You can’t always get what you want, they say, but sometimes you get what you need. That thought – I think it was those ageing rockers The Rolling Stones who coined the phrase – came to me as I read through the DP World results for the financial year 2007.
Note, this was the first full year after the acquisition of the P&O ports business in early 2006, and so the first chance to judge the financial effect of that very high-profile deal. It was also the first time DPW reported as a DIFX listed company – the perfect opportunity then for the market to check out the newly restructured entity.
One instant conclusion is irresistible, though I doubt anybody at DPW would publicly admit it: those xenophobic American politicians who stopped DPW buying the United States ports business originally included in the P&O deal probably did Dubai a big favour.
By avoiding the American terminals, DPW has significantly limited its exposure to the looming threat of world recession, and ensured that Dubai will continue to benefit from the booming expansion in trade between the Middle East and Asia.
Even if the US is managing to pull out of an outright financial crisis – as the consensus seems to be at the moment – there will continue to be serious implications for the American consumer from the tightening of both cash and credit.
That means there will be less for Americans to spend on imported goods from Asia, the world’s manufacturing headquarters, which in turn means fewer goods going through the big US ports.
DPW will not mind that. Apart from some scattered interests in the Caribbean and Latin America, DPW has little of significance west of London Gateway.
Largely thanks to the anti-UAE lobby in the US Congress, DPW is left looking firmly East, to the still-thriving economies of China, India and Southeast Asia, and neatly positioned to straddle the trade routes between there and Europe.
Small wonder that Sultan bin Sulayem, DPW chairman, singled out the “faster growing economies of the emerging markets” in his analysis of the results.
The actual figures – 52 per cent profit growth to a post-tax $420 million (Dh1.54 billion) on revenue 32 per cent ahead at $2.7bn – also make the P&O deal look even better value.
The amount DPW got from AIG when it was forced to sell in December 2006 has never been disclosed, but initial estimates put the value of the US assets at around $700m.
Take this out of the purchase price, and the value of some other assets – largely property and port services – not included in the DPW flotation, and the company’s cash-generation potential makes it look good value indeed.
So why doesn’t the market agree? The shares slipped again yesterday on the Dubai International Financial Exchange, and despite all those optimistic target price forecasts a couple of weeks back, there seems little prospect for an imminent change in sentiment.
Maybe a bold corporate move is required to give the shares some impetus. The official line is that future expansion will continue to focus on the big projects that will increase capacity in the Asian ports as well as London Gateway and in Rotterdam’s Maasvlakte 2, and this is sensible, strategic stuff.
But times have changed in the US, now that banks, property and leisure businesses all seem to positively welcome investment from the Gulf.
I wonder how the US authorities would react now to a new and competitive offer for the US ports from DPW? Maybe an incoming US president would feel obliged to force it through on Capitol Hill.
P&O debacle was a blessing in disguise