Mubasher: Moody's Investors Service has upgraded the long-term issuer rating of DP World Limited (DPW) to Baa2 from Baa3, with a ‘Stable’ outlook.
"Our decision to upgrade DP World's ratings is a result of the company's credit metrics broadly meeting the criteria for an upgrade in conjunction with Moody's recognizing that the company retains a degree of financial cushion in its credit metrics at the Baa2 level despite the current challenging global trade environment," analyst who works as Moody's Assistant Vice President Rehan Akbar said according to a recent report.
The environment for global trade remains challenging, yet DPW's credit profile is underpinned by business resilience due to the group's diversified global operations; management track record of growing and improving profitability and maintaining strong liquidity; and the financial flexibility.
DP World has a material degree of concentration risk, with about 60% of group EBITDA generation derived from assets in Dubai.
“The group is exposed to cyclical global trade volumes and given its growth ambitions, the rating incorporates execution risks related to terminal expansions and M&A,” Moody’s said.
On the liquidity level, DPW has strong liquidity with reported cash balances of about $1.3 billion as of end-June 2016, while Moody's estimates annual operating cash flow generation in excess of $2.0 billion on a reported basis in 2016.
“Moody's forecasts dividend and interest payments to be an additional $650-$700 million, leaving the company broadly free cash flow neutral over the next 12-18 months absent M&A activity,” the report added.
