The document provides an agenda and background information for analyzing the financial statements of Pan Pacific Hotel Group and Shangri-La Asia Limited. It discusses the hotel industry in Singapore and provides an overview of Pan Pacific and Shangri-La. Key ratios for profitability, assets, leverage, liquidity and stock market performance are to be analyzed. A SWOT analysis is also to be conducted for the two companies.

1. Advanced Financial Accounting
Interpretation of Financial Statements
Ang Hui Hui
Alvin Tan Weijun
Chin Bao Lin
Loke Kah Fai
Geraldine Tang Shih Yee

2. Agenda
• Background
– Industry
– Pan Pacific Hotel Group
– Shangri-la Asia Limited
• SWOT Analysis
– Strengths
– Weaknesses
– Opportunities
– Threats

3. Agenda
• Profitability
– Revenue
– Gross Profit Margin
– Net Profit Margin
• Asset turnover
– Fixed Asset Turnover Ratio
• Financial leverage
– Debt to Equity Ratio
– Interest Coverage

4. Agenda
• Liquidity
– Net Working Capital
– Current Ratio
– Quick Ratio
– Accounts Receivable Turnover
– Inventory Turnover
• Stock Market Ratios
– Earning per Shares
– Price to Earning Ratio
– Dividend Yield
– Net Asset Backing per Share
– Price to Book Ratio
• Conclusion
– Wanna Lui’s Profile
– SWOT Analysis
– Return on Equity
– Other Considerations
– Limitations and Assumptions
– Final Words

5. BACKGROUND

6. INDUSTRY

7. Nature of the Hotel Industry
• Goods and Service
– People travel for a variety of reasons
– Hotels will be mainly where they stay while they
are out of town
– However, hotels may be more than just a place to
stay as hotels can even be destinations too
– Hotels and motels comprise the majority of
establishment in the industry and generally
classified as offering either full-service or limited
service.

8. Nature of the Hotel Industry
• Industry Organization
– In recent years, the industry has been dominated
by a few large national hotel chains.
– To most travelers, familiar chain establishments
represent dependability and quality at predictable
rates.

9. Nature of the Hotel Industry
• Recent Developments
– Increased competitions has spurred many
independently owned and operated hotels and
other lodging places to join national or
international reservation systems.
– Online marketing of properties is so popular with
guests that many hotels promote themselves with
elaborate websites and allow people to investigate
availability and rates.

10. Background of the Hotel industry in
Singapore
• For the past few years, Asia has seen a
burgeoning middle class population that is
demanding quality products and hospitality
services.
• Being strategically situated at the centre of
this phenomenon, it is well-positioned as a
global showcase

11. Background of the Hotel industry in
Singapore
• Brand and IP Management
– Possesses the robust brand management and
marketing capabilities
– Supported by a global talent pool and abundance
of creative and media agencies
– Extensive network of Avoidance of Double-
Taxation makes Singapore an ideal choice for
Lifestyle and Hospitality companies

12. Background of the Hotel industry in
Singapore
• City of Life
– As a buzzing cosmopolitan city, Singapore is a key
tourism hub in the Asia-Pacific region
– Presents abundant opportunities for new Asian
products and concepts to be test-bedded in
Singapore before being rolled out to the rest of
the region.
– Nine of the world’s fifteen International Hotel
Groups have established their Asia-Headquarters
in Singapore.

13. Background of the Hotel industry in
Singapore
• Growing Consumer Market
– Burgeoning faster than ever before due to the
population growth, increasing urbanization and
greater consumer affluence.

14. PAN PACIFIC HOTEL GROUP

15. Pan Pacific Hotel Group
• Previously known as Hotel Plaza Limited (HPL)
• Subsidiary of Singapore-listed UOL Group Limited
which is one of Asia’s established hotel and
property company
• With its headquarters located in Singapore, the
Groups owns and manages over 30 hotels,
resorts and serviced suites
• The Group comprises of two acclaimed brands
– Pan Pacific
– ParkRoyal

16. Pan Pacific Hotel Group
Our Vision
– Bring people together to create, share and celebrate success
through passion, personalized experiences and committed
relationships.
Our Mission
– To develop people and capabilities in order to build strong
brands and reach our strategic goals of both growth and
profitability
Our Values
– Passion
– Integrity and respect
– Empowerment
– Social Responsibility

17. Company Structure
Pan Pacific Hotel
Group
Investments Hotel Operation
Pan Pacific
Hotels & Resorts
ParkRoyal Hotels
& Resorts
Hotel
Management
Spa, Lifestyle
and Restaurant
Operations
St Gregory Spa
Dou Hua
Restaurants
Serviced
Apartments

18. Pan Pacific Hotels & Resorts
• Singapore based company
• Philosophy
– “People make the difference”
• Belief
– “Small is beautiful”
• Maintain cultural integrity
– Character
– Style
– Personality

19. Pan Pacific
• A leading 5-star brand in Asia and Pacific Rim
• Situated in key cities of distinguished
destinations offering upper upscale
accommodation and services
• Under this arm, there are 18 hotels, resorts
and services suites

20. ParkRoyal
• A regional Asia Pacific 4-star brand
• Situated in gateway cities offering upscale
accommodation and services
• Under this arm, there are 7 hotels, resorts and
services suites

21. Human Resource Welfare
• Awards are offered for excellent services
• Unique awards are specially arranged for
different departments
– E.g.
• May Day Model Workers Award

22. Distribution Structure
Pan Pacific
Hotel Group
Pan Pacific
Hotel: 14
Rooms: 4057
ParkRoyal
Hotel: 9
Rooms: 2814
Others*
Hotel: 6
Rooms: 2107
*Including hotel owned by an associated company

23. SHANGRI-LA ASIA LIMITED

24. Shangri-La Asia Limited
• The founder
– Robert Kuok
• World's leading Asia-based luxury hotel group
• Comprises 65 deluxe hotels and resorts in key
cities in Asia and the Middle East
• Brands:
– Shangri-La (1981)
– Traders (1989)

25. Company Structure
Shangri-la Asia
Limited
Hotel
Management
Hotel Operation
Shangri-La
Traders
Spa and Lifestyle
Operations
Xili Golf and
Country Club
Aberdeen
Marina Club
Chi, The Spa
Property Rental
Office
Commercial and
serviced
apartment

26. Shangri-la
• A 5-star luxury hotel brand located in premier
city addresses across Asia and the Middle East
• Designed to cater to the most discerning
clientele
– Business crowd
– Affluent leisure guest

27. Traders
• A 4-star hotel brand with hotels located in
major business centres in Asia and the Middle
East.
• The smart choice for business and leisure
travellers who seek high-quality
accommodations with value for money.

28. Analysis
S W
O T

29. Strengths
1. PANTHER System
2. Member of Global Hotel Alliance (GHA)
3. Location
4. Transportation
5. Loyalty Programmes
6. Brand Image
7. Quality of Service
8. Security and Stability of Singapore

30. PANTHER System
• Central and distribution system
• Facilitate 24/7 real-time reservations
• Greater operational synergy amongst the
hotels, capturing more businesses at a lower
transactional cost
• Allow customers to enjoy greater
personalization.

31. Member of Global Hotel Alliance (GHA)
• GHA is currently the world’s largest alliance of
independent hotel groups.
• Reaching out to even a wider audience
globally while having greater economies of
scale.
• Special benefits and preferential treatments
were be given to members of each other’s
guest.

32. Location
• Proximity to the Central Business District
• In the heart of Marina Bay
• Direct access to Singapore International
Convention and Exhibition Centre
• Within walking distance from many historic
landmarks

33. Transportation
• 20 minutes from
Singapore’s Changi Airport
• Easy access backed with
well-established
transportation
infrastructure

34. Loyalty Programmes
• A way to thank their loyal customers for
choosing Pan Pacific and inviting them to
patronize again.
• Four programmes reflecting different needs:
– Pan Pacific Privileges for Advocates
– Pan Pacific Privileges for Bookers
– Pan Pacific Privileges
– Frequent Flyer Programmes

35. Loyalty Programmes
• Pan Pacific Privileges for Advocates
– Priority Reservations
– Complimentary Breakfasts
– Airport Transfers, etc.
• Pan Pacific Privileges for Bookers
– Earn privileges points from corporate booking for
redemption of rewards
• Pan Pacific Privileges
– Earn privileges points from dining for redemption of
rewards

36. Loyalty Programmes
• Frequent Flyer Programme
– Over 19 Global Airline Frequent Flyer Partnership
– Miles point will be issued for each qualifying stay
for redemption of free air tickets

37. Brand Image
• Pan Pacific has won various awards:
– 2009, Top in Q3 2009 Hospitality Index by Market
Metrix (MMHI)
– 2007 - 2009, World's Leading Business Hotel,
World Travel Awards
• Green movement:
– Pledged support for Earth Hour 2009
– 20% off final bills if customers are willing to have
their bed linen and towels changed every
alternate days

38. Brand Image
• Socially responsible
– Youth Career Development Program
• Provide innovation educational and vocational training
to disadvantaged youth who may be led astray.
– Being involved in the Singapore arts scene
• Holding fund-raising activities to provide the youths
opportunities to showcase their talents.

39. Quality Of Products
• The lists of awards are as followed:
– 2009, Top in customer satisfaction measured by Q2 2009
Market Metrix Hospitality Index (MMHI)
Pan Pacific Singapore
– 2006, Singapore's Top Restaurants - Keyaki and Hai Tien Lo,
Wine & Dine
– 2006, Singapore Best Restaurants - Keyaki and Hai Tien Lo,
Singapore Tatler
– 2002 and 2003, Best Japanese Restaurant in Asia - Keyaki,
Hospitality Asia
– 2002, Awarded 2nd Prize in Deluxe Hotel Rating, Official
Hotel Guide

40. Security and Stability of Singapore
• Free from natural disasters
• Places strong emphasis on exterminating terrorists
– Educating the public on terrorism
– Increased security in potentially high-threat areas (e.g.
Airports and MRT Stations)
– Superior defenses with high-technology weapons and well-
trained troops.
• Politically Stable
– Having a good government that responds to citizens’ needs
– No riot and uproar

41. Weaknesses
1. Diversity
2. Global Coverage

42. Diversity
• Pan Pacific lack of a resort-style
accommodation in Singapore.
• Shangri-La have Rasa Sentosa Resort.
– Which provide accommodation to travellers who
are looking for a tropical getaway.
• Therefore they have a wider customer base.

43. Global Coverage
Pan Pacific
10 countries
Shangri-La
22 countries
ParkRoyal
4 countries
Traders
6 countries
• This gave Shangri-La a big advantage over Pan
Pacific for they serve a wider market.

44. Opportunities
1. Surge in tourist arrival
2. Venue for Global Events
3. Growth in India Industries
4. Computer Reservation Systems
5. High Cost of Land in India

45. Surge in tourist arrival
• ‘Reasons to enjoy Singapore’ campaign
• S$500 million project, International Cruise
Terminal in October 2009
• Two upcoming IRs
• Hotel rates can be lowered to attract tourists

46. Venue for Global Events
• APEC
• Grand Prix F1
• Youth Olympics 2010

47. Growth in India Industries
• Growth in information technology, retail, real
estate and telecom sectors
• Low cost airlines
• Investing in tourism infrastructure

48. Growth in India Industries
• Upgrade
– National highway
– 28 regional airports
– Expanding airport in Delhi and Mumbai
• Remove
– Inland air travel tax by 15%
– Restrictions relating to aircraft

49. Computer Reservation Systems
• Easily accessible platform
• Reach out to a wider audience
• No need to call to arrange for hotel rooms
• Direct control over the price and quality

50. High Cost of Land in India
• High barrier of entry into the market
• Room rates 3 times higher
• Restricted to financially-able hotels to reap
future benefits

51. Threats
1. Hotel staffs lured by IRs
2. Risk of terrorist attack
3. Pandemic issues

52. Hotel staffs lured by IRs
• Hotel staffs are resigning their current jobs
• IRs are only recruiting people with experience
• Hotels are coming up with attractive offers to
keep staffs

53. Risk of terrorist attack
• Customers lose faith if there is an attack in
Singapore
• Decline in tourists
- low occupancy in hotels
- affect sales

54. Pandemic issues
• Avoid travelling to infected countries
• Decline in tourists
- low occupancy in hotels
- affect sales

55. Financial Year End
•31 Dec 2008
Pan Pacific
•31 Dec 2008
Shangri-la
• As both companies have the same financial year end,
the financial statements are comparable.

56. PROFITABILITY

57. REVENUE

58. Pan Pacific’s Financial Statement

59. Revenue
2007 2008 Variance
Revenue 290,159,000 315,225,000 25,066,000 9%
64%
36%
Contribution of Increased Revenue
Singapore
Other Countries

60. Revenue
• Contributing factors:
– Setting up of Pan Pacific Orchard in 1st February
2008
– Formula 1 event
– Continuation of privilege programs
– Impact of economy crisis not felt

61. Shangri-La’s Financial Statement

62. Revenue
2007 2008 Variance
Revenue 1,762,667,000 1,951,292,000 188,615,000 10.7%
41%
15%
44%
Revenue Contribution
China
Singapore
Other Countries

63. In Summary
Pan Pacific Shangri-La
Increase in Revenue 9% 10.7%
• Shangri-La is able to have a greater increase of
revenue because they operate in a greater
number of continent.

64. GROSS PROFIT MARGIN

65. Pan Pacific’s Income Statement

66. Gross Profit Margin
2007 2008
Revenue $290,159,000 $315,225,000
COGS $149,040,000 $153,970,000
Gross Profit $$141,119,000 $161,255,000
Gross Profit Margin 0.48 0.51
0.03
The increase in gross profit margin is mainly due to the
increase in revenue which caused the gross profit to be
bigger though there was slight increase in the COGS.

67. Gross Profit Margin

68. Gross Profit Margin
• Revenue
• COGS
– Employee compensation
– Repair and maintenance
– Heat, Light and Power
– Advertising and Promotion

69. Gross Profit Margin
• Revenue
– Though there was a dip in occupancy rate of 6%
to 81%, it was offset by the increase in average
room rate by 21.9% ($202 to $246), hence
explaining part of the increase in revenue
– Opening of Pan Pacific Orchard which can meet
more demands.

70. Gross Profit Margin
• Employee compensation
– There was in increase in wages & salaries and
their percentage over COGS is 54% for both years
even though there was a decrease of employees
from 711 to 683.
– Ineffective cost management

71. Gross Profit Margin
• Repair and maintenance
– There was an increase in repair and maintenance fees
due to the availability of new rooms caused by
expansion of Pan Pacific.
• Light, Heat and Power
– There was an increase in light, heat and power due to
the hike in oil prices which caused electricity to be
more expensive.
• Advertising and Promotion
– There was an increase in advertising due to the newly
opened Pan Pacific Orchard where advertising is
needed to promote it

72. Shangri-la Income Statement

73. Gross Profit Margin
2007 2008
Revenue $1,219,248,000 $1,353,271,000
COGS $493,970,000 $551,249,000
Gross Profit $725,278,000 $802,022,000
Gross Profit
Margin
0.59 0.59
0.00

74. In Summary
Why the difference in gross profit margin?
• Shangri-la has a higher increase in revenue
compared to Pan Pacific. (10.7%>9%) Shangri-
la has much more hotels in other countries.
• Shangri- la has a lower COGS compared to Pan
Pacific. (41%> 49%). Might be due to better
cost management.

75. NET PROFIT MARGIN

76. Pan Pacific’s Income Statement

77. Net Profit Margin
2007 2008
Revenue $290,159,00 $315,225,000
Net Profit $88,008,000 $15,422,000
Net Profit Margin 0.30 0.05
0.25
•A decrease in 0.25
Why?
•Fluctuation of Singapore property market
-Valuation loss of $9,840,000
•Development unable to recover cost
-Impairment charge of $37,000,000

78. Shangri-la Income Statement

79. Net Profit Margin
2007 2008
Revenue $1,219,248,000 $1353,271,000
Net Profit $374,541,000 $183,467,000
Net Profit Margin 0.31 0.14
0.17

80. In Summary
• Both companies had similar trend of decreasing
Net Profit Margin for both years.
• Pan Pacific had a greater decrease mainly due to
a larger proportion of valuation losses
– (15% vs 6%)
• By ignoring valuation gain or loss, both company
will actually have similar profit margin of 20%

81. Are the profits of the company
adequate and sustainable?
• Despite the valuation losses and economic
crisis, the company is able to generate enough
profits to cover its cost, resulting in a positive
net profit margin of 5%. If the valuation losses
are not taken into consideration, due to being
unrealizable, the company can still be able to
generate a net profit margin of 20%. Hence,
the profit is deemed to be adequate.
Due to the nature of industry, revenue is
earned on a daily basis, thus making it
sustainable.

82. ASSET TURNOVER

83. FIXED ASSETS TURNOVER

84. Pan Pacific’s Financial Statement

85. Fixed Asset Turnover
• A decrease in 0.14
• It shows that the company is in an expansion
phrase as they are buying new assets to
generate future income.
2007 2008
Sales 290,159 315,225
Net Fixed Assets 502,644 715,230
Fixed Asset Turnover 0.58 0.44 0.14

86. Fixed Asset Turnover
• The production efficiency for 2008 has
decreased as compared to 2007
• For the second quarter of the year, there were
many construction works, renovations and
refurbishment going on for the hotels under
Pan Pacific Group.
• The property under development that is
expected to be completed in 1st quarter 2011
will lead to an increase in future revenue.

87. Shangri-la Financial Statement

88. Fixed Asset Turnover
• A decrease in 0.02
2007 2008
Sales 1,219,248 1,353,271
Net Fixed Assets 3,260,931 3,789,324
Fixed Asset Turnover 0.37 0.35 0.02

89. In Summary
• Both company showed a decrease in their
fixed assets turnover. This was mainly because
both companies invested heavily in fixed
assets in 2008 to increase their room capacity
and to expand their business within the
region.

90. Investment Strategy
• In 2010 and 2012, there will be two more hotels
opening in China.
• The serviced suites in Bangkok will also be
launching in January 2010.
• Pan Pacific Hotels Group have focused on
expanding its hotel portfolio aggressively in the
key markets of China, Southeast Asia, North
America and Australia.
• Pan Pacific is also committed to create returns
and enhance asset value and responsive to
potential growth opportunities.

91. Is the company investing enough to
safeguard future profitability?
• For now, Pan Pacific is investing enough to
safeguard future profitability as they are
constantly upgrading and expanding their
hotels.
• Although this will decrease the current fixed
asset turnover but it will safeguard future
profitability.

92. FINANCIAL LEVERAGE

93. DEBT TO EQUITY

94. Pan Pacific Balance Sheet
2008 2007
$’000 $’000

95. Debt to Equity
• An increase in 0.05
• Due to the decrease in reserves and increase in
borrowings of the company.
2007 2008
Liability 218,339 238,465
Equity 829,786 767,271
Debt to Equity 0.26 0.31 0.05

96. Debt to Equity
Reason: Decrease in Reserves
• Fluctuation in fair value
-Fair value loss on available-for-sale financial assets
-Fair value loss on cash flow hedge
Reason: Currency translation differences
Reason: Increase in borrowings
• Secured bank loans in 2008
- Construction, development and acquisition of hotels
-Reduction in interest rate due to economic downturn

97. Pan Pacific
Consolidated
Statement of
Changes in
Equity

98. Shangri-La Balance Sheet

99. Debt to Equity
• An increase in 0.17
Reason: Bank loans and overdrafts
• Hotel expansion and China’s Intensive future development projects
Reason: Derivative financial instruments
• Intergroup financing between subsidiaries in Mainland China
through Renminbi loans
• Hotel’s effort to be consistent to their treasury policy
- Minimize interest risk by entering into interest rate swap contracts
to fix interest liability
2007 2008
Liability 1,915,682 2,671,323
Equity 4,185,328 4,251,388
Debt to Equity 0.46 0.63
0.17

100. Shangri-la Notes to the Financial
Statements

101. In Summary
• Both Pan Pacific and Shangri-la took up large amounts of bank
loan for the year 2008 for similar reasons. One of which is
with regards to the upcoming IRs, hotels are preparing
themselves to provide enough accommodation for tourists by
increasing the number of rooms available. Loans are able to
be used to tide over the bad downturn to keep the business
going.
Reasons:
Pan Pacific Shangri-la
Acquisition of Pan Pacific Hotel
Operation
Acquisition of land for hotel
development
Construction of new rooms in
Suzhou’s hotel
Extension of hotel in Paris
Proposed Hotel and SOHO
Development at Upper Pickering
Couple of composite development
mainly in China
Economic downturn affecting the business

102. Summary: Pan Pacific
• Pan Pacific has a lower risk of insolvency by adopting a
conservative financing strategy of relying more on equity
as opposed to debt.
• Relying more on equity financing, Pan Pacific will
incurred a higher cost of borrowing.
• Business in hotel industry is predictable. It is usually a
trend to see an increase in occupancy rate during
holidays and/ or public holidays as compared to normal
days.
• As a result of income fluctuation, hotels are less likely to
experience stable operating cash flows.

103. INTEREST COVERAGE

104. Pan Pacific Statement of Cash flows
2008 2007
$‘000 $‘000

105. Interest Coverage
• A decreased in 3.92
• Due to reasons such as property adjustments and economic factors
despite the fact that there was an increase in the revenue generated
Reasons: Property adjustments
• Fluctuation of properties value
- impairment charge on property under development
- Fair value loss on investment properties
Reasons: Economic factors
• Commotion stirred up by the bombing in Mumbai
• Economic downturn
2007 2008
Earnings before interest & tax 88,008 15,422
Interest Expense 6,901 1,747
Interest Coverage 13.75 9.83 3.92

106. Shangri-La Statement of Cash flows

107. Interest Coverage
• A decrease in 1.02
• Due to revaluation despite the fact that there was an increase in the
revenue generated
Reasons: Revaluation losses
• Fluctuation in fair value
-Fair value losses on investment properties, derivative financial
instruments
-Fall in fair value gain on loans from non-controlling shareholders
2007 2008
Earnings before interest & tax 453,117 252,883
Interest Expense 79,297 53,973
Interest Coverage 6.71 5.69 1.02

108. Pan Pacific Statement of Cash flows
2008 2007
$‘000 $‘000

109. Shangri-La Financial Statement

110. In Summary
• The factors which caused both Pan Pacific and Shangri-la to
have a decrease in their interest coverage in Year 2008 is as
follows:
Pan Pacific Shangri-la
Similarity •Economic factors
•Fluctuation in fair value

111. Summary: Pan Pacific
• For Pan Pacific, the interest coverage at 9 times gives
investors more confidence as compared to Shangri-la
(5 times).
• They would be able to meet interest obligations as
and when it falls due.

112. Are the finances of the company sensibly and
effectively structured?
• Striking a balance, Pan Pacific should not be relying too much
on equity financing. Since hotel industries are less likely to
have stable operating cash flow, adopting a more expensive
source of financing is unfavourable. Pan Pacific are not making
full use of its capital structure to borrow money from others.
• Although the external circumstances are not within Pan
Pacific’s control, they still managed to have low interest
expense over the 2yrs which has caused a relatively high
interest coverage. This enhanced confidence in investor
because the hotel will able to meet contractual interest
payments.

113. LIQUIDITY

114. NET WORKING CAPITAL
CURRENT RATIO
QUICK RATIO

115. Pan Pacific’s Balance Sheet

116. Liquidity Ratios
2007 2008
Current assets 258,209,000 79,523,000
Current liabilities 90,569,000 85,341,000
Net Working Capital 167,640,000 (5,818,000)
2007 2008
Current assets 258,209,000 79,523,000
Current liabilities 90,569,000 85,341,000
Current Ratio 2.8509 0.9318
2007 2008
Current assets 258,209,000 79,523,000
Current liabilities 90,569,000 85,341,000
Inventory 2,969,000 2,839,000
Prepayments 4,406,000 3,650,000
Quick Ratio 2.7695 0.8557

117. Liquidity Ratios
• Acquisition Of Subsidiaries
– UOL Hospitality Pte Ltd (UH) and Pan Pacific
International Pte Ltd (PPIPL)
• New Development
– Payment of balance (75%) tendered price for the Land
Parcel at Upper Pickering Street amounting to
$190million.
• Interest Rate For Fixed Deposits
– Interest rate decreased, resulting in the decrease in
interest income and ultimately cash.

118. Liquidity Ratios
• Problem:
– Careful with securing of loans
– No issuance of shares for that year
This poses a going concern issue as Pan Pacific
may not be able to pay off their current
obligations when they fall due.

119. Liquidity Ratios
• However, it can be seen that Pan Pacific is able to
generate a healthy cash flow from its operating
activities. Therefore it should not have any
problem.

120. Shangri-La Balance Sheet

121. Liquidity Ratios
2007 2008
Current assets $681,957,000 $713,510,000
Current liabilities $507,144,000 $469,078,000
Net Working Capital $174,813,000 $244,432,000
2007 2008
Current assets $681,957,000 $713,510,000
Current liabilities $507,144,000 $469,078,000
Current Ratio 1.34 1.52
2007 2008
Current assets $681,957,000 $713,510,000
Current liabilities $507,144,000 $469,078,000
Inventory $28,215,000 $31,805,000
Prepayments $60,024,000 $74,542,000
Quick Ratio 1.17 1.29

122. Liquidity Ratios
• Similar mode of operations
– Even more aggressive with more developments
• Able to maintain a healthy working capital:
– More loans had been borrowed
– Issuance of rights share

123. ACCOUNTS RECEIVABLE TURNOVER

124. Pan Pacific’s Financial Statements

125. Accounts Receivable Turnover
2007 2008
Revenue $290,159,000 $315,225,000
Average Debtors $24,272,000 $27,594,000
Accounts Receivable
Turnover
11.95 11.42
Average Collection
Period (in days)
30.5 32.0
0.53
•More relaxed credit control
•Economic Crisis
•Allowance for impairment of receivables
increased

126. Accounts Receivable Component
• Accounts
receivable is
mainly made up
of rental income
that have yet to
be received.

127. Shangri-La Financial Statement

128. Accounts Receivable Turnover
2007 2008
Revenue $1,219,248,000 $1,353,271,000
Average Debtors $71,706,000 $54,224,000
Accounts
Receivable
Turnover
17.00 24.95
Average
Collection Period
(in days)
21.5 14.6
7.95
•Stricter Credit Policy

129. In Summary
• With a stricter accounts receivable policy,
Shangri-La is able to collect its debts twice as
fast as Pan Pacific.
Pan Pacific Shangri-La
Average Collection Period
(in days)
32.0 14.6

130. INVENTORY TURNOVER

131. Pan Pacific’s Financial Statements

132. Pan Pacific’s Financial Statements
• Bulk of the inventories come from food and
beverages.

133. Inventory Turnover
4.0
Pan Pacific Hotel has fared better as compared to last
year :
•Increase in COGS
•Decrease in Ending inventory
•Purchasing in small amounts
2007 2008
Revenue $290,159,000 $315,225,000
COGS $149,040,000 $153,970,000
Ending Inventory 2,969,000 2,839,000
Inventory
Turnover
50.2 54.2
Average Age of
Inventory (in days)
7.3 6.7

134. Shangri-La’s Financial Statements

135. Inventory Turnover
2007 2008
COGS $493,970,000 $551,249,000
Ending Inventory 28,215,000 31,805,000
Inventory
Turnover
17.5 17.3
Average Age of
Inventory (in
days)
20.9 21.1
0.2
•Lower Inventory Turnover compared to Pan
Pacific.
•Buy inventory in bulk

136. Is the company managing its liquidity
position well, will it be able to sustain its
operations in the short and medium
term?
• Negative net working capital
• Good cash conversion cycle
• Seek ways to secure new funds (Bank loans
and issuing of share capital)

137. STOCK MARKET RATIO

138. EARNING PER SHARE

139. Pan Pacific Income Statement
2008 2007
$’000 $’000

140. Earnings per share
• As compared to 2007, the earnings per ordinary share takes a
huge plunge.
• Less earnings per share
• Less attractive
– increase in ordinary shares due to Rights issue
• Decrease in net profit due to economic downturn and
revaluation losses
2007 2008
Earnings per share
(cents)
21.22 2.14

141. Shangri-la Income Statement
2008 2007
US$’000 US$’000

142. Earnings per share
• Decrease in net profit due to economic
downturn
• Shares are not redeemed, purchased or sold in
2008
2007 2008
Earnings per share
(cents)
18.4471 8.3053

143. In Summary
• Both have a decrease in their earnings per
share
• The decrease of the earnings per share for Pan
Pacific is twice of Shangri-la
– Amount of revaluation loss that the hotels
suffered
• Pan Pacific’s revaluation loss = 15% of revenue
• Shangri-La's revaluation loss = 6% of revenue

144. PRICE TO EARNING RATIO

145. Pan Pacific Share Price

146. P/E Ratio
2007 2008
Share price 1.75 1.1
Earning per share 0.2122 0.0214
P/E Ratio ($) 8.2469 51.4019
• As compared to 2007, the P/E ratio has a great increase.
• Investors will have to pay more for each dollar earned by the
firm
• Increase is due to the great decrease in earnings per share
• The huge increase maybe due to high growth prospects.

147. P/E Ratio
• However if we take out the $37,000,000
impairment loss, equity holders of the
company will go up
• EPS will go up, P/E ratio go down
2007 2008
Share price 1.75 1.1
Earning per share 0.2122 0.0214
P/E Ratio ($) 8.2469 51.4019

148. Shangri-La Share Price

149. P/E Ratio
• There is a decrease in P/E ratio due to the big drop in
share price (economic reason)
– More hotels worldwide thus impact is greater
– Investors lose confidence and started to sell off the shares
2007 2008
Share price 4.4448 1.13832
Earning per share 0.1845 0.08305
P/E Ratio ($) 24.0948 13.7058

150. Stock Indexes
• Dow
Jones
Industry
Index
• Straits
Time
Index

151. DIVIDEND YIELD

152. Dividend Yield
(Pan Pacific)
• As compared to 2007, there is an increase in
dividend yield.
• Investors are able to earn more dividend for every
dollar they spend on purchasing the company’s
share.
2007 2008
Dividend per
ordinary share
0.05 0.05
Share price 1.75 1.1
Dividend Yield 0.02857 0.04545

153. Pan Pacific Financial Review
• In year 2007, there is a special dividend of 35 cents.
Therefore the normal dividend would be 5 cents.

154. Dividend Yield
(Shangri-la)
• There is an increase in dividend yield due to
the decrease in share price.
2007 2008
Dividend per
ordinary share
0.050004 0.04464
Share price 0.27 0.24
Dividend Yield 0.01125 0.03922

155. In Summary
• Both have an increase in their dividend yield
• Comparing the amount to be yield for every
dollar spend on company's share, investor will
be more interested to invest in Pan Pacific
because they have a higher dividend yield

156. NET ASSETS BACKING PER SHARE

157. Pan Pacific Income Statement
Pan Pacific notes to the financial statements

158. Net Asset Backing per Share
• As compared to 2007, there is a decrease in net asset backing
per share
– Due to the drop in shareholder equity
– Drop in reserve as a result of revaluation loss
• Accounting value for each ordinary shares issued decrease
2007 2008
Total Shareholder’
Equity
829,786 767,271
Number of ordinary
shares
600,000 600,000
Net asset backing
per share
1.38297 1.27879

159. Shangri-La Financial Statement

160. Net Asset Backing per Share
(Shangri-la)
• Shangri-la has an increase in its accounting
value for each ordinary share
2007 2008
Net asset backing
per share
2.09626 2.11959

161. In Summary
• Higher than Pan Pacific
• Investors will be more willing to invest in
Shangri-la because the amount they pay per
shares earns them higher accounting value

162. PRICE TO BOOK RATIO

163. P/B Ratio
(Pan Pacific)
• the ratio < 1 implies that the hotel is actually
worth less than its cost.
2007 2008
Share price 1.75 1.1
Net asset backing per
share
1.38297 1.27879
P/B ratio 1.26539 0.86018

164. P/B Ratio
(Shangri-la)
• the ratio < 1 implies that the hotel is actually
worth less than it cost.
2007 2008
Share price 4.4448 1.13832
Net asset backing per
share
2.09626 2.11959
P/B ratio 2.12034 0.53705

165. In Summary
• Both have their shares worth lesser than its
cost
• Even though their P/E decrease, Pan Pacific's
P/B is still slightly higher than Shangri-la's

166. Is the current stock price attractive for
investors?
• Yes
• Higher dividend yield as compared to Shangri-
La
• The possible future growth prospects
• Might generate more future income

167. CONCLUSION

168. WANNA LUI’S PROFILE

169. Wanna Lui’s Profile
• Timeframe: 5 years
• Risk appetite: Medium
• Investment return: 5% per annum

170. SWOT ANALYSIS

171. Strengths
• 4 key areas:
– Panther System
– Brand Image
– Member of Global Hotel Alliance
– Location
• Boost investors’ confidence on this share
which will have direct impact on the share
price.

172. Weaknesses
• Smaller global coverage
• Strength instead of weakness
– Share price will continue to grow smoothly and
not fluctuate much.

173. Opportunities
• Favorable to Pan Pacific due to 3 factors:
- Surge in tourist arrival
- Venue for Global Events
- Computer Reservation Systems
• Definite and will contribute to Pan Pacific’s
future growth prospect

174. Threats
• 3 potential threats:
- Hotel staffs lured by IRs
- Risk of terrorist attack
- Pandemic issues
• Affect the whole hotel industry
• For only a period of time
• Slowly regain its position

175. RETURN ON EQUITY

176. Return on Equity
2007 2008
Gross Profit 141,119,000 161,255,000
Shareholder’s Equity 801,837,000 743,808,000
Return on Equity 0.175 0.216
Gross Profit
Margin
Fixed Asset
Turnover
Financial
Leverage
• Affected by:
0.041
0.03 0.14 0.04

177. Profitability
• Still making profits through tough times:
– Ability to keep cost low
– Despite downturn
• May seems inadequate, however, it is
sustainable.

178. Investment Strategy
• Style:
– Conservative
– Prudent
– Pragmatic
• Investing in China
• Upgrading and expanding current hotels

179. Financial Leverage
• Lower risk of insolvency
• Relying more on equity as opposed to debt
• Able to meet interest obligations as and when
it falls due (9 times)
• Unstable operating cash flows
• Low interest expense
• High interest coverage

180. OTHER CONSIDERATIONS

181. Liquidity
• Health status: Not favorable
• Fast inventory and accounts receivable
turnover
• Need:
– New bank loan
– New funds from issuance of shares

182. Dividend Yield
• Growing trend over the years since 2003 to 2008
for the amount of dividend paid per ordinary
share
• Paying out more dividends even though their
share price decreased
• Dividend paid per share is the amount of revenue
earned
• Alternative investment appears to be more
attractive
• Expected growth prospects will cause dividend
yield and capital gain to increase

183. Increasing trend in dividends payout
0
1
2
3
4
5
6
2003 2004 2005 2006 2007 2008
DividendamountS$(cents)
Dividend per share

184. Alternative Investments
• Alternative investment appears to be less attractive
as compared to dividend yield of 4.5%
• However, alternative investment yield are constant
whereas share price is more unstable and is
subjected to fluctuation
Type of Instrument Yield Per Annum %
Treasury Bills 0.41
Fixed Deposit 0.175

185. P/E Ratio
• Increase in P/E ratio from 2007 to 2008
• Hotel industries are affected by Economic
crisis
• Pan Pacific amid crisis producing a 8.3 P/E
• Reflects expectation of future growth

186. P/B Ratio
• Decrease from 2007 to 2008
• Share price was unstable and the crisis
affected the whole industry
• One of the hotels higher ratio for the year
• Recovering from the economy crisis at a fairly
fast pace

187. LIMITATIONS AND ASSUMPTIONS

188. Assumptions
1) Exchange rate
• USD:
Year ended 2007- 1 USD: 1.4457SGD
Year ended 2008- 1USD: 1.4419SGD
• HKD:
Year ended 2007- 1HKD: 0.1852SGD
Year ended 2008- 1HKD: 0.1860SGD

189. Assumptions
2) Cost of Goods Sold (COGS)
• Cost of Goods Sold constitute Repair and
Maintenance; Advertising and Promotion; Employees
Compensation; Heat, Light and Power
3) Net Asset Backing Per Share
• The ratio assumes that the Pan Pacific realises all its
assets and liabilities to distribute to individual
shareholders.

190. Limitations for Ratio Analysis
1) Earnings Per Share
• Does not show how much is paid out as dividends
and how much is retained in Pan Pacific.
2 ) Price Earning Ratio
• The historical earnings used for computation may not
reflect future earnings especially if there are large
changes going on in the hotel industry.
• Market prices can move based purely on rumour and
speculation.

191. Limitations for Ratio Analysis
3) Financial Reporting Standard
• Pan Pacific’s financial statements were prepared in
accordance with Singapore Financial Reporting
Standard and Shangri-la’s financial statements were
prepared in accordance with Hong Kong Financial
Reporting Standard.
• The differences between the 2 countries Financial
Reporting Standard might cause comparisons
between figures misleading.

192. Limitations for Ratio Analysis
4) Inventory Policy
• Pan Pacific adopted First-In-First-Out
• Shangri-La adopted Weighted-Average
• A difference in inventory policy will subject to the
stocks in both companies to be accounted differently.
5) Currency translation
• For Pan Pacific, the financial statements are
presented in Singapore Dollars whereas for Shangri-
la

193. Limitations for Ratio Analysis
6) Insufficient Information
As some information are not disclosed in the
financial statements, the data that are needed to do
comparisons are not accurate.
• Example 1: Cost of goods sold
– Does not have a detailed list of what constitute
the cost of sales.
• Example 2: Revenue
– Breakdown of sales is unknown to aid in the
analysis of Pan Pacific’s main source of income.

194. Limitations for Ratio Analysis
7) Distorted Historical Data
Ratios that have been calculated using historical data
might be distorted due to the current effects of inflation.
8) Economy Condition
As the economy improves, the figures from the financial
statements might not be accurate.
9) Companies Difference
Due to the difference in size of companies and financial
structures, comparisons made might not reflect the true
status of the company with its competitions.

195. Limitations for Ratio Analysis
10) Year-End Figures
As the year-end figures are used for ratio analysis
computation, it might not represent the financial
position of the company for the whole year.
11) Non Quantifiable items
Non Quantifiable items may not be reflected in the
ratios.

196. Ethical Issues
Window Dressing
• Possibility that Pan Pacific may manipulate year end
transactions to show better financial position in their
financial statements since data used for analysis are
obtained from there.
• Interim result analysis should be done to prevent
reliance on annual figures making window dressing
more difficult.

197. FINAL WORDS

198. In the nutshell…
• Dividend yield
– Covering a stable level of 3-4%
• Capital gain
• Strengths
• Outlook of the industry
– Expected to cover another 2-3%
• Expectation of investment return is achievable.

199. However...
• Volatility of share:
– As of 27/01/10, transacted volume is 5
– During high time, transacted volume is about
1000
– Share is not liquid
• Pose a problem during cashing out

200. Pan Pacific Transaction Volume

201. Top 20 Volume

202. Conclusion
We do not encourage Ms Wanna Lui to buy hotel
industry shares.
Although Pan Pacific’s share is quite good judging
from its dividend yield of 4.5% plus its expected
capital gain, it is not very volatile due to the low
volume of daily transactions. Hence, even if
there is a profit gain on the shares, Ms Wanna Lui
would not be able to cash out quickly.
In conclusion, if Ms Wanna Lui does not expect a
quick cash out, she can consider buying Pan
Pacific shares.

203. THE END

204. Citation
• http://www.edb.gov.sg/edb/sg/en_uk/index/industry_sectors/Consumer_Products/industry_backg
round.html
• http://www.bls.gov/oco/cg/cgs036.htm
• http://www.pphg.com/about_pphg.html
• http://www.pphg.com/our_brands.html
• http://www.globalhotelalliance.com/AboutGHA.aspx?MCID=71&CAID=0&TQID=1559
• http://www.panpacific.com/en/corporate/corporate_pages/awards.html
• http://www.panpacific.com/en/singapore/location.html
• http://www.parkroyalhotels.com/en/corporate/press_release/parkroyal_hotels__resorts_wins_20
08_patron_of_the_arts_award.html
• http://www.panpacific.com/en/articles/new_central_reservations_and_distribution_system.html
• http://www.panpacific.com/en/articles/pan_pacific_hotels_and_resorts_supports_earth_hour.htm
l
• http://www.parkroyalhotels.com/en/hotels/singapore/beach_road/parkroyal/press_release/earth_
hour_at_parkroyal_on_beach_road.html
• http://www.panpacific.com/en/community.html
• http://www.fundinguniverse.com/company-histories/ShangriLa-Asia-Ltd-Company-History.html
• http://www.hotel-online.com/News/PR2005_2nd/Apr05_Ikeda.html
• http://www.vulcanrealestate.com/content/docs/2200_Westlake.pdf
• http://www.aboutus.org/PanPacific.com