In this report, we will discuss about the capital budgeting of CapitaLand, one of the largest real estate companies in Asia. Business activities and financial background of CapitaLand will be mentioned in this report, also with the evaluation of two potential mutually exclusive capital investments as well as the objective of these investments for this company.
This report also contents the analysis of four main different capital budgeting techniques used in the investments for supporting decision making process. Definition, formula of each technique will be given along with the figure of the investments as well as its advantages and disadvantages. The numeric data ...view middle of the document...
Although the headquartered and listed in Singapore, these core businesses are mainly focused in growth cities in the areas of Asia Pacific, Europe and the Gulf Cooperation Council (GCC) countries. CapitaLand is the parent company of The Ascott Group Limited and it is also the merged company of the DBS Land and Pidemco Land. Their list of subsidiaries and associates include four real estate investment trust (REITs)-which are tax designations for a real estate corporate with the purpose of reducing or eliminating the corporate income taxes-these are CapitaMall Trust, CapitaCommercial Trust, Ascott Residence Trust and CapitaRetail China Trust, as well as Australian Property group Australand. About the real estate and hospitality portfolio of the company, it includes homes, offices shopping malls, services residences and mixed developments.
1.1.2 Group structure.
CapitaLand Residential Singapore
CapitaLand Integrated Leisure, Entertainment & Conventions
Australand (listed, 59.3% ownership)
The Ascott Limited
CapitaMall Trust (listed, 29.7% ownership)
CapitaCommercial Trust (listed, 31.3% ownership)
Ascott Residence Trust (listed, 47.0% ownership)
CapitaRetail China Trust (listed, 26.6% ownership)
Quill Capita Trust (listed, 9.4% ownership)
1.1.3 Financial Background
31/ 12/2010 31/12/2009 31/12/2008 31/12/2007 31/12/2006
3,382.74 2,957.36 2,752.32 3,792.70 3,147.73
1,265.46 1,010.65 1,059.08 1,297.99 913.34
Total Operating Expense
1,819.40 1,677.54 913.93 1,480.78 1,935.19
1,563.35 1,279.82 1,838.40 2,311.92 1,212.53
Net Income Before Taxes
1,936.01 1,095.10 1,697.16 3,420.49 1,486.13
Net Income After Taxes
1,670.11 1,008.63 1,461.38 3,152.45 1,255.78
Net Income Before Extraordinary Items
1,273.14 1,052.96 1,260.11 2,759.31 985.78
1,273.14 1,052.96 1,260.11 2,759.31 1,012.68
Based on the figure of annual financial report shown above (see full version at Appendix A), it can be seen that the total revenue of the company in 2010 increased 14.38% compare to the year 2009, which is 3,382.74 million, for FY2010, revenue came from brisk home sales, and contributions from development projects in Singapore, China, Australia and Vietnam. The Gross Profit figure also increased from 1,010.65 million in 2009 to 1,265 million in 2010, which is developed by 25.12%. Although the Total Operating Expense increased by 8.46%, the Operating Income still get an increase up to 22.154% compare to the year ended 2009. Finally, the Net Income in 2010 rose up by 20.91%, from 1,052.96 million in 2009 to 1,273.14 in 2010.
For the fifth consecutive year, CapitaLand has recorded the Net Profit after tax and minority interests exceeding S$1 billion. Over the last five years, CapitaLand has achieved total Net Profit 7.4 billion. This...