SUBMITTED TO: - Dr. Alaa AlShawa

FINANCIAL MANAGEMENT

I N D U S T R Y : - R E A L E S T A T E

C B R E G r o u p , I n c . , U S A &

E M A A R G R O U P , U A E

5 / 3 / 2 0 1 2

SUBMITTED BY:-ROHIT SAXENA

RESEARCH PROJECT

SMBA 11055

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CONTENT

1. INTRODUCTION CBRE Group, Inc. ………………………………………………2

2. FINANCIAL DATA & ANALYSIS (CBRE Group, Inc.) ………………………….3

3. INTRODUCTION EMAAR PROPERTIES …………………………………………4

4. FINANCIAL DATA & ANALYSIS (EMAAR PROPERTIES) ……………………5

5. FINANCIAL RISK & EFFICIENCY RATIOS

i) Total Debt to Total Assets Ratio (Interpretations & Conclusion) ……………6

ii) Long-Term Debt to Total Assets (Interpretations & Conclusion) ……………7

iii) EBIT To Total Revenues Ratio (Interpretations & Conclusion) ………………8

iv) Operating Leverage Interpretation(Interpretations & Conclusion) …………9

6. CAPITAL STRUCTURE

i) EBIT to Interest Expense (Interest Coverage Ratio) …………………………..10

7. BUSINESS RISK

i)Standard Deviation of EBIT ………………………………………………………..11

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CBRE Group, Inc.

CBRE Group, Inc. (NYSE: CBG), a Fortune 500 and S&P

500 company headquartered in Los Angeles, is the world’s largest

commercial real estate services firm (in terms of 2011 revenue). The

company has approximately 34,000 employees (excluding affiliates),

and serves real estate owners, investors and occupiers through more

than 300 offices (excluding affiliates) worldwide. CBRE offers strategic

advice and execution for property sales and leasing; corporate

services; property, facilities and project management; mortgage

banking; appraisal and valuation; development services; investment

management; and research and consulting.

Type Public

Traded as NYSE: CBG

S&P 500 Component

Industry Real Estate

Founded 1906

Headquarters Los Angeles, California, USA

Area served Worldwide

Revenue US$ 5.9 billion (2011)[1]

Operating income US$ 463 million (2011)[1]

Net income US$ 239 million (2011)[1]

Total assets US$ 7.2 billion (2011)[1]

Total equity US$ 1.2 billion (2011)[1]

Employees Approximately 34,000

Website http://www.cbre.com/

Symbol Price Change

CBG 19.18 -0.18

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FINANCIAL DATA OF CBRE Group (2002- 2011)

Analysis of CBRE Group

REFRENCES:-

http://ir.cbre.com/phoenix.zhtml?c=176560&p=irol-reportsannual

http://ir.cbre.com/phoenix.zhtml?c=176560&p=irol-reportsannual

http://finance.yahoo.com/q/is?s=CBG+Income+Statement&annual

Depreciation & Interest Net Total Long Term Total % change in % change in

Year Revenues Change in Revenues Amortization EBIT Change in EBIT Expense Income Assets Liabilites Liabiliteis EBIT Revenues

2002 1,170,277 - 24,614 130,676 - 57,229 18,727 1,324,876 509,715 1,067,920 0 0

2003 1,630,074 459797 92,622 132,817 2141 67,696 34,704 2,213,481 802,705 1,873,896 1.63840338 39.2896

2004 2,365,096 735022 54,857 245,340 112523 61,154 64,725 2,271,636 612,838 1,705,763 85 45.0913

2005 2,910,641 545545 45,516 454,184 208844 56,281 217,341 2,815,672 561,069 2,015,163 85.1243173 23.0665

2006 4,032,027 1121386 67,595 653,524 199340 35,185 318,571 5,944,631 2,078,509 4,684,854 44 38.5271

2007 6,034,249 2002222 113,269 834,264 180740 133,987 390,505 6,242,573 1,788,726 4,990,417 27.6562146 49.658

2008 5,128,817.00 -905432 102,817 457,021 -377243 149,394 -1,012,066 4,726,414 2,077,421 4,380,691 -45 -15.005

2009 4,165,820 -962997 99,500 188,501 -268520 189146 33,341 5,039,406 2,372,302 4,410,284  -58.7544117 -18.776

2010 5,115,316 949496 108,400 463,208 274707 191,151  200,345 5,121,568  1,851,901 4,213,353 146 22.7925

2011 5,905,411 790095 115,700 579,787  116,579 150249 239,162  7,219,143 2,760,156 6,067,662 25.1677432 15.4457

CBRE Group, Inc (CBG)

Real Estate Industry

Dowjones & NYSE

Year Total Liabilities to Total Assets Long-Term Debt to Total Assets EBIT to Total Revenues Operating Leverage EBIT to Interest Expense Standard Deviation of EBIT

2002 0.806052793 0.384726571 0.111662453 - 2.283387793

2003 0.846583278 0.362643727 0.081479123 0.041700703 1.961962302 1513.915619

2004 0.75089627 0.269778257 0.103733633 1.878860855 4.011838964 65591.97398

2005 0.715695223 0.199266463 0.156042604 3.690386353 8.069934791 152031.7493

2006 0.788081548 0.349644747 0.16208324 1.139189926 18.57393776 226739.9676

2007 0.799416683 0.286536657 0.138254818 0.556934266 6.226454805 290932.0343

2008 0.926853001 0.439534285 0.089108463 3.013596302 3.059165696 266216.6748

2009 0.875159 0.470750323 0.045249435 3.129195892 0.996589936 259195.7738

2010 0.822669 0.361589 0.090553154 6.393864506 2.423257 243781.1446

2011 0.840496164 0.382338458 0.098179 1.629436455 3.858841 237111.8373

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EMAAR PROPERTIES

Emaar Properties (DFM:EMAAR), based in the United Arab Emirates, is a Public Joint Stock Company

(PJSC) listed on the Dubai Financial Market. Established in 1997 with an initial paid-up capital of AED

1 bn,Emaar Properties is currently the Persian Gulf region's largest land and real estate

developer. With over 60 companies, Emaar's activities include property investment and development,

property management services, education, healthcare, retail and hospitality sectors, as well as

investing in financial service providers. In 2007 the government of Dubai through the Investment

Corporation of Dubai took a 32% equity stake in Emaar by exchanging land for 28 billion AED worth of

stock

Type Real Estate (DFM:EMAAR)

Industry Holding company

Founded 1997

Headquarters Dubai, United Arab Emirates

Revenue $3.307 billion (2010)[1]

Employees 10,000[2]

REFRENCES:-

http://www.emaar.com/index.aspx?page=investorrelations-annualreport

http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=EMAAR:UH

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FINANCIAL DATA OF EMAAR PROPERTIES (2002- 2011)

Analysis of CBRE Group

Company EMAAR GROUP ,UAE

Industry REAL ESTATE

Stock Market Dubai Financial Market, PJSC

Depreciation & Interest Net Total Long Term Total % change in% change in

Year Revenues Change in Revenues Amortization EBIT Change in EBIT Expense Income Assets Liabilites Liabiliteis EBIT Revenues

2002 1,880,461 248,754 24,244 1,037,506 201,357 760,150 979,914 10,317,392 243,968.39 2,424,130 0 0

2003 1,960,907 80,446 26,917 1,113,446 75,940 704,485 1,250,311 10,377,813 268,928 2,522,886 7.31946 4.278

2004 2,426,064 465,156 43,860 1,606,964 493,519 813,719 1,544,026 10,901,027 310,341 2,957,404 44.3235 23.7215

2005 2,751,690 325,626 38,380 1,628,967 22,003 866,419 1,794,414 11,001,326 266,475 3,233,088 1.36923 13.422

2006 14,005,502 11,253,812 32,154 1,744,634 115,667 1,087,796 1,732,240 11,359,708 238,645 3,036,912 7.10064 408.978

2007 4,868,848 -9,136,654 49,307 1,784,962 40,328 2,099,115 1,781,024 14,929,394 287,346 17,602,609 2.31156 -65.236

2008 16,015,133 11,146,285 80281.47139 1,141,384 -643,579 2,499,772 33,667 18,169,038 2,499,772 6,574,508 -36.056 228.931

2009 2,292,442 -13,722,691 173,219 552,522 -588,862 2,350,165 78,849 17,478,147 2,350,165 9,609,207 -51.592 -85.686

2010 12,150,274 9,857,832 219,241 675,327 122,805 2,564,063 674,935 17,031,152 313,053 8,502,533 22.2264 430.014

2011 2,210,445 9,939,829 227,827 532,357 -142,970 2,051,422 522,600 16,362,427 222,048 7,756,185 -21.17 -81.807

Year Total Liabilities to Total Assets Long-Term Debt to Total Assets EBIT to Total Revenues Operating Leverage EBIT to Interest Expense Standard Deviation of EBIT

2002 0.234955696 0.023646324 0.551729364 1.679659054 1.36486997

2003 0.243103771 0.025913724 0.567821575 1.710954767 1.580509851 53697.53483

2004 0.27129594 0.028469007 0.66237502 1.868497704 1.974839503 309195.2339

2005 0.293881651 0.0242221 0.591987861 0.102013727 1.88011387 314865.4753

2006 0.267340682 0.021008019 0.124567763 0.017361895 1.6038252 325610.5487

2007 1.179057188 0.019247001 0.366608778 -0.035433779 0.850340347 325971.1315

2008 0.361852287 0.137584197 0.071269071 -0.157495696 0.456595014 324840.3938

2009 0.549784099 0.134463032 0.241018763 0.602106393 0.235099078 433818.6859

2010 0.499234181 0.018381191 0.055581214 0.051687482 0.263381562 460172.389

2011 0.474024126 0.013570617 0.043814399 -0.258784373 0.259506333 490206.2062

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Financial Risks and Efficiency Ratios

Total Debt to Total Assets Ratio:

This ratio basically explains the company’s reliance on debt as a source of financing. Any increase and

decrease in this ratio suggests a greater or lesser reliance on debt as a source of financing.

When using this ratio to make an analysis of a company, it can be really helpful to look at the

company's as well as making industry comparisons. It's not unrealistic for a younger company to have

a debt to total assets ratio closer to "1" (more assets were financed by debt), as it hasn't yet had a

chance to eliminate its debt.

As a general rule, a number close to zero is generally better, because it means that more assets were

paid for without debt. Remember, lenders have first claim on a company's assets if they're forced to

liquidate. But again, it will depend on the industry, as those with highly capital intensive operations

will have a higher relative debt level.

INTERPRETATION:- In case of CBRE group more assets were financed by debt , Since 2002- 2011 the ratio

remains near to 1 mark Whereas, In case of EMAAR group except in the year 2007 & 2008 the ratio remain

approximately 0.4 which means that more assets were paid for without debt.

Conclusion: - Total Debt to Total Assets Ratio for EMAAR properties is better as compare to CBRE

group

0

0.2

0.4

0.6

0.8

1

1.2

1.4

CBRE Group, Inc (CBG)

EMAAR GROUP ,UAE

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Long-Term Debt to Total Assets

A measurement that represents the percentage of a corporation assets that are financed by loans and

financial obligations lasting more than one year. The ratio provides a general measure of the

financial position of a company, including its ability to meet financial requirements for outstanding

loans. A year-over-year decrease in this metric would suggest the company is progressively becoming

less dependent on debt to grow their business. The calculation for the long term debt to total assets

ratio is:

Long term debt to Total Asset Ratio = Long term debt Total Assets

INTERPRETATION:- In case of CBRE group as suggested by graph the company is without following any trend in

last 10 years and the ratio is still approx. to 0.4 which is not much but , Whereas, In case of EMAAR group except in the year 2007 & 2009 the shows upward trend

otherwise the company is progressively becoming less dependent on debt to grow their business.

Conclusion: - Long-Term Debt to Total Assets for EMAAR properties is better as compare to

CBRE group ,And EMAAR properties is progressively becoming less dependent on debt to grow their business.

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

CBRE Group, Inc (CBG)

EMAAR GROUP ,UAE

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EBIT To Total Revenues Ratio:

Operating margin or operating profit margin measures what proportion of a company's revenue is left

over, after deducting direct costs and overhead and before taxes and other indirect costs such as interest. Operating margin formula is:

Operating margin is used to measure company's pricing strategy and operating efficiency. It gives

an idea of how much a company makes (before interest and taxes) on each dollar of sales. Operating

margin ratio shows whether the fixed costs are too high for the production or sales volume.

A high or increasing operating margin is preferred because if the operating margin is increasing,

the company is earning more per dollar of sales.

Operating margin can be used to compare a company with its competitors and with its past

performance. It is best to analyze the changes of operating margin over time and to compare company's

figure to those of its competitors.

INTERPRETATION:- In case of EMAAR properties as suggested by graph, Earlier Company had high operating

margin which was good besides few spikes the trend is downward direction, which means

company making less on each dollar of sales. Whereas, In case of CBRE group as seen in graph the fixed costs are too high for the production

or sales volume so the company is making less on each dollar of sales. In the year 2011 CBRE operating margin has grown larger than EMAAR.

Conclusion: - EBIT to Total Revenues Ratio for EMAAR properties is declining and even falls less

than to CBRE group, which means the fixed costs are too high for the production or sales volume of

EMAAR properties.

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

CBRE Group, Inc (CBG)

EMAAR GROUP ,UAE

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Operating Leverage Interpretation:

Operating leverage boils down to an analysis of fixed costs and variable costs. Operating leverage is

highest in companies that have a high proportion of fixed operating costs in relation to variable operating

costs. This kind of company uses more fixed assets in the operation of the company. Conversely,

operating leverage is lowest in companies that have a low proportion of fixed operating costs in relation to

variable operating costs. The benefits of high operating leverage can be immense. Companies with high operating leverage can make more money from each additional sale if they don't have to increase costs to produce more sales. The minute business picks up, fixed assets such as property, plant and equipment (PP&E), as well as existing workers, can do a whole lot more without adding additional costs. Profit margins expand and earnings soar faster than revenues.

Operating leverage = % change in EBIT____ % change in Revenues

INTERPRETATION:- In case of EMAAR properties as suggested by graph, operating leverage is low because

Company has a low proportion of fixed operating costs in relation to variable operating; even in the 2011 operating leverage went to 0.

As we can see from graph CBRE group has sharp fluctuation .In 2010 operating leverage reaches the maximum approx. 6.5 on next year 2011 it falls below 2.

Conclusion: - As compare to EMAAR properties, CBRE group has high operating leverage, which

means Company can make more money from each additional sale if they don't have to increase costs to

produce more sales

-1

0

1

2

3

4

5

6

7

CBRE Group, Inc (CBG)

EMAAR GROUP ,UAE

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Capital Structure

EBIT to Interest Expense Interest Coverage Ratio

The interest coverage ratio is a measure of the number of times a company could make the interest

payments on its debt with its earnings before interest and taxes, also known as EBIT. The lower the

interest coverage ratio, the higher the company's debt burden and the greater the possibility of

bankruptcy or default.

EBIT to Interest Expense = _____EBIT_______ Interest Expense

General Guidelines for the Interest Coverage Ratio

As a general rule of thumb, investors should not own a stock that has an interest coverage ratio under

1.5. An interest coverage ratio below 1.0 indicates the business is having difficulties generating the

cash necessary to pay its interest obligations. The history and consistency of earnings is tremendously

important. The more consistent a company’s earnings, the lower the interest coverage ratio can be.

INTERPRETATION:- In case of EMAAR properties as suggested by graph has very low interest coverage ratio, which

means the higher the company's debt burden and the greater the possibility of bankruptcy or default.

As we can from graph CBRE group has sharp fluctuation .Except in year 2009 where it went less than 2 otherwise interest coverage ratio for the company remains more than 3, Which is good for investors to invest in company shares.

Conclusion: - As compare to EMAAR properties, CBRE group has high interest coverage ratio, which

means lower the interest coverage ratio, the higher the company's debt burden and the greater the

possibility of bankruptcy or default. As a general rule of thumb, investors should not own a stock that has

an interest coverage ratio under 1.5.Which is applicable for EMAAR group.

0

2

4

6

8

10

12

14

16

18

20

CBRE Group, Inc (CBG)

EMAAR GROUP ,UAE

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BUSINESS RISK

Standard Deviation of EBIT The coefficient of variation is a general way of measuring risk of any data series. It is calculated as the standard deviation of the data series divided by its mean. Business risk is often measured as the coefficient of variation of a company’s operating income (EBIT) over several years: Business Risk = σEBIT Average EBIT Where: σEBIT = Standard deviation of EBIT over the period

INTERPRETATION:- In case of CBRE group as suggested by graph has shown downward trend since 2006 which is

good for Company. As we can see from graph EMAAR properties has shown upward trend but Company has low

business risk as compare to CBRE group.

Conclusion: - .Related to the Companies peer the Business risk is not high for any of the company.

For CBRE group which shows the downward trend is good for the company whereas there is little worry

for EMAAR group as it shows upward trend but still the risk is less.

CBRE Group, Inc (CBG) EMAAR GROUP ,UAE

0.003827814 0.045436806

0.165844022 0.261629212

0.384400029 0.266427154

0.573293741 0.275519225

0.73559821 0.275824336

0.673107414 0.274867549

0.655355632 0.367080823

0.616380984 0.389380321

0.599518177 0.414793791

Business Risk = σEBIT/Average EBIT Business Risk = σEBIT/Average EBIT

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

CBRE Group, Inc (CBG)

EMAAR GROUP ,UAE