 6 percent of the global container traffic last year, will sell 2.822 billion shares at between $1 and $1.30 per share, DP World said in a statement. The offer includes a so-called greenshoe option that allows DP World to sell an additional 498 million shares to meet demand.
The total offer will represent 20 percent of DP World’s 16.6 billion existing shares, according to Deutsche Bank, one of four lead managers of the IPO.
“On the expectation that the IPO is a success, you should consider that the greenshoe would be exercised,” Iain Macleod, managing director for infrastructure at Deutsche Bank, told reporters.
If it sells the shares, including the greenshoe option, at the top end of the price range DP World will raise $4.32 billion.
That will surpass the $2.72 billion Saudi Telecom Co. raised in its public share sale in 2003 as the Middle East’s largest IPO. Saudi Telecom also sold shares to government funds taking the total raised to $4.08 billion.
DP World’s final offer price will be determined by a process of book building.
A person familiar with the plan told Reuters on Sept. 11 that DP World would sell 20 percent of its shares this year in an IPO that would value the company at as much as $22 billion.
The sale of existing shares closes on Nov. 15 and the company will list on the Dubai International Financial Exchange (DIFX), which is set to become an affiliate of US bourse Nasdaq Stock Market Inc under a deal agreed last month.
The IPO could breathe life into the DIFX, a bourse at the heart of Dubai’s ambitions to become a global financial centre but one that has barely attracted investor interest after a 2005 launch trumpeted as the birth of the Arab Hong Kong.
The sale is open globally to institutional investors, nationals of six Gulf Arab oil producers and residents of the United Arab Emirates. Dubai is the second-largest member of the UAE federation.
Cash from the sale will be used to pay off Islamic bonds, Sultan Bin Sulayem, chairman of DP World’s parent Dubai World told reporters when the IPO was announced last month.
Dubai sold $3.5 billion of Islamic bonds to help finance DP World’s $6.8 billion acquisition last year of British rival P&O.
Bonds of Dubai’s Ports, Customs & Free Zone Corp (PCFC), which mature in January and are convertible into shares in any DP World IPO, have been rising on growing interest in owning stock in the company.
DP World is worth about US$10bn (Dh36.7bn), Drewry Shipping estimated after the P&O acquisition last year. A sale of 30 percent of its shares to raise $3.5 billion would value the company at about $10.5 billion.
Well, a $10 billion valuation for DPW appears to be way off the mark based on the the DP World IPO pricing. I don't know Drewry Shipping though. How good are their estimates? They must be better than ShareWadi at least
I was trying to find a balance sheet for DPW in their prospectus, it doesn't seem easy - they've got figures for Dubai Ports Authority (DPA) which is a different organisation that appears to have handed off DPW to Dubai World. Still trying to figure it all out.
That reference is from Bloomberg by the way, not uaeinteract . Was posted here at the time, along with some commentary and another report ...
I was gng thru the DPW prospectus ... nominal price ( book value ) of the stock is $ 0.10 ... i understand this to be the par value of the shares ... which means the premium is bout $ 0.90 to $ 1.20 ... ??? thats a pretty stiff premium ...
I saw that too. It probably doesn't mean that much. If I understand it correctly, the par value could be a relatively arbitrary amount that reflects a historical company value. After some time (we hope), a company is worth much more than that as it grows for example First Gulf Bank (FGB) and National Bank of Dubai (NBAD) are currently trading at around 20 or more dhs per share but par value is still only 1 dh per share.
The nominal value may have been determined some time ago when DPW was set up, presumably with government funds, and is obviously worth a lot more now.
This was part of the problem (or attraction) with UAE IPOs in the past. That arbitrary 1 dh per share par value was fixed as an IPO price, by the Ministry of Economy I think, and if the number of shares had been set a long time before the company did their IPO, the company ended up being way undervalued. _________________ UAE IPO list | posting guidelines
3. let say the it is priced at the upper end lets say 1.2 or 1.3 what will be the PE ratio in this case? and what does this mean?
sharewadi wrote:
2007 Net Profit estimate = $354,000,000
2007 EPS estimate = $0.0213
2007 PE estimate at $1.00 per share = 46.9
A simple calculation is just to multiply the $1 PE by the factor the share price is increased by - in this case 1.2 or 1.3.
So you get a 2007 PE estimate of 56.3 or 60.1.
What does it mean? Well, I'd like to see profit growth of 40% or more per annumn to justify such a high PE. The only forecast I've seen (and I don't know how reliable it is) is less than that.
A company as solid and large as DP World is probably worth a premium but I wouldn't have thought 3x what the current average market PE is in the UAE. _________________ UAE IPO list | posting guidelines
I've been having another look through the DP World IPO prospectus. It's not quite as exciting as watching a James Bond movie .
DP World, DPA and subsidiaries
The prospectus is not easy to follow. From what I understand, the historical income statements are for Dubai Ports Authority (DPA) which is not the same as DP World.
DP World was incorporated in the Dubai International Finacial Center (DIFC) on 09 August 2006 as a holding company for the ports related commercial activities of Dubai World. What that means when looking at the financial data provided, is that it's not very revealing when it comes to DP World activities prior to 2006.
There are a couple of organisation charts in the prospectus that illustrate the relationships between the various companies which boil down to...
DP World Limited will be owned by public shareholders and the Port & Free Zone World FZE - a subsidiary of Dubai World.
DP World Limited has two subsidiaries - DP World FZE and Thunder FZE.
DP World FZE has a subsidiary called DP World UAE.
Thunder FZE is the holding company for P&O (which you may have heard of )
DPA is disconnected from Dubai World, it is a subsidiary of Ports, Customs & Free Zones Corporation (PCFC), owned by the Dubai Government. Dubai World is also owned by the Dubai Government of course.
DP World financials
Anyway, skipping through a lot of explanation (because my head spins when I try and read it), I'm trying to get a balance sheet and income statement for DP World to do a bit of fundamental, or perhaps I should say rudimentary, analysis.
I've got a balance sheet for DP World as at 30 June 2007 (page 44 of the full prospectus) with the same figures as the DPA balance sheet (page 18 of the summary prospectus). That's thrown me a bit. There was some asset transfer, but all of the assets of DPA? And nothing left for DPA ?
Total Assets $16,399,255,000
Total Liabilities $8,333,320,000
Minority Interests $690,480,000
Shareholders Equity $7,375,455,000 (excluding minority interests)
DP World PBV
With share price at $1, and 16.6 billion shares outstanding, I get a Price to Book Value of...
PBV = 1 / (7,375,455,000 / 16,600,000,000) = 2.25 which actually looks quite reasonable, and up to a still fair looking 2.9 if shares are priced at $1.30.
DP World P/E ratio
2007 H1 profit due to shareholders is $111,205,000 (page 42 in the full prospectus) so we could double that to estimate 2007 FY profit = $222,410,000. For shares at $1, we get a Price/Earnings ratio of...
2007 PE estimate = 1 / (222,410,000 / 16.6 bn shares) = 74.6 which looks quite high to me, and an even higher 97.0 if using $1.30.
That profit figure means DP World Return on Equity (ROE) is only 3.0% - quite low compared to many other companies listed in the UAE with double-figure ROEs - and some up to 40-50%.
Of course, that profit estimate is much lower than the figure from the Zawya Dow Jones (ZDJ) article a week ago (see first post), which may be based on something more substantial than just doubling the H1 2007 profit, and is also a bit of a drop from 2006 FY profit of $247,616,000 (page 39 in prospectus). And that figure is different from the ZDJ figure of $191,780,000.
Those profit figures aren't correct for another reason, they don't include "separately disclosable items" which mean an extra $60m for 2007 H1 resulting in a net profit figure more in line with the ZDJ estimate, but a deduction of $190m for 2006 FY putting the net profit figure of $88m, as stated on page 39 of the prospectus, way below the ZDJ figure of $192m.
I assume ZDJ didn't estimate the 2006 figures, they must have had access to some concrete data but I'm at a loss to explain where they got that number.
And at a share price of $1, you get a 2006 PE of a rather unpleasant looking 188.2 based on DPW Prospectus net profit of $88 from their prospectus (page 39).
Time to give up?
At this point I give up on the review of their accounts.
Shares look fairly valued based on PBV, expensive based on PE, and forecast profit growth doesn't seem high enough to justify the high PE. But that's just one forecast and you wonder how accurate it is, given that their historical figures appear to be at odds with what DPW provided.
If anyone can point out some holes in my calculations, or understanding of the prospectus, please do. You have the con Mr Spock ... _________________ UAE IPO list | posting guidelines
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