Assess the Business and Financial Performance of City Developments Limited

OXFORD BROOKES UNIVERSITY BSc (Hons) in Applied Accounting Research and Analysis Report Assess the business and financial performance of City Developments Limited (CDL) from 2007 – 2009 for the suitability of investment. March 2011 CONTENTS Page 1. INTRODUCTION a)Introduction 1 b)Background of City Developments Limited (CDL)1 – 2 c)Background of Industry2 – 3 2. INFORMATION GATHERING a)Sources of information 4 b)Method use 4 3. ANALYSING PERFORMANCE a)Overall review of the group performance 5 b)Profitability 5 – 7 c)Efficiency 8 – 9 d) Gearing 10 – 11 e)Liquidity 12 – 13 )Investor 14 – 15 4. CONCLUSION 16 5. APPENDICES a)Consolidated Income Statement 17 b)Statements of Financial Position 18 c)Ratio Analysis 19 6. BIBILOGRAPHY 20 – 22 1. INTRODUCTION a. Introduction i) Topic chosen I have selected Topic 8 is to analyse the business and financial position of the company. ii)Objective The purpose to conduct this research and analysis is to assess the business and financial performance of City Developments Limited (CDL) from FY2007 to FY2009 so to provide useful information to investors for their economic decision making.

It is crucial for investors to be aware of the risk of their investment, profitability and future growth of CDL before investing in the company. To achieve this, I will review and analyse CDL’s performance for the past three years and gathering all relevant information. I will also perform detailed finding and ratios calculation in order to ensure CDL’s investment is suitable and feasible from the viewpoint as investors. CDL’s analysis is excluding financial year FY2010 due to it’s audited Annual Report 2010 is not yet available at the time of doing this research and analysis project. ii)Reason for choosing the topic Topic 8 is an interesting topic for me to learn how to analyse the company’s business and financial performances before considering invest in the company. Besides, the information required are easily accessible through internet website (e. g. Annual Reports). This is an added advantage for me to conduct the research. By selecting the topic, I am able to refresh my mind and apply what I have learnt from my past ACCA syllabus.

I am also able to review the company’s financial statement and calculate the financial ratios more accurately in a more realistic method as it is involved part of my working experiences. b. Background of the CDL CDL was incorporated on 1 September 1963 in Singapore, is a Singapore listed company held by the Hong Leong Group. The company currently holds 5 companies listed on stock exchange in New Zealand, Hong Kong, London and Philippines. It has more than 300 subsidiaries and associates running the group operations.

The company’s financial year end on 31 December. CDL’s core business activities are involvement in residential developer, commercial landlord, hotel owner and operations and provide hospitality solution services. As the Singapore’s property pioneer over the years, CDL has contributed numerous quality and luxurious homes to Singapore residential and housing market. The launched of high-end residential such as One Shenton at Marina Bay area, Botannia, St. Regis Residences, The Oceanfront at Sentosa Cove and thers are among the prestigious, excellence, good quality and well response development projects from the group. The One Shenton and The Oceanfront @ Sentosa Cove located at Singapore heartland have won the title of Best High Rise Development and Best Development respectively. Properties development is the main profit contributor to the group for the FY 2007 to 2009. 1 b. Background of the CDL (cont’d) The group also has more than 30 prime commercial properties in Singapore mainly for retail and office and industrial leasing to earn rental income.

The office-cum-retail commercial properties such as City Square Mall, Tanglin Shopping Centre, 7 & 9 Tampines Grande, 11 Tampines Concourse and others achieved high occupancy rate over the years. In addition, the 11 Tampines Concourse is awarded the Green Mark Gold Plus Award by Building and Construction Authority of Singapore (BCA) through the excellence achievement of first CarbonNeutral Development in Singapore and Asia Pacific. (CDL annual report 2009) CDL is known as one of the world’s largest hotel groups with over 100 hotels in 17 countries worldwide manage by its London listed subsidiary, Millennium and Copthorne Hotels plc.

The hotel operations is the second highest profit contributions to the group after properties development for the FY 2007 to 2009. The group has 7 hotels in Singapore of which 5 are owned by CDL Hospitality Trusts. Among the hotels in Singapore, the 5-star hotel, Grand Copthorne Waterfront Hotel located near to Singapore River and Orchard Road is the choice of many tourists ; The St. Regis Singapore is another high occupancy rate of 5-star hotel jointly developed by the group. c. Background of the industry

Singapore is a small island city state with a total land area of 697 square kilometres and the country itself has no natural resources. Nevertheless, the country has never stop from developing itself to become a ‘Hub of foreign investments’ and ‘Hub of financial centre’ in Asia and in the world. The country’s strategic location, a pro-business environment, attractive tax regime, liberal immigration policies, skilled and talented labour force, world-class infrastructure and a responsive pro-active stable government are the main factors contributed to the country in order to achieve it successfully.

To-date, the country is able to attract more than 7,000 multinational corporations mainly from the United States, Japan, China and Europe to Singapore and this has directly boost the economic growth as well as blooming the property market, real estate and hotel industry. Singapore economy, property, real estate and hotel industry have been growing consistently all the years. However, the country as well as the whole world economy was gloom in the year 2003 due to the outbreak of SARS (Severe Acute Respiratory Syndrome) and Tsunami Tragedy in 2004.

The market began to recover gradually afterwards with the assistance of Singapore government (eg. Introduce S$230 million on SARS Relief Package, allow foreign to buy land in Sentosa Cove, Real Estate Investment Trust (REIT) incentives to attract more foreign investors to Singapore. In mid 2007, the market was again hit by the United States Sub-prime crisis “Housing Bubble” which had significantly affected the Singapore economy and real estate and hotel industry growth. The economy grew by 1. 2% in 2008 down from 7. % in 2007. Urban Redevelopment Authority (URA) revealed that demand of residential property has dropped 71% in 2008 compared to 2007. This resulted 4. 7% price fell compared with 31. 2% increase in 2007. In the same year, the government has implemented stimulus packages through its 2009 budget. Including introduce resilient package to support the economy and employment, offer special risk-sharing initiative, reduce property and corporate tax rate, deferring land tax, longer the new project completion period and other.

These measures are very important to improved and help the Singapore economy recovery and to remain competitively in the property market, real estate, hotel and other industries. 2 c. Background of the industry (cont’d) Besides, the Singapore Tourism Board (STB) has announced its TOURISM 2015 mainly to boost the country’s economy growth and tourism industry by increasing the number of 17 million visitors and to achieve tourism receipt of S$30 billion.

There are tourists attractions have been implemented to achieve as follows:- – The opening of Marina Bay Sands Integrated Resort and Resorts World Sentosa in 2010 – The tallest ferris wheel in the world – Singapore Flyer in 2008 – Singapore Airshow in 2008 – Singapore International Water Week in 2008 – Formula One (F1) Singtel Singapore Grand Prix night race with world premiere of F1 Rock – Redevelopment and upgrading along Orchard Road – The host of World’s 1st Youth Olympic Games in 2010

In 2009, TOURISM COMPASS 2020 was launched as an enhancement of TOURISM 2015, aimed at developing a new tourism roadmap to upbeat the long term prospects of growth in tourism in areas for Business, Enrichment, Lifestyle, Marketing, Travel and Hospitality. With implementation of government assistances for the economy recovery, the Ministry of Trade and Industry has announced economy grew by 14. 5% in the whole of 2010, compared with decline of 0. 8% in 2009, 1. 5% in 2008 and 8. 8% in 2007. (www. singstat. gov. sg)

Therefore, the demand for property market, real estate, hotel and other industries are expected to perform well in the years ahead. 3 2. Information Gathering a. Sources of information I downloaded all the relevant information mainly from CDL website in order for me to perform the research and analysis works. Information such as CDL’s annual report for FY2007 to FY2009, articles, speeches and press updates are among the important information for me to complete this project. From the CDL annual reports obtained, I managed to review the company past years financial results and history compared to current year.

Financial information from the annual reports such as 10-years financial highlights, financial review, chairman statement, statutory reports and accounts and others are information to be reviewed and analysed when performing my research project. With these source of information readily available, it enables me to calculate and interpret the financial ratios with more accurately and efficiently. Besides, I have borrowed the hardcopy of CDL annual reports for the past 3 years from my friend. I have obtained some valuable information and advices from him as he has investing in CDL shares for some years.

In the meantime, I have visited to library to review the hardcopy of annual reports of CDL and its competitors in order for me to know deeper of the industry trend and performance. This is useful to ensure I have calculated and interpreted the financial ratios correctly by not to misleading the users. I have reviewed and referred to books regarding the financial ratios calculation and interpretation. I also made used the discussion notes and advise from my mentor as the source of information in the project. b. Method uses to gather information

CDL group’s main operations are related to real estate, residential and commercial properties, and hotel industries. In order to obtain more industries related information, I log on to websites which can provide information in form of figures, statements, graphs and statistic mainly from below: – Urban Redevelopment Authority of Singapore (URA) – Singapore Land Authority (SLA) – Building and Construction Authority of Singapore (BCA) – Statistic Department of Singapore – Economic Development of Singapore (EDB) – Singapore Tourism Board (STB) Ministry of Trade and Industry of Singapore (MTI) – Singapore stock exchange (SGX) I have conducted the search information from electronic newspapers, related speeches, articles that are valuable opinions given by professional which are useful to my research and analysis project. 4 3. Analysing Performance a. Overall review of the group performance for the financial year(FY) 2007 to FY2009 The group has performed well in FY2007 with the highest profit for the year of S$889,219 and lowest Net Assets Value of S$6,916,397.

The profit for the year dropped to S$681,675 and S$670,632 in FY2008 and FY2009 respectively. In FY2008, profit for the year declined by 24% mainly due to decrease in share of profit of jointly controlled entities; NAV has increase 9% to S$7,022,317 to S$7,644,181. S$’000 200720082009 Net Assets Value 6,916,3977,022,317 7,664,181 Profit for the year 889,219 681,675 670,632 The performances of CDL for FY2007 to FY2009 can be reviewed and complemented in more detailed below. b. Profitability Ratio i) Return on Capital Employed (ROCE)

ROCE is a measure to assess how efficiency and effectiveness CDL uses its funds employed in making the profits. As a potential investor, ROCE is used to evaluate a company’s opportunity in generating wealth in future. As calculated below, CDL’s ROCE dropped from 2. 01% and 1. 76% respectively in FY2008 and FY2009. The gradually decrease in ROCE over the years mainly due to lower Profit before Interest and Tax (PBIT) and increased value of capital employed resulted from the high development properties costs payable for the on-going projects. 200720082009 ROCE 15. 3% 13. 52% 11. 76% There are 2 other ratios to consider when analysing ROCE are:- Assets Turnover Assets Turnover measures of how well the assets of a business are being used to generate sales (BPP Professional Education 2005). From the calculation tabulated, CDL assets generated average 0. 25 times its value in total for FY2007 to FY2009 sale. It is indicating the group using its assets effectively at constant level over the years. 200720082009 Asset turnover (times) 0. 25 0. 24 0. 25 Profit Margin CDL’s Profit margin has declined by 2. 6% in FY2008 mainly due to lower contribution from the group’s development properties whereby the projects mostly completed and profits recognised in FY2007. The decline is also due to the group hotel operations in the UK suffered losses from the appreciation of Singapore Dollar against Sterling Pound and the global economic crisis. Profit margin decreased means CDL made loss S$0. 0236 per S$1of sales made in FY2008 compared with FY2007. The Profit Margin has further reduced by 4. 67% in FY2009. 200720082009 Profit margin 34. 58% 32. 22% 27. 55% 5 b.

Profitability Ratio (cont’d) ii) Gross Profit Margin (GPM) GPM is revenue less cost of sales. CDL’s GPM has increased by 4. 42% in the FY2008 and decreased 6. 83% in FY2009. The revenue for FY2009 has in fact increased by 10% but is offset by losses from hotel operations which believe will take longer time for recovery from the global economic recession. 200720082009 Gross profit margin52. 41% 56. 83% 50. 00% The ratios calculated above are based on profit before interest and tax (PBIT), revenue and capital employed. Profit before Interest and Tax (PBIT)

PBIT decreased by 11. 6% (FY2007: FY2008) mainly due to lower contribution from hotel operations in the UK. The appreciation of Singapore Dollar currency against Pound Sterling reduced the group’s hotel operations result and the lower profit of the group’s joint-controlled entities resulted from impairment charged during the year. Besides, decrease in profit from property developments is also the main factor PBIT dropped. This is due to unrecognised profit for some residential properties still in early construction stage. PBIT further decreased by 5% in FY2009.

Profit before Interest and Tax (‘000) [pic] 6 b. Profitability Ratio (cont’d) Revenue In 2007, the Urban Redevelopment Authority (URA) has released the real estate statistics showing overall prices increased of 31. 2% in private residential, 32. 6% in office, 13. 2% in shop and 22. 7% in industrial properties. The group has achieved the highest turnover of S$3,106million since FY2003. However, revenue dropped by 5. 2% to S$2,945million in FY2008 largely due to the impact of economic downturn causing the real estate market, hotel industry office and retail occupancy rate go downward.

Low contribution from the development properties and low revenue from hotel operations are the main reason for the decrease. In FY2009, the group revenue overall increased by 11% to S$3,272million mainly due to high contributions from the development properties such as The Arte, Livia, Shelford Suites and Solitaire, as the property market started to rebound in mid 2009. This revealed by URA announcement for the overall prices of private residential properties increased by 15. 8% and 7. 4% in 3rd and 4th quarter 2009 respectively. Revenue (‘000) [pic] Capital Employed Capital Employed increased by 1. 53% (FY2007: FY2008) and 9. 4% (FY2008: FY2009) mainly due to the increased in development properties as the group delay the launch of its new residential projects resulted from slower market. The significant increase in Capital Employed in FY2009 is also due to S$574million of investment properties reclassified from property, plant and equipment on adoption of revised Financial Reporting Standard 40. Capital Employed (‘000) [pic] 7 c. Efficiency Ratio Efficiency ratio measures how efficient CDL manages and employs its assets and liabilities. The efficiency ratio of CDL can be further analysed as follows:- i)Inventory Turnover

Inventory turnover reflects how frequently a company flushes inventory from its system within a given financial reporting period. (Jacob J. Bierley,Jr. MBA). The higher the inventory turnover, the quicker the inventory is sold. CDL’s inventories consists mainly high consumable food and beverage and other hotel related consumables. As calculated, CDL’s inventory turnover is much higher than the normal hotel industry average indicates the food and beverage are highly replenish and consumable. This is important to the group’s hotel operations in order to satisfy customers’ needs and maintain the hotel reputation.

FY2007FY2008FY2009 Inventory turnover (times) 99. 36 113. 32 161. 45 ii) Account Receivables (AR) Collection Period It measures the average duration needed by customers to pay the debt owing. CDL has strong credit control over its account receivables as its collection period calculated below is within the normal 30 days credit stated period over the years. This is due to properties buyers are bounded by the payment schedule set in sales and purchase agreement that they are required to make payments progressively in accordance to the construction workdone.

Besides, the group has minimal risk in collecting rental from its contractual tenants for the commercial properties and offices lease out. Another reason AR collection period is efficient because low receivables in the group’s hotel operations. At most time, hotels revenue is collected mainly in cash term (pay by cash, credit/ debit card) upon the services rendered. In FY2008, the AR collection period increased by 2 days to 19 days due to higher account receivables and lower revenue. It could be the group extended its credit term resulted from the economy downturn. However, the ncreased in revenue has improved the AR collection period in FY2009. So the group has higher level of cash to backup cash flows and to expand its operations. FY2007FY2008FY2009 AR collection period (days) 17. 59 19. 33 16. 74 8 c. Efficiency Ratio (cont’d) iii) Account Payables (AP) Payment Period It measures the length of time taken by CDL to pay its suppliers. The longer time to pay suppliers, the better CDL’s cash flow position as credit from suppliers means free credit. Overall, CDL takes 24 days to 26 days to pay off its debts to suppliers from the FY2007 to FY2009.

The AP payment period remain constant with no significant fluctuation over the years. This indicates that the movement in cost of sales is almost in-line with AP. For example in FY2008, cost of sales dropped by 14% almost consistent with 15% decreased in AP. CDL maintains good relationship with its suppliers to build up goodwill by not delaying their payments. This is important to ensure the group engages trusted suppliers who can provide reliable services to run its operations. Especially CDL is one of the named property developer in Singapore.

The group should be prudent in selecting creditworthy contractors who are able to meet the requirements. FY2007FY2008FY2009 AP payment period (days) 25. 48 24. 80 24. 79 9 d. Gearing Gearing concerns with a company’s long-term stability; how much the company owes in relation to its size, whether it is getting into heavier debt or improving its situation, and whether its debt burden seems heavy or light. (BPP Learning Media Ltd 2007) i)Net Gearing Ratio Net gearing ratio measures the proportion of equity capital employed to finance the company’s net borrowings.

The company’s financial risk is high geared if significant proportion of equity capital is used to repay the borrowings. [pic] CDL’s gearing is not more than 50% over the years and this would be considered as low gearing. The gearing remains at 48% for both FY2007 and FY2008 as the proportion increased in net borrowing is in-line with the increased capital employed. Net borrowing has increased by 1. 5% meanwhile the capital employed also increased by 1. 5% in FY2008. In FY2009, the ratio dropped 8% to 40% mainly due to lower net borrowings during the year as higher cash generated from operating activities of S$986million (FY2008: S$437. million) resulted from positive changes S$115. 5million (FY2008: -S$375. 8million) in working capital . The main change due to increased in development properties S$20million in FY2009 compared with S$340. 8million decreased in FY2008. CDL manages its capital efficiently in order to maintain an optimal capital structure to support its operations and maximise shareholders value in future development and growth. The group’s capital structure consists of equity, net borrowings and minority interests is illustrated below:- [pic] 10 d. Gearing (cont’d) ii)Interest Cover

Interest cover measures the number of times profit must be allocated to pay interest charges. (Joshua Kennon, 2001). It shows how safety CDL’s profit to shareholders against interest payable on long-term borrowings. The lower the interest cover ratio, the higher the group’s debt burden in repaying interest. FY2007FY2008FY2009 Interest Cover (times) 10. 50 11. 00 14. 50 CDL’s interest cover increased by 0. 5 to 11 times in FY2008 due to lower interest expense payable during the year. Interest charged on interest-bearing borrowings such as term loans and bank loans at lower rate compared with FY2007.

In FY2009, the group’s interest cover has improved to 14. 5 times as the interest expense further decreased by 39% during the year higher than decreased in PBIT. The loans borrowing is charged at lower interest compared with FY2008. Besides, the group has reduced the interest-bearing borrowings amount by S$130. 5million. Thus, reduced the interest charged on the outstanding borrowings during the year. (‘000) [pic] 11 e. Liquidity Ratio “Liquidity is the amount of cash a company can put its hands on quickly to settle its debts (and possibly to meet other unforeseen demands for cash payments too)”. BPP Learning Media Ltd. 2007). This ratio measures the extent a company can immediately liquidate its assets to meet liabilities. i) Current Ratio This ratio indicates the extent to which current liabilities are covered by those assets expected by be converted to cash in the near future. ( Eugene F. Brigham, Joel F. Houston) FY2007FY2008FY2009 Current ratio (times) 2. 92 2. 86 2. 72 As a general rule, the normal current ratio of 2 or higher shows the healthy financial position of the company can retire its current debts.

CDL’s current ratio is maintained at more than 2 times greater over the 3 years means the group has twice of assets to cover its liabilities. As calculated, CDL’s current ratio is gradually decreased over the years due to higher current liabilities. In FY2008, the ratio declined resulted from increase in trade and other payables as higher project development costs and hotel operating and staff costs were accrued during the year. The group has also issued 72 million secured Notes and S$500 million Medium Term Bonds resulted higher interest-bearing borrowings during the year.

Higher tax expense accrued by the group in FY2009 has further reduced the current ratio. Current liabilities (‘000) [pic] 12 e. Liquidity Ratio i) Current Ratio (Cont’d) The group’s current assets as shown below mainly consist of development properties, trade and other receivables and cash and cash equivalents. The slight dropped in current ratio for FY2008 and FY2009 are caused by the higher proportion of current liabilities increased which is not in-line with the increased in development properties and trade and other receivables.

Also, the cash and cash equivalents has just increased 9% and 26% in FY2008 and FY2009 respectively. Current Assets (‘000) [pic] Development properties is the biggest assets in the current assets over the 3 years. It is stated at development properties costs plus attributable profits minus net of progress billings. The development properties increased by 11. 7% in FY2008 and 13. 2% in FY2009 largely due to higher development costs incurred and capitalised such as lands acquisition costs, development expenditure, borrowing costs on loan funding until the completion of projects.

Development Properties (‘000) [pic] 13 f. Investor Investor ratio helps equity shareholders and other investors to assess the value and quality of an investment in the ordinary shares of a company. (BPP Learning Media 2007). Potential investors use this ratio to understand and review the company’s performance and future growth when making investment decisions. i) Earning per share (EPS) It measures the profit of each share. It is important for shareholders and potential investors to know what amount of potential dividend gain from each share. The higher the ratio indicates the shares value is increased.

Thus, shareholders will be paid more dividends for the shares owned. In FY2008, the EPS dropped by 15. 8 cents to 62. 5 cents per share due to lower profit attributable to shareholders while the weighted average number of shares remain unchanged over the years. The decreased in revenue mainly from property development and hotel operations despite the economic downturn has resulted lower profit during the year. Revenue declined by S$160. 8million in FY2008 as lower contributions from the group’s development projects, hotel industry office and retail occupancy rate go downward. However in FY2009, the EPS has bounced back by 2. 8% to 63. 8 cents market closing after the group revenue overall increased tremendously to S$3,272million. The group revenue increased largely due to higher contributions from its development properties such as The Arte, Livia, Shelford Suites and Solitaire, those are among the profitable projects after property market started to rebound in mid 2009. [pic] ii) Dividend Cover It shows how many times a company can pay dividends over the current profit attributable to shareholders. This ratio is important to investors because the higher the dividend cover means the better the ability of a company maintains the level to pay dividends.

The group maintains to declare constant 7. 5 cents final dividends per ordinary share in FY2007 and FY2008. However, the dividend cover for FY2008 has doubled to 8. 32 times as the group has not declared special dividends compared with FY2007. In FY2009, the dividend cover is maintained at 7. 98 times as the group has decided to increase the final dividends payable to 8 cents to shareholders. FY2007FY2008FY2009 Dividend Cover (times) 3. 90 8. 32 7. 98 14 f. Investor (cont’d) iii)Price Earnings (PE) Ratio PE ratio measures the market price per ordinary share to the company’s earnings per share.

It provides important information to investors in making decision to buy the company’s shares at a particular market price. CDL’s PE ratio dropped by 44% in FY2008 mainly due to significant decline in market share price resulted from the global economic crisis. It shows that investors no longer has confidence over the group’s current performances that they believe will take longer time for economic recovery. In FY2009, the PE ratio increased tremendously by 77% after the economic rebounded sharply in mid 2009. This indicates that investors have returned to shares market and have high expectation in CDL future growth and performance.

FY2007FY2008FY2009 Price Earnings (times) 18. 14 10. 19 18. 12 iv)Dividend yield Dividend yield shows the percentage return a company pays dividends out to shareholders in relation to its market share price. (Ken Litte). In FY2008, CDL’s dividend yield decreased by 0. 23% largely due to lower dividends per share payable to shareholders. In FY2009, the dividend yield further decreased by 0. 49% resulted from the higher earnings per share. [pic] 15 4. Conclusion Financial ratios are part of the important tools for an investor to assess the risk of their investments in the company’s performance and future growth.

It helps investors to identify the potentiality of a company and making sound decisions in their investment. The 5 financial ratios analysed are Profitability, Liquidity, Efficiency, gearing and investment ratios. Generally, CDL’s profitability ratios slightly decline in FY2009 compared with both FY2008 and FY2007 mainly affected by the global economic turmoil. Lower Profit before Interest and Tax from the group’s operations has resulted Return on Capital Employed (ROCE) decreased in the FY2008 & FY2009. However, the Gross Profit Margin increased by 4. 42% to 56. 83% in FY2008 and subsequently dropped to 50% in FY2009.

It is believe that the profitability ratios can certainly be improved with the economy, property market and hotel operations rebound strongly which had started slowly in mid 2009. The group has confidence to generate higher revenue and earnings to improve the group’s profitability ratios in the coming years. In respect of liquidity, the group maintains its current ratio in the range between 2. 5 to 3 times in FY2007 to FY2009. It means CDL has 2. 5 to 3 times assets to cover the current liabilities payable CDL manages its working capital effectively to ensure the group’s operations run smoothly with no issue in paying current debts.

The group increased its current assets by 8. 5% and 5. 2% in FY2008 and FY2009 respectively in the productive assets such as high-end development project, The Arte, Livia, Shelford Suites, Solitaire and Quayside at Sentosa Cove. CDL placed its cash balances and bank deposits in the reputable banks to ensure the group has sufficient cash to settle its short-term liabilities. The group has also maintained strong and healthy net increase in cash and cash equivalents of S$91million and S$204million in FY2008 and FY2009 individually. Overall, the group has no liquidity risks in its operations.

Efficiency ratio is important as it measures how well CDL’s assets and liabilities being managed and utilised effectively to generate revenue. CDL has high inventory turnover indicated the inventories are high consumable and perishable in the group’s hotel operations. Account receivable collection and account payable payment period have not much fluctuation over the years due to the group effective long-term management strategy. CDL’s financial risk is low geared as the group able to maintain its gearing ratio below 50% over the years. It means the group has higher proportion of capital to cover its debts.

The group’s earnings per share and price earnings ratios declined by 20% and 44% in FY2008 largely due to the impact of shares market collapsed over the world. However, the ratios have improved in FY2009 following the economy rebounded as the investors have confident over the group’s operation performances and future growth in the near future. In additions, the growth in dividend cover from 3. 9 times to 8. 32 times (FY2007: FY2008) and 7. 98 times in FY2009 indicate the group maintains its dividend payout rate and declare attractive dividends payout in future.

After assessing and studying all the key financial ratios and interpretation, CDL has the potential for growing in the future. The group overall performances appear to be strong and financially stability. Currently with the Singapore government support and assistance measures to boost the economy and industries growth, it will be further improving the property and hotel outlook in the future. Thus, CDL is the ideal company to be invested by potential investors. 16 5. Appendices a. Consolidated Income Statement |The Group | | | | | | | |2007 |2008 |2009 | | |$’000 |$’000 |$’000 | | | | | | |Revenue |3,106,106 |2,945,229 |3,272,825 | | | | | | |Cost of sales |(1,478,150) (1,271,410) |(1,637,637) | | | | | | |Gross profit |1,627,956 |1,673,819 |1,635,188 | | | | | | |Other operating income |29,202 |138,083 |7,896 | | | | | | |Administrative expenses |(522,757) |(504,569) |(460,566) | | | | | | |Other operating expenses |(396,230) |(527,523) |(375,612) | | | | | | |Profit from operating activities |738,171 |779,810 |806,906 | | | | | | |Finance income |49,218 |30,760 |31,844 | | | | | | |Finance costs |(119,486) |(115,273) |(70,077) | | | | | | |Net finance costs |(70,268) |(84,513) |(38,233) | | | | | | |Share of after-tax profit of associates |16,254 |19,006 |17,437 | | | | | |Share of after-tax-profit of jointly-controlled entities | | | | | |270,456 |119,504 |45,476 | | | | | | |Profit before income tax |954,613 |833,807 |831,588 | | | | | | |Income tax expense |(65,394) |(152,132) |(160,956) | | | | | | |Profit for the year |889,219 |681,675 |670,632 | | | | | | |Attributable to: | | | | |Equity holders of the Company | | | | |Ordinary shareholders |712,089 |568,038 |580,517 | | | | | | |Preference shareholders |12,904 |12,906 |12,904 | | |724,993 |580,944 |593,421 | |Minority interests |164,226 |100,731 |77,211 | | | | | | |Profit for the year |889,219 |681,675 |670,632 | | | | | |Earnings per share | | | | |Basic |78. 3 cents |62. 5 cents |63. 8 cents | | | | | | |Diluted |76. 0 cents |60. 9 cents |61. 6 cents | 17 b. Statement of Financial Position |The Group | | |2007 |2008 |2009 | | |$’000 |$’000 |$’000 | |Non-current assets | | | | |Property, plant and equipment |4,257,799 |4,161,527 |3,616,768 | |Investment properties |2,468,253 |2,312,675 |3,063,766 | |Investment in: | | | | |associates |277,615 |348,644 |345,725 | |jointly-controlled entities |553,213 |693,860 |675,702 | |Financial assets |183,880 |162,718 |393,660 | |Other non-current assets |30,981 |18,569 |121,243 | | |7,771,741 |7,697,993 8,216,864 | | | | | | |Current assets | | | | |Development properties |2,578,015 |2,920,056 |3,278,635 | |Consumable stocks |14,877 |11,220 |10,143 | |Financial assets |67,509 |19,727 |32,671 | |Trade and other receivables |1,074,806 |1,098,648 |757,820 | |Cash and cash equivalents |711,602 |775,882 |981,486 | | |4,446,809 |4,825,533 |5,075,537 | | | | | | |Total Assets |12,218,550 |12,523,526 |13,292,401 | | | | | | |Equity attributable to equity holders of the Company | | | | | | | | | |Share capital |1,991,397 |1,991,397 |1,991,397 | |Reserves |3,207,387 |3,438,311 |3,981,077 | | |5,198,784 |5,429,708 |5,972,474 | |Minority interests |1,717,613 |1,592,609 |1,691,707 | |Total Equity |6,916,397 |7,022,317 |7,664,181 | | | | | |Non-current liabilities | | | | |Interest-bearing borrowings |3,235,377 |3,286,610 |3,197,816 | |Employee benefits |36,999 |27,259 |40,682 | |Other liabilities |74,739 |84,388 |89,301 | |Provisions |3,464 |2,400 |1,818 | |Deferred tax liabilities |426,812 |410,616 |433,797 | | |3,777,391 |3,811,273 |3,763,414 | | | | | | |Current liabilities | | | | |Trade and other payables |585,002 |641,218 |795,599 | |Interest-bearing borrowings |796,290 |860,063 |818,312 | |Employee benefits |15,718 |14,536 |15,383 | |Other liabilities |2,236 |2,099 |75 | |Provision for taxation |115,894 |167,130 |230,528 | |Provisions |9,622 |4,890 |4,335 | |Liabilities classified as held for sale |- |574 |- | | |1,524,762 |1,689,936 |1,864,806 | | | | | | |Total Liabilities |5,302,153 |5,501,209 |5,628,220 | |Total equity and liabilities |12,218,550 |12,523,526 |13,292,401 | 18 c. Ratio Analysis |2007 |2008 |2009 | | | | | | |PROFITABILITY | | | | | | | | | |Return on Capital Employed (ROCE) |15. 53% |13. 52% |11. 76% | |Asset turnover |0. 25x |0. 24x |0. 25x | |Profit Margin |34. 58% |32. 22% |27. 55% | |Gross Profit Margin |52. 41% |56. 83% |50. 0% | | | | | | | | | | | |LIQUIDITY | | | | |Current Ratio |2. 92x |2. 86x |2. 72x | | | | | | | | | | | |EFFICIENCY RATIO | | | |Inventory Turnover |99. 36x |113. 32x |161. 45x | |Account Receivables Collection | | | | | Period |17. 59 days |19. 33 days |16. 74 days | |Account Payables Payment | | | | | Period |25. 48 days |24. 81 days |24. 9 days | | | | | | | | | | | |GEARING | | | | |Gearing Ratio |48% |48% |40% | |Interest Cover |10. 5x |11x |14. x | | | | | | | | | | | |INVESTOR | | | | |Earnings Per Share (EPS) |78. 3 cents |62. 5 cents |63. 8 cents | |Dividend Cover |3. 90% |8. 32% |7. 98% | |PE Ratio |18. 14x |10. 19x |18. 2x | |Dividend Yield |25. 54% |12% |12. 54% | | | | | | | | | | | |Market Share Price |$14. 20 |$6. 37 |$11. 56 | |Dividend Per Share |20 cents |7. 5 cents |8 cents | |No.

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