UPDATE 3-DP World sees little sign of volume recovery

* Sees no end in sight to fall-off in activity

* Sees 8 pct decline in volume in first two months of '09

* Stock rallies 13 pct as analysts recommend 'buy' (Adds net profit, further analyst comment, updates shares)

By Thomas Atkins

DUBAI, March 25 (Reuters) - Dubai-based port operator DP World DPW.DI said there was no end in sight to a fall-off in activity caused by the global downturn, after reporting an 8 percent drop in trade volumes in the first two months of 2009.

The company, one of the world's largest container operators, reported a 19 percent rise in 2008 net profit to $572 million, ahead of expectations, but only after a sharp contraction in the last quarter of the year.

"This volume decline has continued into 2009 and in the first two months of the year we have seen an average decline of 8 percent in consolidated volume across the group," the company said in a statement. [DPW.DI-CNR]

Shares in the company, a bellwether for global economic activity, dipped as much as 4.5 percent on the uncertain outlook but then rallied 13 percent to $0.26 after analysts recommended buying the stock following its recent slump.

The World Trade Organisation expects global trade volumes to fall 9 percent in 2009 in the biggest contraction since World War Two as demand collapses in the most serious economic downturn in decades.

"The volume deceleration we saw in the last quarter of 2008 has continued into early 2009 and shows little sign of easing in the foreseeable future," said DP World, which operates 48 marine terminals and 13 new port developments in 31 countries.

The company said it would delay plans to expand capacity until it saw demand rise and that it would consider new options to address the fall in its share price, which hit a low of $0.17 on March 5 after a high of $1.25 on January 4, 2008.

"Over the next few months the board will evaluate all available options to address its continued disappointment with the market's valuation of the company," DP World said.

WARM WELCOME

Analysts welcomed the results but were left to puzzle over what measures the group was considering to improve its share price, saying a share buyback was one possibility.

Nabil Ahmed, analyst at Deutsche Bank, said the results met expectations and upgraded his rating to "buy" while cutting the share price target to $0.30, saying the share price slide, down 46 percent so far this year while peers are up 4 percent, made the stock a bargain.

"Management is now seriously addressing the falling volumes issue by drastically cutting new capacities and costs," Ahmed said in a note to clients.

"Key risks include further deterioration in global trade, high exposure to Dubai's weakening economy, which accounts for circa 50 percent of profits, and capacity utilisation rate, which is a key factor influencing margins," Ahmed said.

Analysts at Citibank said they expected the company to consider selling shares to strategic investors, changing its current listing -- the company is now listed on Nasdaq Dubai -- or even taking the company private.

"None look simple and not all might be feasible or desirable to the majority shareholder," Citi analysts said in a note. "Fundamental value is far higher than the current share price unless volumes collapse and recovery is 'L'-shaped."

Societe General analyst Matthew O'Keefe reiterated a "buy" rating on the stock and said the group may choose to launch a share buyback or move its listing to London.

Analysts polled by Reuters Estimates had expected a 2008 net profit of $482 million. (Editing by Rupert Winchester, Greg Mahlich)