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Economic Value Added ("EVA") improved
over the past five years, from a negative
$76.4 million in 2005 to a positive
of $81.7 million in 2009, reflecting a
more effective utilisation of the
Group's resources to enhance the
shareholder value.
The highest EVA was achieved in 2007
at a positive $222.2 million, contributed
by the strong performance in trading
properties in Singapore and overseas,
as well as a gain of $235.2 million on
the restructuring of the ownership in
One Raffles Quay.
The Group recorded EVA of $81.7 million
in 2009, an increase of $36.7 million
compared with the $45 million in 2008.
This was attributable largely to a lower
capital charge as a result of lower average
EVA capital employed as well as lower
weighted average cost of capital.
The decrease in average EVA capital
employed for 2009 was due mainly to
the Group's decision to defer the capital
charge pertaining to investment properties
under construction/redevelopment with
effect from 1 January 2009. Assuming
no capital deferral, the Group's EVA for
2009 at $28.2 million would be lower
than that in 2008 due mainly to the
enlarged shareholders' equity following
the Company's rights issue in 2009.
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Notes:
- Average EVA capital employed was derived from the quarterly averages of net assets plus
interest-bearing liabilities and deferred tax.
- Weighted average cost of capital is calculated in accordance with the Group EVA Policy as follows:
- cost of equity using Capital Asset Pricing Model with market risk premium of 6% (2008: 6%)
per annum;
- risk free rate of 1.98% (2008: 2.5%) based on yield-to-maturity of Singapore government
10-year bonds;
- unlevered beta of 0.75 (2008: 0.75); and
- pre-tax cost of debt of 3.63% (2008: 3.53%) using 5-year Singapore dollar swap offer
rate plus 150 basis points (2008: 50 basis points).
- With effect from 1 January 2009, the capital charge pertaining to investment properties under
construction/redevelopment are deferred since these assets are not currently in service and are unable to generate any revenue.
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