China HGS Reports Second Quarter of Fiscal Year 2014 Results
Revenues Up by Approximately 157.5%
HANZHONG, CHINA – May 9, 2014 – China HGS Real Estate Inc. (NASDAQ: HGSH) (“China HGS” or the “Company”), a leading regional real estate developer headquartered in Hanzhong City, Shaanxi Province, China, today reported its financial results for the second quarter of fiscal 2014 ended March 31, 2014 with the U.S. Securities and Exchange Commission. An electronic copy of the quarterly report on Form 10-Q can be accessed on the SEC's website at www.sec.gov.
Highlights for the Quarter
| l | Total revenues for the second quarter of fiscal 2014 were approximately $49.9 million, an increase of 157.5% from approximately $19.4 million in the same quarter of fiscal 2013. Total revenues recognized from percentage of completion method were approximately $33.5 million, which accounted for 67.2% of total revenues in the second quarter of fiscal 2014. |
| l | Net income for the second quarter of fiscal 2014 totaled approximately $13.4 million, an increase of approximately $7.7 million from the net income of approximately $5.8 million in the same period of last year. The increased net income in this quarter compared to the same quarter of last year was primarily due to the significantly increased revenue. |
| l | Basic and diluted net earnings per share (“EPS”) attributable to shareholders for the second quarter of fiscal 2014 were $0.30, increased by 130.8% from $0.13 for the same quarter last year. |
“I am very pleased that the Company has delivered strong performance in this quarter,” said Mr. Xiaojun Zhu, Chairman and Chief Executive Officer of China HGS. “During the second quarter, we sold a significant portion of commercial units located in Yang County Pearl Garden Project and successfully delivered two municipal roads constructed for the local government. We also experienced significant sales progress in our newly constructed Mingzhu Beiyuan and Oriental Garden real estate projects. These strong results demonstrate that our growth strategy is working well and our execution is effective.”
“As the government is cautiously implementing new policies and strategies to manage a stable economic growth in China, new catalysts will drive the growth. We have confidence that our strategy focusing on the real estate market in Tier 3 and Tier 4 cities and counties in China remains sound and effective going forward.” Mr. Zhu continued. “For example, the new airport for the greater Hanzhong area is near its completion and is expected to be in operation in the second half of this year. The new airport will offer several direct flights daily from Tier 1 cities such as Beijng, Shanghai and Shenzhen, and many other regional flights, which we believe will add new catalysts to the economic growth in the greater Hanzhong area. We expect that the regional economy in the area which is our major market will get a boost with the new catalysts.” concluded Mr. Xiaojun Zhu.
Safe Harbor Statement
This press release contains forward-looking statements, which are subject to change. The forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All "forward-looking statements" relating to the business of China HGS Real Estate Inc., which can be identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties which could cause actual results to differ. These factors include but are not limited to: the uncertain market for the Company's business, macroeconomic, technological, regulatory, or other factors affecting the profitability of real estate business; and other risks related to the Company's business and risks related to operating in China. Please refer to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2013, as well as the Company's Quarterly Reports on Form 10-Q that have been filed since the date of such annual report, for specific details on risk factors. Given these risks and uncertainties, you are cautioned not to place undue reliance on forward-looking statements. The Company's actual results could differ materially from those contained in the forward-looking statements. The Company undertakes no obligation to revise or update its forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.
About China HGS Real Estate, Inc.
China HGS Real Estate, Inc. (NASDAQ: HGSH), founded in 1995 and headquartered in Hanzhong City, Shaanxi Province, is a leading real estate developer in the region and holds the national grade I real estate qualification. The Company focuses on the development of high-rise, sub-high-rise residential buildings and multi-building apartment complexes in China's Tier 3 and Tier 4 cities and counties with rapidly growing populations driven by increased urbanization. The Company provides affordable housing with popular and modern designs to meet the needs of multiple buyer groups. The Company’s development activity spans a range of services, including land acquisition, project planning, design management, construction management, sales and marketing, and property management. For further information about China HGS, please go to www.chinahgs.com.
Company contact:
Randy Xiong,
President of Capital Market
China Phone: (86) 091-62622612
Email: randy.xiong@chinahgs.com
CHINA HGS REAL ESTATE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| March 31 | September 30 | |||||||
| 2014 | 2013 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 2,843,953 | $ | 5,878,101 | ||||
| Restricted cash | 1,483,280 | 1,332,807 | ||||||
| Advances to vendors | - | 109,134 | ||||||
| Cost and earnings in excess of billings | 5,744,960 | 2,178,270 | ||||||
| Real estate property development completed | 9,472,719 | 11,607,164 | ||||||
| Real estate property under development | - | 1,580,670 | ||||||
| Other current assets | 583,328 | 368,377 | ||||||
| Total current assets | 20,128,240 | 23,054,523 | ||||||
| Property, plant and equipment, net | 930,331 | 977,739 | ||||||
| Real estate property development completed, net of current portion | 2,183,887 | 7,619,811 | ||||||
| Security deposits for land use right | 3,245,752 | 3,259,240 | ||||||
| Real estate property under development, net of current portion | 199,704,185 | 142,916,601 | ||||||
| Accounts receivable | 3,161,946 | - | ||||||
| Total Assets | $ | 229,354,341 | $ | 177,827,914 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Bank loan – current portion | $ | 11,360,132 | $ | 4,888,860 | ||||
| Accounts payable | 25,424,259 | 22,527,686 | ||||||
| Other payables | 5,644,077 | 1,863,922 | ||||||
| Construction deposits | 370,131 | 357,447 | ||||||
| Billings in excess of cost and earnings | 8,745,055 | 5,109,758 | ||||||
| Customer deposits | 6,005,135 | 6,130,466 | ||||||
| Shareholder loan | 9,356,374 | 1,810,000 | ||||||
| Accrued expenses | 2,731,959 | 2,896,539 | ||||||
| Taxes payable | 9,177,823 | 6,612,707 | ||||||
| Total current liabilities | 78,814,945 | 52,197,385 | ||||||
| Long-term bank loan, less current portion | 12,983,008 | 11,407,340 | ||||||
| Deferred tax liabilities | 1,742,989 | 650,067 | ||||||
| Customer deposits, net of current portion | 19,681,160 | 13,410,081 | ||||||
| Construction deposits, net of current portion | 1,009,683 | 1,013,877 | ||||||
| Total liabilities | 114,231,785 | 78,678,750 | ||||||
| Commitments and Contingencies | ||||||||
| Stockholders' equity | ||||||||
| Common stock, $0.001 par value, 100,000,000 shares | ||||||||
| authorized, 45,050,000 shares issued and outstanding | ||||||||
| March 31, 2014 and September 30, 2013 | 45,050 | 45,050 | ||||||
| Additional paid-in capital | 17,759,349 | 17,759,349 | ||||||
| Statutory surplus | 8,977,230 | 8,977,230 | ||||||
| Retained earnings | 79,763,614 | 63,257,918 | ||||||
| Accumulated other comprehensive income | 8,577,313 | 9,109,617 | ||||||
| Total stockholders' equity | 115,122,556 | 99,149,164 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 229,354,341 | $ | 177,827,914 | ||||
CHINA HGS REAL ESTATE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
| Three months ended March 31, | Six months ended March 31, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Real estate sales | $ | 49,907,770 | $ | 19,382,960 | $ | 64,048,333 | $ | 30,386,375 | ||||||||
| Less: Sales tax | 3,007,183 | 1,148,725 | 3,953,871 | 1,859,442 | ||||||||||||
| Cost of real estate sales | 31,392,779 | 10,678,011 | 40,538,620 | 14,508,255 | ||||||||||||
| Gross profit | 15,507,808 | 7,556,224 | 19,555,842 | 14,018,678 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Selling and distribution expenses | 253,916 | 297,914 | 368,266 | 459,008 | ||||||||||||
| General and administrative expenses | 586,245 | 1,117,545 | 1,126,474 | 1,678,516 | ||||||||||||
| Total operating expenses | 840,161 | 1,415,459 | 1,494,740 | 2,137,524 | ||||||||||||
| Operating income | 14,667,647 | 6,140,765 | 18,061,102 | 11,881,154 | ||||||||||||
| Interest income | 4,446 | - | 9,005 | - | ||||||||||||
| Interest (expense) | (128,411 | ) | (18,100 | ) | (146,511 | ) | (36,200 | ) | ||||||||
| Other income (expenses) - net | - | 7 | - | 7,959 | ||||||||||||
| Income before income taxes | 14,543,682 | 6,122,672 | 17,923,596 | 11,852,913 | ||||||||||||
| Provision for income taxes | 1,095,103 | 355,952 | 1,417,900 | 577,116 | ||||||||||||
| Net income | $ | 13,448,579 | $ | 5,766,720 | $ | 16,505,696 | $ | 11,275,797 | ||||||||
| Other comprehensive income | ||||||||||||||||
| Foreign currency translation adjustment | (939,669 | ) | 468,723 | (532,304 | ) | 677,708 | ||||||||||
| Comprehensive income | $ | 12,508,910 | $ | 6,235,443 | $ | 15,973,392 | $ | 11,953,505 | ||||||||
| Basic and diluted income per common share | ||||||||||||||||
| Basic | $ | 0.30 | $ | 0.13 | $ | 0.37 | $ | 0.25 | ||||||||
| Diluted | $ | 0.30 | $ | 0.13 | $ | 0.37 | $ | 0.25 | ||||||||
| Weighted average common shares outstanding | ||||||||||||||||
| Basic | 45,050,000 | 45,050,000 | 45,050,000 | 45,050,000 | ||||||||||||
| Diluted | 45,126,214 | 45,116,695 | 45,126,214 | 45,090,074 | ||||||||||||
CHINA HGS REAL ESTATE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Six months ended | ||||||||
| March 31, | ||||||||
| 2014 | 2013 | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 16,505,696 | $ | 11,275,797 | ||||
| Adjustments to reconcile net income to net cash used in operating activities: | 1,103,204 | - | ||||||
| Deferred tax provision | ||||||||
| Depreciation | 43,661 | 44,671 | ||||||
| Stock based compensation | - | 5,512 | ||||||
| Changes in assets and liabilities: | ||||||||
| Restricted cash | (157,070 | ) | (127,177 | ) | ||||
| Accounts receivable | (3,183,853 | ) | (4,030,621 | ) | ||||
| Advances to vendors | 109,435 | (1,475,065 | ) | |||||
| Loans to outside parties | - | 15,917 | ||||||
| Security deposits for land use rights | - | (398,329 | ) | |||||
| Cost and earnings in excess of billings | 3,681,777 | - | ||||||
| Real estate property development completed | 7,542,703 | 7,834,524 | ||||||
| Real estate property under development | (56,191,546 | ) | (16,983,329 | ) | ||||
| Other current and non-current assets | (217,975 | ) | (56,762 | ) | ||||
| Accounts payables | 3,010,516 | 1,302,987 | ||||||
| Other payables | 3,814,113 | 652,305 | ||||||
| Billings in excess of cost and earnings | (3,600,479 | ) | - | |||||
| Customer deposits | 6,269,755 | 401,479 | ||||||
| Construction deposits | 14,260 | 95,605 | ||||||
| Accrued expenses | (154,580 | ) | 184,157 | |||||
| Taxes payable | 2,610,444 | 857,617 | ||||||
| Net cash used in operating activities | (18,799,939 | ) | (400,712 | ) | ||||
| Cash flow from financing activities | ||||||||
| Proceeds from shareholder loan | 7,598,660 | - | ||||||
| Proceeds from bank loan | 8,170,602 | - | ||||||
| Net cash provided by financing activities | 15,769,262 | - | ||||||
| Effect of changes of foreign exchange rate on cash | (3,471 | ) | 8,219 | |||||
| Net decrease in cash | (3,034,148 | ) | (392,493 | ) | ||||
| Cash, beginning of period | 5,878,101 | 1,104,686 | ||||||
| Cash, end of period | $ | 2,843,953 | $ | 712,193 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Interest paid | $ | 751,584 | $ | - | ||||
| Income taxes paid | $ | 244,997 | $ | 37,408 | ||||