Corporate Governance Compliance And Financial Strategies For Banyan Tree Holding Limited

Vertical Analysis of Banyan Tree Holding Limited

Banyan Tree Holding Limited was established in 1994 and headquarter of the company is situated in Singapore, since then it is the one of the leading company, which is recognized globally. The company expanded its operation worldwide such as in China, India, Thailand, Indonesia etc. The company is primarily engaged in the developing and managing the hotels, resorts and spa.  Further, the activities of the company are comprised with the three main segments. The name of the first segment is hotel investment segment, which is basically engaged in the investment in the hotel, the second segment of the company is property sale segment, which is engaged in the sale of the development project and sites or the sale of the service apartment and the hotels. The last segment of the company is a Fee-based segment, in this segment operations related to the hotel management, club management, innovative designs for the spa and gallery are included.

Further for the better understanding of the financial position of the Banyan Tree Holding Limited, comparison with the Mantra group limited also stated in this study. Mantra Group limited is the Australian based company which is engaged in the investment and the development of the hotel industries worldwide.

Profit and loss account

	2017		2016 Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper		2015		2014		2013
Revenue	317511		309565		370688		327366		356147
other income	50928		29652		6350		9193		22691
Total revenue	368439		339217		377038		336559		378838
Cost and expenses
cost of operating supplies	-25338	-6.87712	-25663	-7.56536	-26254	-6.96322	-27420	-8.14716	-30467	-8.04222
cost of properties sold	-28888	-7.84065	-27765	-8.18503	-58506	-15.5173	-14850	-4.4123	-13618	-3.59468
salaries and related expenses	-101387	-27.518	-99929	-29.4587	-105915	-28.0913	-103174	-30.6555	-120162	-31.7186
administrative expenses	-61472	-16.6844	-53115	-15.6581	-68195	-18.087	-59420	-17.6552	-57942	-15.2947
sales and marketing expenses	-16208	-4.3991	-19453	-5.73468	-21362	-5.66574	-17387	-5.16611	-15416	-4.06929
other operating expenses	-60477	-4.3991	-61596	-5.73468	-65796	-5.66574	-63257	-5.16611	-67136	-4.06929
profit before interest, tax, depreciation and amortization	74669	20.26631	51696	15.2398	31010	8.224635	51051	15.16851	74097	19.55902
depreciation of property, plant and equipment	-22515	-6.11092	-22341	-6.58605	-21826	-5.78881	-19520	-5.79987	-19762	-5.21648
Amortization expenses	-2599	-0.70541	-2722	-0.80244	-2882	-0.76438	-2350	-0.69824	-2694	-0.71112
profit from operations and other gain	49555	13.44999	26633	7.851316	6302	1.67145	29181	8.670397	51641	13.63142
financial income	2571	0.697809	3674	1.083083	2351	0.623545	3402	1.010818	2749	0.72564
finance cost	-28181	-7.64876	-29630	-8.73482	-28083	-7.44832	-25451	-7.56212	-23296	-6.14933
Share of results of associates	346	0.09391	33	0.009728	-35	-0.00928	31	0.009211	22	0.005807
share of results of joint venture	-1632	-0.44295	0	0	0	0	0	0	0	0
profit before taxation	22659	6.15	710	0.209306	-19465	-5.16261	7163	2.128304	31116	8.213537
income tax expenses	-7802	-2.11758	-7660	-2.25814	-6495	-1.72264	-6564	-1.95033	-12961	-3.42125
profit/loss after taxation	14857	4.032418	-6950	-2.04884	-25960	-6.88525	599	0.177978	18155	4.792286

Through the above vertical analysis of the Banyan Tree Holding limited, it has been seen that the all the operating expenses of the company was reduced, by which the gross profit of the company increased. Further, the overall profit of the company in respect of the revenue was also better than the previous financial year. The performance of the company in the year 2013 and in the year 2017 was almost similar, although in the year 2016 and 2015, company was suffered from losses.

Balance sheet

	2017		2016		2015		2014		2013
Non-Current Assets	1069751	63.68525	956024	59.44602	958803	60.18934	931223	62.28929	894381	64.3913
Current Assets	609996	36.31475	652198	40.55398	634175	39.81066	563774	37.71071	494597	35.6087
Total Assets	1679747		1608222		1592978		1494997		1388978
Non-Current Liabilities	494626	29.44646	594183	36.94658	678563	42.59714	552545	36.95961	444015	31.96703
Current Liabilities	407585	24.26467	281193	17.48471	214954	13.49385	215148	14.3912	249015	17.92793
Total Liabilities	902211	53.71112	875376	54.43129	893517	56.09098	770693	51.55147	693030	49.89496
Total Equity	777536	46.28888	732846	45.56871	699461	43.90902	724304	48.44853	695948	50.10504

The above vertical analysis in respect of the balance-sheet shows that in the total asset of the company the ratio of the non-current asset was decreased however the current asset as a percentage of the total asset was increased. This may be due to the company realize its current asset more quickly in comparison with the previous financial year. Further, the ratio of the total liabilities with the total asset was decreased, and the equity of the company was increased. This is the sign of the good financial performance of the company.

 Profit and loss account

	2013	2014		2015		2016		2017
Revenue	356147	327366	-0.08081	370688	0.132335	309565	-0.16489	317511	0.025668
other income	22691	9193	-0.59486	6350	-0.30926	29652	3.669606	50928	0.717523
Total revenue	378838	336559	-0.1116	377038	0.120273	339217	-0.10031	368439	0.086145
Cost and expenses
cost of operating supplies	-30467	-27420	-0.10001	-26254	-0.04252	-25663	-0.02251	-25338	-0.01266
cost of properties sold	-13618	-14850	0.090468	-58506	2.939798	-27765	-0.52543	-28888	0.040447
salaries and related expenses	-120162	-103174	-0.14138	-105915	0.026567	-99929	-0.05652	-101387	0.01459
administrative expenses	-57942	-59420	0.025508	-68195	0.147678	-53115	-0.22113	-61472	0.157338
sales and marketing expenses	-15416	-17387	0.127854	-21362	0.228619	-19453	-0.08936	-16208	-0.16681
other operating expenses	-67136	-63257	-0.05778	-65796	0.040138	-61596	-0.06383	-60477	-0.01817
profit before interest, tax, depreciation and amortization	74097	51051	-0.31102	31010	-0.39257	51696	0.667075	74669	0.444386
depreciation of property, plant and equipment	-19762	-19520	-0.01225	-21826	0.118135	-22341	0.023596	-22515	0.007788
Amortization expenses	-2694	-2350	-0.12769	-2882	0.226383	-2722	-0.05552	-2599	-0.04519
profit from operations and other gain	51641	29181	-0.43493	6302	-0.78404	26633	3.226119	49555	0.860662
financial income	2749	3402	0.237541	2351	-0.30894	3674	0.562739	2571	-0.30022
finance cost	-23296	-25451	0.092505	-28083	0.103414	-29630	0.055087	-28181	-0.0489
Share of results of associates	22	31	0.409091	-35	-2.12903	33	-1.94286	346	9.484848
share of results of joint venture	0	0	0	0	0	0	0	-1632	0
profit before taxation	31116	7163	-0.7698	-19465	-3.71744	710	-1.03648	22659	30.91408
income tax expenses	-12961	-6564	-0.49356	-6495	-0.01051	-7660	0.179369	-7802	0.018538
profit/loss after taxation	18155	599	-0.96701	-25960	-44.3389	-6950	-0.73228	14857	-3.1377

The horizontal analysis of the company shows that in the initial year, the revenue of the company reduced, however in the year 2017 the company increased its revenue by the 2% and along with the other income the total revenue of the company increased by the 8%. Along with this, the expenses of the company was also decreased in spite of the increased revenue, by which the company earned more profit.

	2013	2014		2015		2016		2017
Non-Current Assets	894381	931223	0.041193	958803	0.029617	956024	-0.0029	1069751	0.118958
Current Assets	494597	563774	0.139865	634175	0.124875	652198	0.02842	609996	-0.06471
Total Assets	1388978	1494997	0.076329	1592978	0.065539	1608222	0.009569	1679747	0.044475
Non-Current Liabilities	444015	552545	0.244429	678563	0.228068	594183	-0.12435	494626	-0.16755
Current Liabilities	249015	215148	-0.136	214954	-0.0009	281193	0.308154	407585	0.449485
Total Liabilities	693030	770693	0.112063	893517	0.159368	875376	-0.0203	902211	0.030655
Total Equity	695948	724304	0.040744	699461	-0.0343	732846	0.04773	777536	0.060981

The above horizontal analysis of the company shows that overall the total asset, total liabilities, as well as the total equity of the company, was more than in the year 2017 as compared with the earlier years. However the current asset and the non-current liabilities were reduced from the year 2016, it may be possible that the company through its current asset paid the non-current liabilities.

Horizontal Analysis of Banyan Tree Holding Limited

In the year 2016, the company was in loss of $ 6950000 in the year 2016. However, in the year, 2017, the company made the profit of $ 14857000. This leads that the performance of the company improved in the year 2017 as in comparison with the year 2017. The reason behind the better performance is the revenue of the company increased and the simultaneous reduction in the sales and marketing expenses as well as its operating expenses. Further, the company built the various strategies for the enhancing its performance such as the company through its own pipeline projects and entering into the joint venture with the other company achieving the objective of the company. Apart from this the good economic condition in the world also enhances the profitability of the company.

In the present era, the hotel industries are growing very fast to the worldwide. There is the positive relationship between the economic condition and the hotel industries. Further, the hotels, restaurant, resorts, are also the part of the hotel industries. However, research has shown that the global economic condition, social and culture of the country does not impact the hotel industries. Further due to the significant growth of the industry, the hotel industry becomes the fastest growing and dynamic economic sector in the world.

Profitability Ratio

		The amount in $’000	The amount in $’000
Ratio	Formula	Banyan tree holding limited	Mantra group
Gross profit ratio	gross profit/sales*100
	Sales	368439	688973
	gross profit	282624	472198
	gross profit ratio	76.71	68.53
Net profit Ratio	net profit/sales*100
	net profit	14857	45597
	net profit ratio	4.03	6.62
Return on ordinary shareholders fund ratio	net income attributable to equity shareholders/ equity shareholders fund*100
	net income attributable to equity shareholders	12929	43707
	equity shareholders fund	777536	477948
	Return on ordinary shareholders fund ratio	1.66	9.14
Return on Asset ratio	Net income/total asset*100
	Total asset	1679747	806259
	Return on Asset ratio	0.88	5.65

The profitability ratio of the company shows that overall financial position of the company (Uechi & et al. 2015). From the above calculation, it has been seen that the Mantra Group limited was more profitable as compared with the Banyan Tree Holding Limited. However the Gross Profit Ratio of the Banyan Tree Holding Limited was more than the mantra Group Limited, but due to the increased non-operating expenses of the Banyan Tree Holding Limited, the overall profitability reduced in comparison with the other company (Wahlen, Baginski, and Bradshaw, 2014).

Dividend Ratio

Earnings per share	net income attributable to equity shareholders/ number of equity share
	Earnings per share	1.67	15.3
P/E ratio	market price per share/earning per share
	Market price per share	0.58	2.96
	P/E ratio	0.34	0.19
Dividend yield ratio	dividend per share/ market price per share*100	1.90%	3.15%
	dividend per share
Dividend Payout Ratio	The total dividend paid to the shareholders/ net income	23.25%	67.34%
	The total dividend paid to the shareholders

The above dividend ratio shows that the shareholders of the mantra group limited receive higher profit as compared with the Banyan Tree Holding limited since the earning per share of the Mantra group Limited was significantly higher than the other company (Jabbouri, and Attar, 2017). However the Price earnings ratio of the Banyan Tree Holding limited was more than the mantra group, it means that the market value of the share of the Banyan Tree holding Limited was more than the mantra group limited (Monahan, 2018). This ratio influences the investment decision to the great extent.

Liquidity ratio

current ratio	current assets/current liabilities
	current assets	609996	130154
	current liabilities	407585	97613
	current ratio	1.50	1.33
Quick ratio	current assets-inventory/current liabilities
	current assets-inventory	602362	127055
	Quick ratio	1.48	1.30
Debt to Equity Ratio	Total liabilities/ shareholder’s equity
	total liabilities	902211	328311
	shareholder’s equity	777536	477948
	Debt to Equity Ratio	1.16	0.69
interest coverage ratio	earnings before interest and tax/ interest expenses
	earnings before interest and tax	50840	73240
	interest expense	28181	4658
	interest coverage ratio	1.80	15.72

The overall liquidity ratio of the company Banyan Tree Holding Limited was more than the mantra group. The higher liquidity ratio indicates that the company was holding more cash in hand, but it can be utilized in the other areas (Ahmed, 2015). Further, the higher liquidity ratio also shows that the company can meet its short-term obligation easily, but the ratio should be within the certain range. Since more liquidity also results in the ideal cash to the company. However the interest coverage ratio of the mantra group limited was more than the other company, it means that company can easily pay the interest on the debt as compared with the other company.

Financial Ratios Analysis

Efficiency ratio

inventory turnover ratio	cost of sales/ average inventory
average inventory	opening stock+ closing inventory/2
	cost of sales	85815	233364
	opening inventory	9398	2826
	closing inventory	7634	3099
	average inventory	8516	2962.5
	inventory turnover ratio	10.07	78.77265823
assets turnover ratio	total sales/total assets
	total assets	1679747	806259
	assets turnover ratio	0.22	0.85
receivable turnover ratio	credit sales/ average account receivables
average account receivables	opening debtors +closing debtors/2
	credit sales	368439	688973
	opening trade receivables	43155	45678
	closing trade receivables	37122	54125
	average account receivables	40138.5	49901.5
	receivable turnover ratio	9.18	13.81
payable ratio	cost of sales/ average account payable
average account payable	opening creditors +closing creditors/2
	opening trade payables	19368	44785
	closing trade payables	25311	52595
	average account payables	22339.5	48690
	payable ratio	3.84	4.79

The efficiency ratio of the company evaluates that the manner in which the company is using its assets and liabilities. All the efficiency ratios of the mantra group were higher than the Banyan Tree Holding limited, which indicates that the utilization of the asset and liabilities of the company was better than the other company. Further through the proper strategy, a company can improve its efficiency ratio.

Assessment of share prices of the company

Particular	Amount
Net Asset Value per share	S$0.714 (Banyan Tree Holdings Ltd. Annual Report, 2017)
Market price at 31st December 2017	S$0.56
Current Market Price	S$0.52

Figure 1: Graph representing fluctuation in the market share price of Banyan Tree Holding Ltd

(Source: Banyan Tree Holdings. Valuation, 2018)

A per the analysis a change of -17.97% has been assessed in a period of 53 weeks in last year (Banyan Tree Holdings. Trading Information, 2018). It can be assessed that the current market price share of Banyan Tree Holding Ltd. is lower than net asset value per share. The same represents that share price is undervalued. Thus, it can be said that presently the market is bearish thus investors can purchase shares in order to earn an appropriate return in the future. Moreover, as per the analysis of the analyst, it can be said that the company is having good value based on earning in comparison to Singapore market as well as the hospitality industry. The revenue growth of the company is not above the existing Singapore market average (Banyan Tree Holdings. Valuation, 2018). Even the shareholding fund is not appropriately used by the company as the return provided to equity is just 2.6% which is less than the average return on equity, i.e. 20% in the hospitality industry.

Generally the customer relationships, innovation, corporate social responsibility, quality of the service etc. are considered as the non-financial parameters of the company (Lau, 2015). The Banyan Tree Holding also limited through the non-financial factors improving its performance. The company enhancing the revenue through the use of e-commerce medium, it also helps in the company to enhance the customer relationship.  Along with this company also focus on the essential product line and increasing the distribution channel, so that the company ensure about the premium quality and the product that satisfy the need of the customers (Gunasekaran, & et al. 2015). The objective of the company is to enhance its financial performance after considering the social, economic and governance factors. For achieving this objective company follows are the principle of the corporate governance, which ensures about the transparency and the fairness of the operations of the company (Ho, Wu, and Wu, 2014). Moreover, for improving the brand image and create the awareness about the brand in the eye of the customer, the company enhanced its marketing principles which lead to engagement of the more customers. The company also achieves the various awards due to its good brand image. For developing the skill of the employee company also provides the training to its employee. In the year 2017, total training hours provided to the employees was 435835 hours. The company reduced its greenhouse emission and water resources through its efficient operations which also support the global economic environment. Apart from this, the company also entered with the partnership with the other companies for the sustainable tourism, optimum utilization of the resources and for the new research and innovative ideas for the business. The hotel under the new brand cassia leads to the enhancement of the market share of the company very significantly.

Economic Conditions and Financial Strategies

Therefore the Banyan Tree Holding Limited through the non-financial factors obtains the growth and the long-term success of the organization (Smith, and Van Der Heijden, 2017).

Banyan Tree Ltd is on its path to transformative journey in order to attain potential to maximum context (Banyan Tree Holdings Ltd, 2017). It has developed strong relationships with new strategic partners Accor Hotels and China Vanke Co. Ltd in order to expand its brand at a worldwide level with unprecedented pace.

The decision of developing a partnership with Vanke which is one of the largest real estate developers in China will provide the company to access an enhanced database of customers for hotel, spas and property sales (Banyan Tree Holdings Ltd. Annual Report, 2017.). The same will assist the company in enhancing its brand image, and the expertise management will make sincere efforts to accelerate the mid-range brand in order to make it strong. Moreover, an opportunity will be available to increase the profitability through being part of Vanke hotel. The immense global economic outlook will also support the decision and will assist in enhancing the existing level of income. As major economies are working on broad-based growth; the two key markets, i.e. China and Russia which will be accessible to the company will assist in extending the brand beyond luxury segment and will put customer requirements as a prime position to ride on this uptrend.

The directors of Banyan Tree Ltd are Ho KwonPing, Ariel P Vera, Chia Chee Ming Timothy, Fang Ai Lian, Elizbeth Sam, Chan Heng Wing, Tham Kui Seng, Lim Tse Ghow Olivier, Zhang Xu, Sebastien Bazin and Gaurav Bhushan. Mr Zang Xu, Gaurav Bhusan, Ariel P Vera and Ho (chairman of Laguna Resorts and Hotels) are a non-executive director of the company. Board of the company is responsible for reviewing and approving the result along with the announcement which has been released on SGXNET. Further, it is also liable for legal and regulatory compliance of report provided by management in order to assure that the company has accomplished required regulatory provisions.

As a finance director, it can be assessed that the company is moving in appropriate director in order to accomplish its main objective of redefining travelling as a journey to an iconic destination in order to develop authentic, memorable experiences. The decision of a joint venture with Vanke can be said appropriate as the company has made a healthy gain of S$40 million with the same. Moreover, the company has decreased its net gearing ratio by 17% points which were 69% in the year 2016, and it has been 52% in the year 2017. Even the cash flow of the company has boosted due to the decision of a joint venture with Vanke. The revenue of company has enhanced to a major extent in comparison to previous year, i.e. it has increased from S$ 339.217million in the year 2016 to S$ 368439 million in the year 2017 (Banyan Tree Holdings Ltd. Annual Report, 2017). It can be concluded that company has taken appropriate steps relating to its main strategic objective, i.e. to develop a globally recognized brand and enhance the physical and human environment in associates with which the company operates in order to provide attractive returns to the shareholders.

Conclusion

It can be concluded from above analysis that decision of Banyan Tree Holdings to make a joint venture with Accor Hotels, and China Vanke Co is appropriate. As due to the same company has been able to enhance its brand image in a significant manner. Moreover, the study of ratio analysis of Banyan Tree Holding and Mantra group depict that Banyan Company has higher gross profit ratio but the position is not the same in net profit ratio. Return to shareholder and return on asset ratio of both the companies specify than Mantra Group is able to satisfy shareholders by providing more return comparatively. Even Mantra group is able to generate more revenue through its asset in comparison to Banyan Tree Holding Ltd. Thus; it can be concluded that Banyan Tree holding is not able to perform in significant manner to the extent which is possible through resources available with it.

References

Ahmed, I.E., 2015. Liquidity, Profitability and the Dividends Payout Policy. World Review of Business Research, 5(2), pp.73-85.

Banyan Tree Holdings Ltd. 2017. [PDF]. Available through <https://investor.banyantree.com/>. [Accessed on 27^th September 2018]

Banyan Tree Holdings Ltd. Annual Report. 2017. [PDF]. Available through <https://investor.banyantree.com/PDF/Annual_Reports/2017/BTH_AR2017.pdf>. [Accessed on 27^th September 2018]

Banyan Tree Holdings. Trading Information. 2018. [Online]. Available through < https://sg.finance.yahoo.com/quote/B58.SI/key-statistics?p=B58.SI/>. [Accessed on 27^th September 2018]

Banyan Tree Holdings. Valuation. 2018. [Online]. Available through < https://simplywall.st/stocks/sg/consumer-services/sgx-b58/banyan-tree-holdings-shares/>. [Accessed on 27^th September 2018]

Gunasekaran, A., Irani, Z., Choy, K.L., Filippi, L. and Papadopoulos, T., 2015. Performance measures and metrics in outsourcing decisions: A review for research and applications. International Journal of Production Economics, 161, pp.153-166.

Ho, J.L., Wu, A. and Wu, S.Y., 2014. Performance measures, consensus on strategy implementation, and performance: Evidence from the operational-level of organizations. Accounting, Organizations and Society, 39(1), pp.38-58.

https://simplywall.st/stocks/au/consumer-services/asx-mtr/mantra-group-shares/news/should-mantra-group-limited-asxmtr-be-part-of-your-dividend-portfolio/

Jabbouri, I. and El Attar, A., 2017. Does a high dividend payout ratio signal proper corporate governance or high agency cost of debt?. Corporate Ownership & Control, 14(2), pp.51-58.

Lau, C.M., 2015. The effects of nonfinancial performance measures on role clarity, procedural fairness and managerial performance. Pacific Accounting Review, 27(2), pp.142-165.

Monahan, S.J., 2018. Financial Statement Analysis and Earnings Forecasting. Foundations and Trends® in Accounting, 12(2), pp.105-215.

Smith, S. and Van Der Heijden, H., 2017. Analysts’ evaluation of KPI usefulness, standardisation and assurance. Journal of Applied Accounting Research, 18(1), pp.63-86.

Uechi, L., Akutsu, T., Stanley, H.E., Marcus, A.J. and Kenett, D.Y., 2015. Sector dominance ratio analysis of financial markets. Physica A: Statistical Mechanics and its Applications, 421, pp.488-509.

Wahlen, J., Baginski, S. and Bradshaw, M., 2014. Financial reporting, financial statement analysis and valuation. Nelson Education