Business and Financial Analysis
By employing the benchmarking an organisation successfully evaluates its strategic capability against other organisations. Benchmarking can thus be regarded as a process that stimulates the improvement and change. 3. 4 Benchmarking Benchmarking is used as a way of understanding how CapitaLand’s strategic capability compares with City Developments Limited (CDL). The analysis provides the pros and cons of CapitaLand against CDL. As one of Singapore’s property pioneers since 1963, CDL is a listed international property and hotel conglomerate in the fields of real estate, hotel facilities management and hospitality.
CDL had controlled its cost effectively so that its GPM and ROCE were higher than CapitaLand; even though its revenue was much lower (Table 17). CapitaLand might adopt Bowman’s differentiation strategies (Bowman, 1997). It owns a powerful brand and core competences, such as Raffles City, which has become a well-recognised brand in Asia (CapitaLand, 2010b). CapitaLand sought a high degree of differentiation in return for a high price premium. CapitaLand’s NPM were much higher than CDL’s due to high return from associates and joint ventures (Appendix 2 and 5).
Both CapitaLand’s current ratio and quick ratio were higher than those of CDL (Table 17), indicating that CapitaLand had better financial health than CDL. However, CapitaLand had around 2. 5 times interest-bearing borrowings and 3. 8 times cash and cash equivalents than CDL (Appendix 1 and 4). It showed that some of CapitaLand’s long-term sources of finance were used as fluctuating current assets. By using such a conservative financing policy CapitaLand had to pay higher finance costs and generated lower profitability, which resulted in much lower interest cover than CDL, as given in table 17.
CDL had lower net operational cycle than CapitaLand (Table 17). This demonstrated that CDL had better management on its working capital and thus needed less financial resource than CapitaLand. That was why CDL had lower long-term borrowings and less share capital comparing than CapitaLand (Appendix 1 and 4). With higher profitability and lower share issued, CDL’s earnings per share were 51 cents higher than that of CapitaLand. The lower dividend cover of CDL was due to 18 cents dividend paid comparing to 6 cents paid by CapitaLand (CapitaLand, 2011b and City Developments Limited, 2010b).