CapitaLand Ltd.

Is a property management company which engage in management of property

and provision of consultancy services. The segment of CapitaLand include CapitaLand China,

CapitaLand Mall Asia, Ascott Limited, CapitaLand Singapore and others. CapitaLand was

established in November 2000 and its headquarters are found in Singapore. The CapitaLand

Singapore y owns, manage and develop residential properties for sale in Malaysia and Singapore.

The CapitaLand China is involved in development commercial, residential and integrated

properties. The CapitaLand Mall Asia is involved in owning and developing of shopping mores

in China, Singapore, India, Malaysia and Japan. The Ascott Limited segment act as an

international serviced residence owner-operator and its operation are in cities like Europe, Asia,

U.S, Pacific and Gulf region. The current price for the company share is 3.370 SGD which is

indicate 0.01 increases. To improve the company sustainability the company have invested more

on technology hence creative a positive corporate image. In 2017 the company registered

PATMI of S$267.7 million and revenue $4,609.8 million which was 12.2% decrease. This was a

result ower completion and handover of units from development projects in China.

The company is set to embark to next stage of enhancing return on stakeholder and

creating long-term sustainable value. The two project for the company growths that is real estate

investment and international expansion will help the in harnessing core competence and

competitive advantage across all classes of assets. The will also help the company allocate

capital more efficiently across different asset cycles.

To income statement and statement of financial position horizontal and vertical analysis method

were used to analyze business performance of Capitaland Company. The ability of the business

was based on five years operation.

The horizontal analysis shows that there is huge change in current asset from - 23.5% in 2017 to

a positive figure (3.9%) in 2017. Majority of the company investment was in current asset as at

end of 2017 financial period. Current asset accounted for 19.9% of the total asset. With the case

of Non-current asset there was also big change. Property investment has increase from 15.5

million to 36.5 million dollars which is 135%. The total liabilities have increased by 42% while

the total equity have increased with 31% since year 2013.

Revenue and profits have also shown gradual increase over the years 31% and 48% respectively

in the last 5 years.

Total Revenue
6,000

5,000

4,000

3,000
Total Revenue
2,000

1,000

-
2017 2016 2015 2014 2013

From 2013 to 2016 the Capitaland revenue increased gradually but there was a slight decrease in

2017. The 12% decrease as result of lower handover and completion of china project.
 Profit
2,500

2,000

1,500

Net Income
1,000

500

0
2017 2016 2015 2014 2013

Despite decrease in revenue the company profits increased rapidly in 2017. This may have

resulted from decrease in cost of sale and operational expenses. The in Singapore the cost of

doing property have decreased and hence have impact on the company.

III. Financial Ratios

Profitability Ratios

The demand of property has shown a rising demand in the last one year. This is after four

years of decline in fall of house prices. Singapore property market is expanding again hence

strengthening economic growth. Construction of residential houses is also increasing amidst

growing homebuilder sentiment. These changes in the market have affected the profitability of

Capitaland Ltd hence resulting to high profitability.

2017 2016 2015 2014 2013

Gross profit ratio 40% 30% 31% 35% 35%

Operating ratio 10% 8% 9% 13% 12%

Return on assets (ROA) 4% 3% 3% 4% 3%

Return on equity (ROE) 7% 6% 6% 7% 6%

The table above show the profitability ratios. The profitability ratios show how profit of the

company is affected by various variables. The company shows positive results in terms of profit.

The profit increased in 2014 but dropped in 2014. The drop in 2015 profits was attributed by

lower values on property revaluation gains and higher provision for predicted losses and

impairment. in 2016 and 2017 the profitability increased. Capitaland profitability increased

from 35% to 40% year by year hence the company applied good strategies to promote it

business. The operating ratio for the company are lowe compared to gross profit ratio hence

despite more expenditure spent by the company they still get profit. There is a slight change on

ROA from 3% in 2013 to 4% 2014 and then reduced to 3% on 2015, then increased in 2017 to

4%. This show that Capitaland made more profit on less investment.

They were good figure because Singtel earned more money on less amount of investment.

Likewise, ROA had the slight decrease from 16% in 2012 to 15.6% in 2015 as well as ROA

declined from 13.4% in 2011, grew drastically 26.1% in 2012 and then decreased again to 11.9%

in 2015. The trend was the same for Return on Asset though the asset invested was slightly

higher.

2. Dividend Ratios

Dividend payment is decided by the board of director based on the company

performance. The method for divided can be stock dividend, extraordinary dividend or cash

dividend. Capitaland issue cash dividend based on company profit and investment opportunity.
 Dividend 510 425 382 384 341

Earnings per share ratio 12.0 % 10.0 % 9.0 % 9.0 % 8.0 %

Dividend payout ratio 22% 28% 26% 22% 22%

The company dividend policy is to declare at least 30% of annual cash PATMI as dividend to the

shareholders. This is defined sum of realize valuation gains/losses, portfolio gains/losses and

PATMI. The table above shows that the earning per share for Capitaland increased from 8% to

12%. This increase results from increase in profits. The company have low dividend payable

ratio. This is because of many investment opportunities available for the company. The payout

ratio grew between 2013 and 2016 though there was decrease in 2017 despite increase in profits.

It is also noted that in 2017 the earning per share increased though there was decline in payout

ratio. This was as result of high increase in profits.

Stability and Liquidity

Business performance is not only measured through profitability ratio it is also accessed

by examining the liquidity and stability of the company. The liquidity risk is a key factor to

consider when measuring business performance. Liquidity measures how the business is able to

pay it short term and long term debt when they fall due. A health business should be able to pay

all its financial obligations on time. The table below applied to conclude the ability of Capitaland

company ltd to meet its financial obligations.

Current ratio 1.39 1.52 1.82 1.65 3.26

Quick ratio 0.93 0.90 0.82 0.56 1.67

 Interest Coverage 4.76 7.52 4.96 7.57 5.93

Debt to Equity ratio 0.92 0.88 0.89 0.90 0.84

Asset turnover 0.05 0.08 0.07 0.06 0.05

Creditors and investors use current ratio to understand the liquidity of the business. The

adeal current ratio is 1:1. From the table above it clear that the current ratio has change

from2013 to 2014 and capitaland Ltd current was higher than 1. This is favorable current ratio

and hence the company able to pay its debt when they fall due. The ideal quick ratio also is 1:1.

The quick ratios for Capitaland is lower than 1 except in2013 which translate that the company

has weak ability to pay off its short term obligations.

Beside that the interest on debt is used to measure the business liquidity. A higher

coverage ratio is more favorable than smaller one since high interest coverage ratio describes

business ability to pay interest based on the company profits. Interest coverage ratio for

Capitaland is favorable and has been fluctuating over time.

The other ratio evacuated is debt to equity ratio. Higher debt to equity ratio means that

the business faces more risk in terms of loans. The debt to equity Ratio for Capitaland is quite

higher between 0.84 and 0.90. This shows that the company is not financial stable and hence

high liquidity risk.

Efficiency Ratios
 Efficiency ratio measure how well business is able to utilize it asset to generate incomes.

Investors use efficiency ratio improves the company image to the creditors and investors. It is

also called activity ratio as it concentrates on company activities.

2017 2016 2015 2014 2013

Asset Turnover ratio 0.05 0.08 0.07 0.06 0.05

Current Asset turnover

ratio 0.23 0.31 0.26 0.22 0.15

inventory turnover ratio 0.68 0.76 0.47 0.33 0.31

Asset turnover, current turnover and inventory turnover ratio are used to measure the company

efficiency. The table above show that the asset turnover ratios were lower than 1 from 2013 to

20115. This shows that Capitaland Company is not able to use it asset efficiently and optimally

to generate profit. The ratio of asset to the revenue generate is very less compared to the

investment. The inventory turnover ratio is also less than one. The management should come

with more innovating way to market their product to increase their revenue.

Capitaland Company Ltd

The result of the company shows that the company outperforms the industry based on the

basis of Return on Equity. Currently the ROE is 9.2% which is relatively high compared to the

industry return on investment of 6.6% over the past one year. The company has been able to

generate higher profits using the lower equity capital. However return on equity does not tell
how much Capitaland has borrowed on the debt hence the need for evaluating the company

financial leverage to evaluate the sustainability of Capitaland’s Return on Equity.

Return on equity measure the company profits against the shareholder equity level. For

example if Capitaland invest one dollar in form of equity it will be able to generate 0.07 dollar in

earning from this. A higher ROE is preferred however other decision needs to be considered

before making investment decisions.

Return on Equity = Net Profit ÷ Shareholders Equity

Apart from financial parameters the performance is measured by use of other non-

financial indictors including the customer service, company brand, technology and innovation.

The companies have technology to enhance service delivery. For example in the recent

Capitaland launch digitalization drive to enhance e-payment of properties. The customers are

able to pay for services at comfort of their home. Digital has helped the customers to become

more influential. The company has realized that digital technology has replaced the human being

in doing business more efficiently and effectively. To increase the asset turnover ratio the

company must invest in technology.

Corporate governance

Corporate governance is set of practice that every stakeholder in the business should

comply with. Capitaland has developed in all material aspects with the guidelines, principles,

practices and recommendation in corporate government document. The company corporate

governance document should be prepared in accordance to the disclosure guide provided by

Exchange Securities Trading Limited (SGX-ST)

 CapitaLand Limited desires to have the highest corporate governance. The company is

committed in promoting its corporate governance practices. This can only be achieved through

promoting accountability, transparency, integrity, maintain practices and policies that meet

specific business requirement hence promoting business respect and trust from all the

stakeholders. All the business stakeholder should remain focused on complying with code of

ethics and corporate governance 2012 while delivering the company long-term strategic goals

and operational excellence. It is the responsibility of the company Board of Directors to promote

and implement corporate governance policies and standards. To remain competitive the company

Board of director should enhance proper governance such that the customers, investors and other

stakeholders have the confidence on the company.

The company have 12 directors of whom 11 are non-executive independent directors(

including the chairman). The company chairman and P&GCEO perform their duties

independently.

Mr Ng Kee Choe is the chairman of the board and he is an independent non-executive

member. The chairman is responsible of directing and leading the board. The P&GCEO, Mr Lim

Ming Yan is responsible for managing the business of the Group and developing and implement

policies approved by the board. He is part of executive in the business.

The chairman is the leader of the group and facilitates the condition for overall success of

the individual directors, board and board committees. With consultation with the P&GCEO the

chairman ensure that company agendas and information are delivered to the shareholder on time.

The chairman play critical role in providing guidance, advice, direction and oversight to the
strategy of P&GCOE. The chairman acts as the bridge between the executives and other

members of the board.

The chairman and P&GCEO should carry out their responsibilities independently and

should not be related. The separation of duties between the chairman and the P&GCEO provide

health professional relationship between the management and the board hence facilitating

achievement of the company objective. There is no need for the company having a lead director

since the chairman is a non-executive.

The chairman with the help of the other 10 board members act together to enhance

business performance. The board review and make recommendation on the size and composition

of the Board, membership and structure of the board committee and Directors succession plan.

The Board recommends and reviews the process for evaluating the directors, Board and Board

Committees performance. The board develops and identifies professional and training

programmes for the board.

It is clear that role of the company director is to promote corporate governance. As one of

the director I would ensure that the company investors and customer get value for their money

hence improving the company corporate image. In order to achieve this director should conduct

himself in money that creates trust to all the stakeholders of the business. The director should

ensure that he or she is accountable for all the decision he make when executing his

responsibility. As director of the company should ensure that the other directors perform their

responsibilities in accordance to the company corporate governance policy. To ensure that the

long-term objective of the company are achieved every director should carry oversight role on

the management hence making sure that the all approved recommendations are implemented.
Finally the director should be updated with the current affairs. This help the director to make

investments recommendation that will affect the performance of the company positively

therefore maximizing the wealth of the shareholder and promoting the company corporate image.