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Overview of Reduced Stamp Duty Tax Implications on Residential Property Holding Period

Question:

Discuss about the Equity Market Structure Literature Review.

The overall evaluation of the article mainly helps in depicting the reduced sellers stamp duty that is imposed by the government if the property is sold within 4 years of buying. The relevant stamp duty rate is mainly declining from the range of 16%-4% to 12%-4% within the three years of holding period. The article mainly helps in reducing the overall stamp duty tax that is imposed on the residential property holding period. The overall holding period has mainly declined from 4 years to 3 years, which will be implemented in March 11 2017. The overall contraction of the SSD mainly restricts the loan obligation of the individuals to 60% of the monthly gross income. The article states that the TDSR threshold could only affect small group of owners.

The article also indicates that the problems, which was previously faced by individuals in dealing within the residential market. In addition, the overall decision that was made by government is to promote the overall residential property and financial prudence among households. Therefore, evaluation of the article mainly helps in depicting the overall promotion that could help in increasing evaluation of the residential property sector. Rydqvist, Spizman & Strebulaev (2014) mentioned that the decline in the overall tax could eventually help in increasing transaction and sale of property.

UOL group is many identified as Property Company which mainly deals in development and investment conducted in property. The overall operations of the organisation are mainly concentrated within China and Singapore, where relevant development projects are being conducted by the company. The concentration of activities mainly brings the actual revenue for UOL, which has steadily been increasing from S$1361 to S$1441. This increment in revenue is not allowed the company's net profit to increase, as it declined from S$686 million to S$287 million. The relevant decline in net profit is mainly due to the rising cost of goods sold of S$956 million. Quick ratio of the company also declined from 0.7 to 0.4 indicating lower capacity of the organisation to support their short term obligations. Levi & Segal (2015) mentioned that use of fundamental analysis mainly allow the investors to identify the overall value of the shares according to the annual reports.

From the overall evaluation it could also be identified that profit margin assertively dropped from 50.4% to 19.9% in 2016. This relevant decline in overall profit margin mainly indicates the high expenses that are conducted by the organisation. Return on assets and return on equity of the organisation also fell rapidly due to the reduced profits obtained in 2016. The dividend payout of the organisation has relevantly increased from 17.2% to 42% indicating a high payout ratio which will attract more potential investors into the vicinity of the company.

Financial Performance Metrics Evaluation of UOL Group and CapitaLand Limited

From the overall evaluation of CapitaLand Limited financials it could be identified that Main activities related to consultancy and investment holding. In addition, the company directly conduct operations in Malaysia and Singapore which has allowed the organisation to adequately capture of Asia Pacific, Europe and Gulf region. However, revenues of the organisation adequately increased from S$3511 to S$5252 million indicating the high revenue generation capacity of the organisation. This relevant increment in Revenue is mainly allowed the organisation to increase the net profit from S$840 million to S$1190 million. Moreover deduction in expenses could be identified from S$118 to S$53 in 2016. Current ratio however has been declining from 1.8 to 1.5, which is adequate as per the industry standard. The quick ratio of the organisation increased from 0.8 to 0.9 improving its ability to support its short term obligations.

The gross profit margin of the company mainly declined from 31% to 30.4%, whereas the overall net income ratio increased by 0.2 to 0.3 indicating the low expenditure conducted on expenses. The return on equity of the company has a relatively increased from 5.17% to 6.7%.  However, the dividend payout ratio declined from 35.9% to 35.6% indicating low ability of the organisation to pay relevant dividends. Furthermore, EPS of the organisation increased from 0.18 to 0.26 in 2016 indicating an increase in earnings per share obtained by the organisation.

Dividend discount model

CapitaLand Ltd

Year

CashFlow

2017F

1881

2018F

1928

2.5%

2019F

2309

19.8%

Average growth rate

11.1%

cost of equity

8.82%

Dividend

0.1

Share price

4.810739198

The intrinsic value could only be depicted with the help of Gordon model, which is used in the above table. According to the table the overall value of the shares is mainly derived to be at 4.8, while the actual price is around 3.67. This indicates that the value of shares will eventually increase in future due to the identification of growth rate.

Dividend discount model

UOLs

Year

CashFlow

2016A

483

2017F

558

15.5%

2018F

679

21.7%

Average growth rate

18.6%

cost of equity

7.52%

Dividend

0.15

Share price

1.604773

However, the overall valuation of the intrinsic value of UOL is mainly identified at 1.6, where the share price of the company is relatively estimated to decline in future. This is mainly indicating that relevant inflation in prices of the stock is been conducted. Therefore, relevant decline in share value of UOL could be witnessed in the near future according to the Gordon discounted model (Hornuf, L., & Schwienbacher (2016).

Key Performance Metrics

CapitaLand Ltd

UOL

Beta

1.34

1.08

Dividend Yield

35.6%

42%

Profit Margin

22.7

19.9

Price

3.67

9.07

The overall above table mainly depicts the key performance metrics of both the companies, which could help in identifying investment viability. In addition, the beta, dividend yield profit margin and price mainly depict the CapitaLand ltd is a best investment opportunity for investment. However, beta is lower for UOL and divined yield is higher, which does not comply with the rising profit margin and increased price. Nevertheless, the reduced price increase profit margin and dividend yield mainly depicts the overall opportunity, which could be conducted by the individual. Guharay et al., (2013) mentioned that evaluating the overall financial performance of companies mainly allows investors to understand the viability of its investment.

Investment Strategies for UOL Group and CapitaLand Limited Based on Fundamental and Technical Analysis

From the overall evaluation of the figurer 2 relevant share price valuation of CapitaLand Ltd could be identified. This relevant increment in the share value is mainly depicting the overall opportunity of an investor. According to the technical analysis valuation the overall share price of the company could be conducted to increase return from investment. The overall evaluation mainly helps in depicting the overall stop loss, target price and entry level for the trade. Therefore, the entry level for the trade could be conducted from $3.5 with a stop loss of $3.0 and target price of $4.2. The depiction of the overall trading strategy could mainly provide a profit ratio of 20%, while the loss estimation is mainly at 14%. The overall depiction of Relative strength index and simple moving averages directly support the uptrend of the stock. Therefore, share price of the company is mainly in a uptrend, which might increase return generation capacity of the company. Coffee Jr, J. C., Sale & Henderson (2015) mentioned that use of technical analysis mainly allow the investor to identify the overall trend present in the stock, which help in making adequate investment decision. The overall support line is at levels of $3, while the resistance level is around $4, which might be used in drafting the overall investment plan. In addition, the overall evaluation also indicates that the stock is in bullish form, where higher highs is been achieved by the stock.

The evaluation of figure 2 overall share price of UOL is mainly increasing over time, which is supported by both simple moving average and relative strength index. In addition, the overall share price of the company has increased over time, which could depict the relevant investment opportunity. The share price of the company has relatively increased and obtained higher high, which depicts an adequate investment opportunity. The share price has increased adequately, where the target returns could be obtained from investment. The overall entry level of the share is mainly at $8, while the stop loss is at 7 with a target of $10. This relevant investment strategy could eventually help in generating higher returns from investment. Therefore, the investment the stock could eventually help in generating higher return of 25%, while the loss will be projected to 13%. On the other hand, Editorial (2017) criticises that technical analysis mainly loses its fiction if an economic crisis in unfolding in the capital market. In case of UOL, the overall shares have a support level around $8, while there is no resistance level, as the stock has achieved an all time high. This relevant achievement of all time high directly indicates the bullish trend that is currently present in the stock.

Recommendation

Company

HOLD

CapitaLand

SELL

UOL

The overall table mainly represents the investment strategy, which needs to be conducted for CapitaLand and UOL. In addition, the investment strategy could eventually help in generating the required level of profitability for the investor. From the overall evaluation of the stock with relevant fundamental and technical analysis growth in stock could be identified. However, the shares of CapitaLand have hold condition, where relevant increment in value could be witnessed according to the Gordon model. Nevertheless, the overall share or UOL is relatively depicting an inflated share price, which initiates a sell call. This relevant limitation of the share value is mainly due to the weak fundamental characterises of the company. Hence, the stock of CapitaLand has Hold Position, while the sock of UOL is advised for Sell position.

Reference and Bibliography:

Barth, M. E., Gómez Biscarri, J., Kasznik, R., & López-Espinosa, G. (2016). Bank earnings and regulatory capital management using available for sale securities.

Boehmer, E., Chava, S., & Tookes, H. E. (2015). Related Securities and Equity Market Quality: The Case of CDS. Journal of Financial & Quantitative Analysis, 50(3).

Choi, S. J., Min, B. C., & Park, S. (2017). Empirical Analysis of Credit Risk in Autocallable Structured Product Market: Evidence from Korean Equity-Linked Securities (ELS) Market.

Coffee Jr, J. C., Sale, H., & Henderson, M. T. (2015). Securities regulation: Cases and materials.

Fauver, L., Loureiro, G., & Taboada, A. G. (2015). Equity offerings, stock price crash risk, and the impact of securities regulation: international evidence. NIPE working papers series, (NIPE WP 14/2015), 1-49.

Guharay, S. K., Thakur, G. S., Goodman, F. J., Rosen, S. L., & Houser, D. (2013). Analysis of non-stationary dynamics in the financial system. Economics Letters, 121(3), 454-457. Cremers, K. M., & Curtis, Q. (2016). DO MUTUAL FUND INVESTORS GET WHAT THEY PAY FOR? SECURITIES LAW AND CLOSET INDEX FUNDS. Va. L. & Bus. Rev., 11, 31-149.

Hornuf, L., & Schwienbacher, A. (2016). Should securities regulation promote equity crowdfunding?. Small Business Economics, 1-15.

Levi, S., & Segal, B. (2015). The Impact of Debt-Equity Reporting Classifications on the Firm's Decision to Issue Hybrid Securities. European Accounting Review, 24(4), 801-822.

Light, R. S. (Ed.). (2015). Structuring venture capital, private equity and entrepreneurial transactions. Wolters Kluwer Law & Business.

Mwenje, J. M., & Olweny, T. (2016). The impact of private equity on value creation among listed firms at the nairobi securities exchange. International Journal of Economic, Commerce and management, 4(2), 84-106.

Reuters.com. (2017). ${Instrument_CompanyName} ${Instrument_Ric} Quote| Reuters.com. U.S.. Retrieved 2 November 2017, from https://www.reuters.com/finance/stocks/overview/CATL.SI

Reuters.com. (2017). ${Instrument_CompanyName} ${Instrument_Ric} Quote| Reuters.com. U.S.. Retrieved 2 November 2017, from https://www.reuters.com/finance/stocks/overview/UTOS.SI

Rydqvist, K., Spizman, J., & Strebulaev, I. (2014). Government policy and ownership of equity securities. Journal of Financial Economics, 111(1), 70-85.

Securities, U. S., & Exchange Commission. (2014). Equity market structure literature review Part II: High frequency trading. Staff of the Division of Trading and Markets.

Straitstimes.com. (2017). The Straits Times. Retrieved 3 November 2017, from https://www.straitstimes.com/business/property/govt-eases-property-cooling-measures-sellers-stamp-duty-cut-tdsr-relaxed.

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