BLDG 3023 Construction Business Strategy: Hotel Properties Limited

Hypothetical Case

Hotel Properties Limited (HPL) is one of the leading resort and property development corporations in Singapore and its strategic aim is to strengthen its presence and market shares in South East Asia and Australasia regions. Since early July 2018, Mr. Benson Evans (the Chief Operations Officer [COO] of HPL has been approached by representatives of two Australian corporations, i.e. Mirvac Group and Stockland Group, for discussions about potential partnership in residential and resort development. At present, HPL is very keen to form partnership with one of these corporations to fulfil its strategic organisational goals.

As such, you have just been appointed, as a Business Management Consultant, by Mr. Benson Evans to assess the overall performance of these two potential partners, i.e. Mirvac Group and Stockland Group, and provide advisory services. As part of the consultancy agreement, you are required to:

Examine and discuss the overall performance of each corporations for the past five years (i.e. 2013– 2017) in terms of their:

Capital structure and leverage measures
Liquidity measures
Efficiency measures

Performance (or profitability) measures

Growth potentials
Compare the overall performance of these two corporations;

Make recommendations to Mr. Benson Evans as to:
which corporation could be a better-capitalised and ideal partner; and
which organisational form will be most appropriate for this potential partnership
Justify your recommendations in item 3.

Answer:

Introduction

As a business management consultant, being appointed by Mr. Benson Evans who is the Chief Operations Officer of Hotel Properties Limited (HPL), the companies to be compared are Stockland Group and Mirvac Group. Both of these companies are involved in real estate business and have approached HPL for potential partnership in residential and resort development (Atkinson, 2012). As part of the consultancy agreement, the overall performance of both the companies have been analyzed individually using ratio analysis as stated below (Alvarez, 2013):

Ratio Analysis

Capital Structure and Leverage measures help us to understand the sources of finance and the dependence of debts over shareholder's equity as well as the burden of debts over the company. The various ratios helps us to understand the value of the company in terms of net worth, it's employed capital, whether the net worth is worth the fixed assets owned, the obligations over the company in terms of interest costs, etc (Berry, 2009).

Stockland Group :

Net Worth
Particulars	2013	2014	2015	2016	2017
Total Assets	14069700000	14900000000	15729000000	16942000000	17495000000
Total Liabilities	5874800000	6602000000	6942000000	7688000000	7568000000
Net Worth ( Total Assets - Total Liabilities)	8194900000	8298000000	8787000000	9254000000	9927000000
Net Worth ( Total Assets - Total Liabilities)	8194900000	8298000000	8787000000	9254000000	9927000000
Capital Employed
Particulars	2013	2014	2015	2016	2017
Total Assets	14069700000	14900000000	15729000000	16942000000	17495000000
Current Liabilities	2801800000	2953000000	3293000000	3714000000	3778000000
Capital Employed (Total Assets - Current Liabilities)	11267900000	11947000000	12436000000	13228000000	13717000000
Capital Employed (Total Assets - Current Liabilities)	11267900000	11947000000	12436000000	13228000000	13717000000

From 2013 to 2017, we see an increase in the net worth of the company which is basically due to increase in total assets every year. Over a period of five years, the company, in total, shows its net worth 20% up as compared to what it was in 2013. We see a similar change in capital employed where the current capital is approximately 21% ahead of what it was in 2013 (Boyd, 2013). Also, it shows an increase in capital employed.

Fixed Assets To Net Worth Ratio
Particulars	2013	2014	2015	2016	2017
Fixed Assets	12862800000	13294000000	14575000000	15531000000	16172000000
Net Worth	8194900000	8298000000	8787000000	9254000000	9927000000
Fixed Assets to Net Worth Ratio (Fixed Assets / Net Worth)	1.57	1.60	1.66	1.68	1.63
Fixed Assets to Net Worth Ratio (Fixed Assets / Net Worth)	1.57	1.60	1.66	1.68	1.63
Current Liablities To Net Worth
Particulars	2013	2014	2015	2016	2017
Current Liabilities	2801800000	2953000000	3293000000	3714000000	3778000000
Net Worth	8194900000	8298000000	8787000000	9254000000	9927000000
Current Liabilities to Net Worth (Current Liabilities / Net Worth)	0.34	0.36	0.37	0.40	0.38

From 2013 to 2017, we see increasing fixed assets to net worth ratio, which is undesirable in normal business days as it shows the extent of owner's cash being locked up in fixed assets and how much cash is left for business operating activities. However, Stockland shows 1.63 times of net worth in fixed assets. Also, we see an increase in current liabilities to net worth ratio which is undesirable for a business (Easton, 2010).

Total Debt Ratio
Particulars	2013	2014	2015	2016	2017
Total Liabilities	5874800000	6602000000	6942000000	7688000000	7568000000
Total Assets	14069700000	14900000000	15729000000	16942000000	17495000000
Total Debt Ratio (total liabilities / total assets)	0.42	0.44	0.44	0.45	0.43
Debt Equity Ratio
Particulars	2013	2014	2015	2016	2017
Total Debts	2352400000	2815000000	3030000000	3319000000	3272000000
Equity/Shareholder's funds	8194900000	8298000000	8787000000	9254000000	9927000000
Debt-Equity Ratio (debt / equity)	0.29	0.34	0.34	0.36	0.33

Total debt ratio and debt equity ratio are somewhat similar that shows the burden of liabilities over assets of the company. In case of total debt ratio, we see slight changes from 0.42 in 2013 to 0.43 in 2017. In case of debt equity ratio, we saw an increasing burden from 2013 to 2016 which decreased in 2017 to 0.33 times (Elaine, 2015). Thus, lower debt equity ratios show the dependence of company on leverage less. Also, the debts almost form 30% of equity's money.

Equity Multiplier
Particulars	2013	2014	2015	2016	2017
Total Assets	14069700000	14900000000	15729000000	16942000000	17495000000
Total Equity	8194900000	8298000000	8787000000	9254000000	9927000000
Equity Multiplier (total assets / total equity)	1.72	1.80	1.79	1.83	1.76

The equity multiplier helps in calculating the financial leverage of the company. From 2013 to 2017, the company's equity firms approximately 55-58% of the total assets or total balance value which means the company's debts forms 40-45% approximately from 2013 to 2017 (Fridson & Alvarez, 2012).

Times Interest Earned
Particulars	2013	2014	2015	2016	2017
Earnings before tax	440300000	528000000	604000000	681000000	857000000
Interest	79000000	79000000	69000000	74000000	79000000
Times Interest Earned (earnings before taxes and interest / interest payment)	5.57	6.68	8.75	9.20	10.85

Coming to times interest earned, we see a positive result that is the company's earnings have shown an increase every year making it sufficient enough to bear obligations such as interest costs. Currently, the earnings are 11 times approximately of its interest obligation compared to 6 times in 2013 (Girard, 2014).

Mirvac Group :

Net Worth
Particulars	2013	2014	2015	2016	2017
Total Assets	9246400000	9921700000	10403500000	11169000000	12108000000
Total Liabilities	3235600000	3745600000	3941400000	3989000000	4136000000
Net Worth ( Total Assets - Total Liabilities)	6010800000	6176100000	6462100000	7180000000	7972000000
Net Worth ( Total Assets - Total Liabilities)	6010800000	6176100000	6462100000	7180000000	7972000000
Capital Employed
Particulars	2013	2014	2015	2016	2017
Total Assets	9246400000	9921700000	10403500000	11169000000	12108000000
Current Liabilities	911000000	899400000	887400000	1353000000	944000000
Capital Employed (Total Assets - Current Liabilities)	8335400000	9022300000	9516100000	9816000000	11164000000
Capital Employed (Total Assets - Current Liabilities)	8335400000	9022300000	9516100000	9816000000	11164000000

From 2013 to 2017, we see an increase in the net worth of the company which is basically due to increase in total assets every year. Also, it shows an increase in capital employed. However, there is a slight increase in value every year's net worth and capital employed (Ittelson, 2009).

Fixed Assets To Net Worth Ratio
Particulars	2013	2014	2015	2016	2017
Fixed Assets	8355000000	8203900000	9463600000	9923000000	11081000000
Net Worth	6010800000	6176100000	6462100000	7180000000	7972000000
Fixed Assets to Net Worth Ratio (Fixed Assets / Net Worth)	1.39	1.33	1.46	1.38	1.39
Fixed Assets to Net Worth Ratio (Fixed Assets / Net Worth)	1.39	1.33	1.46	1.38	1.39
Current Liablities To Net Worth
Particulars	2013	2014	2015	2016	2017
Current Liabilities	911000000	899400000	887400000	1353000000	944000000
Net Worth	6010800000	6176100000	6462100000	7180000000	7972000000
Current Liabilities to Net Worth (Current Liabilities / Net Worth)	0.15	0.15	0.14	0.19	0.12

From 2013 to 2017, we see a high fixed asset to net worth ratio, which is undesirable in normal business days (McLaney & Adril, 2016). However, Mirvac shows 1.39 times of net worth in fixed assets. Also, we see an increase in current liabilities to net worth ratio in 2016 but a drastic decrease in 2017 with ratio as 0.12.

Total Debt Ratio
Particulars	2013	2014	2015	2016	2017
Total Liabilities	3235600000	3745600000	3941400000	3989000000	4136000000
Total Assets	9246400000	9921700000	10403500000	11169000000	12108000000
Total Debt Ratio (total liabilities / total assets)	0.35	0.38	0.38	0.36	0.34
Debt Equity Ratio
Particulars	2013	2014	2015	2016	2017
Total Debts	2088600000	2599700000	2747200000	2293000000	2872000000
Equity/Shareholder's funds	6010800000	6176100000	6462100000	7180000000	7972000000
Debt-Equity Ratio (debt / equity)	0.35	0.42	0.43	0.32	0.36

In case of total debt ratio, we see slight changes from 0.35 in 2013 to 0.34 in 2017. In case of debt equity ratio, we saw no fixed trend from 2013 to 2017. Thus, lower debt equity ratios show the dependence of company on leverage less. Also, the debts almost form 36% of equity's money (Parrino, 2013).

Equity Multiplier
Particulars	2013	2014	2015	2016	2017
Total Assets	9246400000	9921700000	10403500000	11169000000	12108000000
Total Equity	6010800000	6176100000	6462100000	7180000000	7972000000
Equity Multiplier (total assets / total equity)	1.54	1.61	1.61	1.56	1.52

As we know that the equity multiplier helps in calculating the financial leverage of the company. From 2013 to 2017, the company's equity firms approximately 60-65% of the total assets or total balance value which means the company's debts forms 35-40% approximately from 2013 to 2017 (Penman, 2012).

Times Interest Earned
Particulars	2013	2014	2015	2016	2017
Earnings before tax	363300000	447900000	471700000	584000000	588000000
Interest	35300000	144800000	145100000	137000000	162000000
Times Interest Earned (earnings before taxes and interest / interest payment)	10.29	3.09	3.25	4.26	3.63

Coming to times interest earned, we see a negative result. Though the company's earnings have shown an increase every year, it is insufficient to bear obligations such as interest costs. Currently, the earnings are 4 times approximately of its interest obligation compared to 10 times in 2013 (Ramírez, 2018).

Coming to liquidity measures, we adopt such measures to understand the solvency position of the company, that is, its ability to pay its liabilities if required to be paid immediately.

Stock land Group :

Net Working Capital To Total Asset Ratio
Particulars	2013	2014	2015	2016	2017
Current Assets	1206900000	1606000000	1154000000	1411000000	1323000000
Current Liabilities	2801800000	2953000000	3293000000	3714000000	3778000000
Working Capital	(1594900000)	(1347000000)	(2139000000)	(2303000000)	(2455000000)
Total Assets	14069700000	14900000000	15729000000	16942000000	17495000000
Net Working Capital To Total Asset Ratio	(0.11)	(0.09)	(0.14)	(0.14)	(0.14)

The company shows a weak solvency position as there is a negative working capital since 2013 which has increased only (Rivenbark, Vogt, & Marlowe, 2009).

Current Ratio
Particulars	2013	2014	2015	2016	2017
Current Assets	1206900000	1606000000	1154000000	1411000000	1323000000
Current Liabilities	2801800000	2953000000	3293000000	3714000000	3778000000
Current Ratio (Current Assets/ Current Liabilities)	0.43	0.54	0.35	0.38	0.35

Also, where the current assets are desired to be at least above 1, the company has a weak current ratio which kept on decreasing from 0.43 in 2013 to 0. 35 in 2017.

Quick Ratio
Particulars	2013	2014	2015	2016	2017
Current Assets	1206900000	1606000000	1154000000	1411000000	1323000000
less : CA Other	810700000	753000000	881000000	1069000000	923000000
Quick Assets	396200000	853000000	273000000	342000000	400000000
Quick Liabilities	2801800000	2953000000	3293000000	3714000000	3778000000
Quick Ratio ( Quick Assets/Quick Liabilities)	0.14	0.29	0.08	0.09	0.11

Note : Assuming that Others in Current Assets is composed of closing stock.

Also, quick ratio shows worse position than current ratio which remains low in all the five years.

Mirvac Group :

Net Working Capital To Total Asset Ratio
Particulars	2013	2014	2015	2016	2017
Current Assets	891400000	1717800000	939900000	1246000000	1027000000
Current Liabilities	911000000	899400000	887400000	1353000000	944000000
Working Capital	(19600000)	818400000	52500000	(107000000)	83000000
Total Assets	9246400000	9921700000	10403500000	11169000000	12108000000
Net Working Capital To Total Asset Ratio	(0.0021)	0.0825	0.0050	(0.0096)	0.0069

This company showed positive changes in 2017 as compared to 2016, that is, from negative balance $107,000,000 to positive $83,000,000 which is a drastic improvement (Seitz & Ellison, 2009).

Current Ratio
Particulars	2013	2014	2015	2016	2017
Current Assets	891400000	1717800000	939900000	1246000000	1027000000
Current Liabilities	911000000	899400000	887400000	1353000000	944000000
Current Ratio (Current Assets/ Current Liabilities)	0.98	1.91	1.06	0.92	1.09

The company shows a better current position with 1.09 currently.

Quick Ratio
Particulars	2013	2014	2015	2016	2017
Current Assets	891400000	1717800000	939900000	1246000000	1027000000
less : CA Other	641500000	1435000000	774400000	780000000	824000000
Quick Assets	249900000	282800000	165500000	466000000	203000000
Quick Liabilities	911000000	899400000	887400000	1353000000	944000000
Quick Ratio ( Quick Assets/Quick Liabilities)	0.27	0.31	0.19	0.34	0.22

Note : Assuming that Others in Current Assets is composed of closing stock.

However, quick ratio, being a real indicator after excluding closing stock, shows worse solvent position. However, as per the analysis, the current liabilities have been reduced drastically in 2017 (Siciliano, 2015).

Efficiency ratios are a measure of checking the operating effectiveness of fixed assets whether they are being used properly to generate revenue, the debtors & creditors policies, relation between profits and revenues, etc.

Stockland Group :

Average Collection Period
Particulars	2013	2014	2015	2016	2017
Average Receivables	169100000	119000000	103000000	134000000	139000000
Revenues	674100000	679000000	698000000	728000000	752000000
Average Collection Period (Average Receivables*365/revenues) [in days]	92 days	64 days	54 days	67 days	67 days

The lesser the days, the better cash flow is into the firm. The company shows a decrease in days which is a positive sign, that is, the credit policy is improving.

Accounts Relievable To Revenues
Particulars	2013	2014	2015	2016	2017
Average Receivables	169100000	119000000	103000000	134000000	139000000
Revenues	674100000	679000000	698000000	728000000	752000000
Accounts relievable to revenues (average accounts recievablers/ revenue sales)	0.25	0.18	0.15	0.18	0.18
Accounts Payable To Revenues
Particulars	2013	2014	2015	2016	2017
Average Payables	310400000	554000000	595000000	643000000	585000000
Revenues	674100000	679000000	698000000	728000000	752000000
Accounts Payable To Revenues (Average Payables/ Revenues)	0.46	0.82	0.85	0.88	0.78

The debtors turnover ratio shows no significant change for all the five years while the creditors turnover ratio is high for all the five years except in 2013.

Assets To Revenue Ratio
Particulars	2013	2014	2015	2016	2017
Total Assets	14069700000	14900000000	15729000000	16942000000	17495000000
Revenues	674100000	679000000	698000000	728000000	752000000
Assets to revenue ratio (Average total assets/ Revenues)	20.87	21.94	22.53	23.27	23.26
Total Assets Ratio
Particulars	2013	2014	2015	2016	2017
Revenues	674100000	679000000	698000000	728000000	752000000
Total Assets	14069700000	14900000000	15729000000	16942000000	17495000000
Total Assets Ratio ( Revenues/ Total Sales)	0.05	0.05	0.04	0.04	0.04

The asset to revenue shows a positive result which is 24% in 2017. However, the total asset ratio shows a negative result meaning that the company isn't using it fixed assets in the most effecient way.

Working Capital Turnovers
Particulars	2013	2014	2015	2016	2017
Revenues	674100000	679000000	698000000	728000000	752000000
Working Capital	(1594900000)	(1347000000)	(2139000000)	(2303000000)	(2455000000)
Working Capital Turnover ( Revenues/Working Capital)	(0.42)	(0.50)	(0.33)	(0.32)	(0.31)
Operational Efficiency Ratio
Particulars	2013	2014	2015	2016	2017
Rental Income	674100000	679000000	698000000	728000000	752000000
Investment Income	7100000	24000000	86000000	12000000	75000000
Other Income	1053200000	1241000000	1412000000	1600000000	2043000000
PreTax Profit	440300000	528000000	604000000	681000000	857000000
Expenses	1294100000	1416000000	1592000000	1659000000	2013000000
Revenue sales	674100000	679000000	698000000	728000000	752000000
Operational Efficiency Ratio (Expenses/Revenue Sales)	1.92	2.09	2.28	2.28	2.68
Note : We are assuming that the profit has been calculated after deducting expenses from the revenues. Also, there is no information regarding purchases. So, the difference would be regarded as operating or general expenses.
Note : Stockland is involved in real estate business and that is why, rental income is solely considered as the revenue or sales. Investment income is assumed to be other business or other income of the company.

The working capital ratio shows negative results in all the five years while the operational effeciency ratio shows higher expenditures of the company.

Mirvac Group :

Average Collection Period
Particulars	2013	2014	2015	2016	2017
Average Receivables	110900000	121200000	94400000	110000000	97000000
Revenues	583100000	650900000	618400000	613000000	618000000
Average Collection Period (Average Receivables*365/revenues) [in days]	69 days	68 days	56 days	65 days	57 days

The lesser the days, the better cash flow is into the firm. The company shows a decrease in days which is a positive sign.

Accounts Relievable To Revenues
Particulars	2013	2014	2015	2016	2017
Average Receivables	110900000	121200000	94400000	110000000	97000000
Revenues	583100000	650900000	618400000	613000000	618000000
Accounts relievable to revenues (average accounts recievablers/ revenue sales)	0.19	0.19	0.15	0.18	0.16
Accounts Payable To Revenues
Particulars	2013	2014	2015	2016	2017
Average Payables	549900000	505100000	673100000	531000000	519000000
Revenues	583100000	650900000	618400000	613000000	618000000
Accounts Payable To Revenues (Average Payables/ Revenues)	0.94	0.78	1.09	0.87	0.84

The debtors turnover ratio is low for all the five years while the creditors turnover ratio is high for all the five years.

Assets To Revenue Ratio
Particulars	2013	2014	2015	2016	2017
Total Assets	9246400000	9921700000	10403500000	11169000000	12108000000
Revenues	583100000	650900000	618400000	613000000	618000000
Assets to revenue ratio (Average total assets/ Revenues)	15.86	15.24	16.82	18.22	19.59
Total Assets Ratio
Particulars	2013	2014	2015	2016	2017
Revenues	583100000	650900000	618400000	613000000	618000000
Total Assets	9246400000	9921700000	10403500000	11169000000	12108000000
Total Assets Ratio ( Revenues/ Total Sales)	0.06	0.07	0.06	0.05	0.05

The asset to revenue shows a positive result which is 20% in 2017. However, the total asset ratio shows a negative result meaning that the company isn't using it fixed assets in the most effecient way.

Working Capital Turnovers
Particulars	2013	2014	2015	2016	2017
Revenues	583100000	650900000	618400000	613000000	618000000
Working Capital	(19600000)	818400000	52500000	(107000000)	83000000
Working Capital Turnover ( Revenues/Working Capital)	(29.75)	0.80	11.78	(5.73)	7.45
Operational Efficiency Ratio
Particulars	2013	2014	2015	2016	2017
Rental Income	583100000	650900000	618400000	613000000	618000000
Investment Income	19700000	22700000	33000000	512000000	12000000
Other Income	900000000	1204900000	1285800000	1812000000	1728000000
PreTax Profit	363300000	447900000	471700000	584000000	588000000
Expenses	1139500000	1430600000	1465500000	2353000000	1770000000
Revenue sales	583100000	650900000	618400000	613000000	618000000
Operational Efficiency Ratio (Expenses/Revenue Sales)	1.95	2.20	2.37	3.84	2.86
Note : We are assuming that the profit has been calculated after deducting expenses from the revenues. Also, there is no information regarding purchases. So, the difference would be regarded as operating or general expenses.
Note : Stockland is involved in real estate business and that is why, rental income is solely considered as the revenue or sales. Investment income is assumed to be other business or other income of the company.

The working capital ratio shows a drastic improvement in 2017 while the operational effeciency ratio shows higher expenditures of the company.

Profitability measures show the relation between the profits and revenues of the company and the return to equity shareholders. Also, it shows the return on assets to show how well the assets are being used to generate revenues.

Stockland Group :

Net Profit Margin
Particulars	2013	2014	2015	2016	2017
Pretax Profits	440300000	528000000	604000000	681000000	857000000
Total Revenue	1734400000	1944000000	2196000000	2340000000	2870000000
Net profit margin (net profit before income tax / sales)	25.39%	27.16%	27.50%	29.10%	29.86%

The net profit margin shows an increasing trend from 2013 to 2017 but slight changes are observed.

Return On Equity
Particulars	2013	2014	2015	2016	2017
Reported NPAT After Abnormals	104600000	527000000	903000000	889000000	1195000000
Equity/Shareholder's funds	8194900000	8298000000	8787000000	9254000000	9927000000
Return on equity (net profit/ average equity)	1.28%	6.35%	10.28%	9.61%	12.04%

There is an increasing return to the equity holders which was 1.28% in 2013 and 12.04% in 2017.

Return On Assets
Particulars	2013	2014	2015	2016	2017
Pretax Profits	440300000	528000000	604000000	681000000	857000000
Total Assets	14069700000	14900000000	15729000000	16942000000	17495000000
Return on asset (net profit/ average total assets)	3.13%	3.54%	3.84%	4.02%	4.90%

However, the return to assets ranges between 3-5% which is not a good sign as it shows the inefficiency of the management to use their assets in the best possible way for generating revenues.

Mirvac Group :

Net Profit Margin
Particulars	2013	2014	2015	2016	2017
Pretax Profits	363300000	447900000	471700000	584000000	588000000
Net Sales	1502800000	1878500000	1937200000	2937000000	2358000000
Net profit margin (net profit before income tax / sales)	24.17%	23.84%	24.35%	19.88%	24.94%

The net profit margin shows a decrease in 2016 but an increase in 2017.

Return On Equity
Particulars	2013	2014	2015	2016	2017
Reported NPAT After Abnormals	139900000	447300000	609900000	1033000000	1164000000
Equity/Shareholder's funds	6010800000	6176100000	6462100000	7180000000	7972000000
Return on equity (net profit/ average equity)	2.33%	7.24%	9.44%	14.39%	14.60%

There is an increasing return to the equity holders which was 2.33% in 2013 and 14.60% in 2017.

Return On Assets
Particulars	2013	2014	2015	2016	2017
Pretax Profits	363300000	447900000	471700000	584000000	588000000
Total Assets	9246400000	9921700000	10403500000	11169000000	12108000000
Return on asset (net profit/ average total assets)	3.93%	4.51%	4.53%	5.23%	4.86%

However, the return to assets ranges between 3-5% which is not a good sign as it shows the inefficiency of the management to use their assets in the best possible way for generating revenues.

Growth potentials show the comparison of revenues or equity with previous years balances to evaluate the growth of the company or the potential capacity of the company.

Stockland Group :

Revenue Growth
Particulars	2013	2014	2015	2016	2017
Revenue in current year	1734400000	1944000000	2196000000	2340000000	2870000000
Revenue in previous year	-	1734400000	1944000000	2196000000	2340000000
Revenue Growth (Current Year Revenue-Previous Year Revenue)/Previous Year Revenue*100	-	12.08%	12.96%	6.56%	22.65%
Equity Growth
Particulars	2013	2014	2015	2016	2017
Equity In Current Year	8194900000	8298000000	8787000000	9254000000	9927000000
Equity In Previous Year	-	8194900000	8298000000	8787000000	9254000000
Equity Growth ( Equity in current year-equity in previous year/previous year equity)*100	-	1.26%	5.89%	5.31%	7.27%

The company shows a high improvement in 2017 as compared to 2016 with 22.65% in case of revenue growth and 7.27% in case of equity growth.

Profit Growth
Particulars	2013	2014	2015	2016	2017
Current Year Profit After Tax and Abnormals	104600000	527000000	903000000	889000000	1195000000
Previous Year Profit After Tax and Abnormals	-	104600000	527000000	903000000	889000000
Profit Growth (Current Year Profit-Previous Year Profit/Previous Year Profit)*100	-	403.82%	71.35%	-1.55%	34.42%
NOTE : From Profitability ratios, total revenue has been considered to reflect a true percentage of net profits, growth results, etc.

However, the profit growth isn’t as good as the results in 2014 and 2015.

Mirvac Group :

Revenue Growth
Particulars	2013	2014	2015	2016	2017
Revenue in current year	1502800000	1878500000	1937200000	2937000000	2358000000
Revenue in previous year	1502802013	1502800000	1878500000	1937200000	2937000000
Revenue Growth (Current Year Revenue-Previous Year Revenue)/Previous Year Revenue*100	0.00%	25.00%	3.12%	51.61%	-19.71%
Equity Growth
Particulars	2013	2014	2015	2016	2017
Equity In Current Year	6010800000	6176100000	6462100000	7180000000	7972000000
Equity In Previous Year	5754700000	6010800000	6176100000	6462100000	7180000000
Equity Growth ( Equity in current year-equity in previous year/previous year equity)*100	4.45%	2.75%	4.63%	11.11%	11.03%

The company shows a negative percentage in 2017 as compared to 2016 where 52% was observed, thus, showing a drastic fall in case of revenue growth. However, it shows not much change in equity growth with 11.03% in 2017.

Profit Growth
Particulars	2013	2014	2015	2016	2017
Current Year Profit After Tax and Abnormals	139900000	447300000	609900000	1033000000	1164000000
Previous Year Profit After Tax and Abnormals	416100000	139900000	447300000	609900000	1033000000
Profit Growth (Current Year Profit-Previous Year Profit/Previous Year Profit)*100	-66.38%	219.73%	36.35%	69.37%	12.68%

NOTE : From Profitability ratios, total revenue has been considered to reflect a true percentage of net profits, growth results, etc.

Also, the profit growth isn’t as good as the results in 2014 and 2016. It is much lower in the current year.Comparison Of Overall Performance

Comparing the overall performance of both the companies:

Stockland shows negative working capital for all the five years indicating heavy burden of liabilities over it while Mirvac did show a negative balance in 2016 but showed a drastic improvement in 2017 by reducing its liabilities.
Stockland shows higher net worth than Mirvac while Mirvac shows higher capital employed than Stockland. Mirvac has lesser burden lf debts over it as compared to Stockland. However, the interest bearing ratio is way better in case of Stockland with approximately 10 times while it is just 4 times in case of Mirvac in the year 2017.
Mirvac shows a better current ratio than Stockland. Also, the credit policy of Mirvac is better with 57 days in 2017 as compared to 67 days in case of Stockland. Both the companies show drastic revenue to asset ratios. However, the Mirvac has a better working capital turnover in 2017 as compared to negative results in Stockland.
The net profit margin is higher in case of Stockland while return on equity is higher in case of Mirvac. The revenue growth of Mirvac shows a negative change while Stockland shows a good & high change in revenue growth. On the other hand, Mirvac shows better equity growth than Stockland. However, the profit growth of Stockland is much higher than Mirvac Group (Skonieczny, 2012).

Recommendation

Analyzing the companies individually and comparing their results, the observations say that both the companies have flaws and therefore, relevant decision is hard to be formed. However, we consider Mirvac Group to be a better capitalizing and ideal partner. The following organization will form the most appropriate potential partnership with HPL.

The reasons behind recommending this company can be enumerated as below:

The company shows drastic improvements in 2017 as compared to 2016. For example, the positive change in working capital but Stockland Group shows negative working capital balances over the last five years.
Mirvac Group has a better capital structure than Stockland in terms of equity debt structure, that is, it has a lesser proportion of debts in its capital structure. Also, the company has a better current ratio reflecting a better liquidity status. Mirvac has a better credit policy (Taillard, 2013).
It’s true that a better revenue growth is observed in Stockland which is a vital need for every company but having a better equity growth is a positive signal for long term sustainability as it shows the external stakeholders increasing trust and confidence in the company.

However, the most commendable part of Mirvac Group is its drastic improvements in the year 2017 which were worse in 2016. This somewhere shows the company's ability to take strong decisions and focusing more on other factors than higher revenues. The company's changes such as reduction of current liabilities, increase in current assets, increase in equity growth, better debtor turnover, etc reflects its strong determination towards taking its company onto higher levels. This also proves their promising nature towards the coming up projects and thus, we recommend Mirvac Group for this deal.

Conclusion

The above comparative analysis is however restricted to the financial information. The certain information such as a company's future plans, or some ongoing projects due to which it is incurring heavy expenditure and such other non financial information are equally important to understand the business operations and accordingly, compare it with other companies. However, ratio analysis tool aren't based on such information. We can conclude by choosing Mirvac over Stockland for HPL Limited on the basis of above analysis.

Bibliography

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Easton, P. (2010). Financial statement analysis & valuation. Cambridge, UK: Cambridge Business Publishers.

Elaine, H. (2015). International financial statement analysis. Hoboken: John Wiley & Sons.

Fridson, M., & Alvarez, F. (2012). Financial Statement Analysis: A Practitioner's Guide. New York: John Wiley & Sons.

Girard, S. L. (2014). Business finance basics. Pompton Plains, NJ: Career Press.

Ittelson, T. (2009). Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports. Franklin Lakes, N.J.: Career Press.

McLaney, E., & Adril, D. P. (2016). Accounting and Finance: An Introduction. United Kingdom: Pearson.

Menifield, C. E. (2014). The Basics of Public Budgeting and Financial Management: A Handbook for Academics and Practitioners. Lanham, Md.: University Press of America.

Parrino, R. (2013). Fundamentals of Corporate Finance, 2nd Edition. Milton: John Wiley & Sons.

Penman, S. (2012). Financial statement analysis and security valuation. Boston, Mass.: McGraw-Hill.

Ramírez, C. Z. (2018). The Impact of IFRS 16 on Key Financial Ratios: A New Methodological Approach. Accounting in Europe .

Rivenbark, W. C., Vogt, J., & Marlowe, J. (2009). Capital Budgeting and Finance: A Guide for Local Governments. Washington, D.C.: ICMA Press.

Seitz, N., & Ellison, M. (2009). Capital Budgeting and Long-Term Financing Decisions. New York: Thomson Learning.

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