HANZHONG, China, Feb. 11 /PRNewswire-Asia-FirstCall/ -- China HGS
Real Estate Inc. (OTC:CAHS) (BULLETIN BOARD: CAHS) ("China HGS" or
the "Company"), a leading residential property developer in
Hanzhong, China, today reported financial results for the first
quarter of its 2010 fiscal year ended December 31, 2009. First
Quarter Highlights -- Revenues increased 18.4% year-over-year to
$10.4 million -- Gross profit increased 21.0% to $4.8 million with
gross margin of 46.6% -- Net income was $3.6 million, or $0.08 per
diluted share "In the first quarter of fiscal 2010, we witnessed
strong demand for the Projects II and III of Yangzhou Pearl Garden
as well as continued Mingzhu Xinju, generating net income in line
with our expectations. Demand for our residential projects remains
strong and we are not materially affected by the Chinese
government's recent tight monetary policies," commented Mr. Xiaojun
Zhu, Chairman and Chief Executive Officer of China HGS. "In the
markets we operate, our average selling price increased 5% to 10%
in January 2010, and we expect this trend to continue throughout
2010." First Quarter Results Revenues increased 18.4% to $10.4
million, from $8.8 million in the comparable period of fiscal 2009.
The revenue growth during this period was attributable to stronger
advertising and sales promotions and a larger customer base. Sales
from the Company's Yangzhou Pearl Garden project accounted for
approximately 100% of the Company's total revenue during the
quarter. Gross profit increased 21.0% to $4.8 million, as compared
to $4.0 million in the same period last year. Gross margin expanded
almost 100 basis points to 46.6%, as compared to 45.6% in the same
period a year ago. Total operating expenses were $1.1 million, up
274.1% from $0.3 million in the same period a year ago. Selling and
distribution expenses rose 130.1% to $0.3 million due to increased
advertising expenses to raise the Company's brand awareness among
customers in Yang County, a new market. General and administrative
expenses ("G&A") were $0.8 million, up 385.1% year-over-year.
The increase in G&A expenses was primarily related to legal and
professional expenses associated with being a publicly traded
company. Operating expenses as a percentage of revenue were 10.7%,
as compared to 3.4% in the same period last year. Operating income
was $3.7 million for the three months ended December 31, 2009, flat
with the same period a year ago. Operating margin was 35.8%,
compared to 42.2% in the same period a year ago. Net income was
$3.6 million, or $0.08 per diluted share, up 1.3% from $3.5
million, or $0.09 per diluted share, in the same period a year ago.
Diluted earnings per share was calculated using weighted average
shares of approximately 45.1 million in the quarter ended December
31, 2009 compared to 39.0 million a year ago. The increase was the
result of increased shares outstanding due to the reverse merger
last year. Financial Condition As of December 31, 2009, China HGS
had $1.9 million in cash and cash equivalents, up from $0.8 million
at September 30, 2009. China HGS had working capital of $32.7
million and no long-term debt. Shareholders' equity was $33.4
million. The Company generated $1.2 million of operating cash flow
in the first quarter of fiscal 2010. Business Outlook Hangzhou,
China HGS' key market, is located at the center of China's Grand
Western Triangle, which includes some of the most developed cities
in China, including Chengdu, Xi'an and Chongqing. As of December
31, 2009, China HGS had approximately $38.9 million of real estate
projects under development. The Company's major projects under
development include Mingzhu Garden in Hanzhong City and Yangzhou
Pearl Garden in Yang County. China HGS re-affirms its previously
issued guidance for fiscal year ended September 30, 2010. The
Company expects revenues to be approximately $47.5 million to $49.0
million and net income to be approximately $15.5 million to $16.0
million. The Company expects to generate stronger sales in the
second quarter of fiscal 2010 than in the first quarter, as migrant
workers return home to celebrate the Spring Festival, which marks
the traditional sales season for apartment units. "Despite the fact
that many national real estate developers have been impacted by the
government's recent tight monetary policy, China HGS has not been
materially affected. We believe our projects in Hanzhong City and
Yang County have little speculative buying due to strong
fundamentals and GDP growth," said Mr. Xiaojun Zhu. "With
significant land reserves and a balance sheet with no long-term
debt, we believe we will continue to capture opportunities for
revenue and profit growth in the year ahead." Conference Call China
HGS will conduct a conference call at 10:00 a.m. Eastern Time on
Thursday, February 11, 2010 to discuss results for the first
quarter of fiscal 2010. To participate in the live conference call,
please dial the following number five to ten minutes prior to the
scheduled conference call time: (877) 883-4655. International
callers should dial: (706) 758-4585. When prompted by the operator,
enter conference ID number: 56336995. A replay will be available
for 14 days starting at 11:00 a.m. Eastern Time on Thursday,
February 11, 2010, and can be accessed by dialing (800) 642-1687.
International callers should dial (706) 645-9291. When prompted,
please enter conference ID number: 56336995. About China HGS Real
Estate Inc. China HGS Real Estate Inc., through its wholly-owned
subsidiary, Shaanxi Guangsha Investment and Development Group Co.,
Ltd., specializes in real estate development in China's second-tier
and third-tier cities. The Company's real estate properties include
multi-layer, sub-high-rise, and high-rise apartment buildings. The
Company possesses the national grade II real estate qualification
and was ranked as the No. 1 property developer in Hanzhong, Shaanxi
Province in terms of market share in 2007 and 2008 successively.
Forward-looking Statements: This press release contains certain
statements that may include 'forward-looking statements'. All
statements other than statements of historical fact included herein
are 'forward-looking statements'. These forward looking statements
are often identified by the use of forward-looking terminology such
as 'believes,' 'expects' or similar expressions, involve known and
unknown risks and uncertainties. Although the Company believes that
the expectations reflected in these forward-looking statements are
reasonable, they do involve assumptions, risks and uncertainties,
and these expectations may prove to be incorrect. You should not
place undue reliance on these forward-looking statements, which
speak only as of the date of this press release. The Company's
actual results could differ materially from those anticipated in
these forward-looking statements as a result of a variety of
factors, including those discussed in the Company's periodic
reports that are filed with the Securities and Exchange Commission
and available on its website http://www.sec.gov/. All
forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by
these factors. Other than as required under the securities laws,
the Company does not assume a duty to update these forward-looking
statements. --Financial Tables Follow-- CHINA HGS REAL ESTATE INC.
AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS AS OF
DECEMBER 31, 2009 AND SEPTEMBER 30, 2009 (UNAUDITED) (In U.S.
Dollars) December 31, September 30, 2009 2009 (unaudited) (audited)
ASSETS Current assets: Cash and cash equivalents $1,942,513
$820,783 Restricted cash 613,431 $412,373 Loans to outside parties,
net of allowance 3,956,006 $1,762,022 Due from related party Real
estate property development completed 6,067,557 2,392,003 Real
estate property under development 38,906,520 42,522,287 Other
current assets 88,808 71,985 Total current assets 51,574,835
47,981,453 Property, plant and equipment, net 695,945 713,008 Total
assets $52,270,780 $48,694,461 LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: Short-term loans $585,035 $672,751 Accounts
payable 872,997 730,838 Other payables 1,113,839 1,021,147 Customer
deposits 13,806,359 14,900,334 Accrued expenses 763,948 125,742
Taxes payable 1,695,482 1,380,694 Total current liabilities
18,837,660 18,831,506 Stockholders' equity: Common stock, $.001 par
value, 100,000,000 shares authorized, 45,050,000 shares issued and
outstanding as of December 31, 2009 and September 30, 2009,
respectively 45,050 45,050 Additional paid-in capital 17,632,348
17,632,348 Statutory surplus 11,473,560 7,904,531 Retained earnings
3,199,920 3,092,499 Accumulated other comprehensive income
1,951,903 1,950,766 Total stockholders' equity 33,433,120
29,862,955 Total liabilities and stockholders' equity $52,270,780
$48,694,461 CHINA HGS REAL ESTATE INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED
DECEMBER 31, 2009 AND 2008 (UNAUDITED) (In U.S. Dollars) Three
months ended December 31, 2009 2008 Real estate sales, net of sales
taxes of $663,246 and $545,470, respectively $10,390,857 $8,776,343
Cost of real estate sales, exclusive of depreciation 5,552,590
4,776,439 Gross profit 4,838,267 3,999,904 Operating expenses
Selling and distribution expenses 299,081 129,953 General and
administrative expenses 817,230 168,474 Total operating expenses
1,116,311 298,427 Operating income 3,721,956 3,701,477 Other income
(expenses) Interest expenses (14,752) (41,571) Other expenses 0
(309) Total other income (expenses) 14,752 41,880 Income before
income taxes 3,707,204 3,659,597 Provision for income taxes 138,176
137,250 Net income 3,569,028 3,522,347 Other comprehensive income
Foreign currency translation adjustment 1136 978 Comprehensive
income $3,570,164 $3,523,325 Basic and diluted income per common
share - Basic $0.08 $0.09 - Diluted $0.08 $0.09 Weighted average
common shares outstanding: - Basic 45,050,000 39,000,000 - Diluted
45,050,000 39,000,000 CHINA HGS REAL ESTATE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE
MONTHS ENDED DECEMBER 31, 2009 AND 2008 (UNAUDITED) (In U.S.
Dollars) Three months ended December 31, 2009 2008 Cash flows from
operating activities Net income $3,569,028 $3,522,965 Adjustments
to reconcile net income to net cash provided by (used in) operating
activities: Depreciation 14,246 11,344 Loss on disposal of fixed
assets 2,861 308 Changes in assets and liabilities (Increase)
decrease in Restricted cash (201,068) 54,437 Accounts receivable 0
(14,784) Loans to outside parties (2,194,256) (350,664) Real estate
property development completed (3,676,043) 4,776,439 Real estate
property under development 3,618,875 (2,533,239) Due from related
party Other current assets (16,823) (214,034) (Increase) decrease
in Accounts payables 142,141 (349,649) Other payables 92,647
(522,620) Customer deposits (1,095,034) (6,788,087) Accrued
expenses 638,308 (38,501) Taxes payable 314,761 365,454 Net cash
provided by (used in) operating activities 1,209,643 (2,081,245)
Cash flow from investing activities Addition of fixed assets 0
(343,447) Proceeds from disposal of fixed assets 0 0 Net cash used
in investing activities 0 (343,447) Cash flow from financing
activities Proceeds from shareholder loans 0 (412,360) Repayment of
short-term loans (87,770) 0 Capital contribution 0 (437,750) Net
cash provided by (used in) financing activities (87,770) (850,111)
Effect of changes of foreign exchange rate on cash and cash
equivalents (143) (504) Net increase (decrease) in cash and cash
equivalents 1,121,730 (1,574,007) Cash and cash equivalents,
beginning of year 820,783 2,121,060 Cash and cash equivalents, end
of period $1,942,513 $546,983 Supplemental disclosure of cash flow
information Interest paid $13,337 $42,733 Income taxes paid $31,411
$78,430 Non-cash financing activities Capital contribution
converted from dividend payable $0 $5,483,508 Capital contribution
converted from retained earnings $0 $10,788,349 Capital
contribution converted from surplus $0 $799,137 For more
information, please contact: Company Contact: Mr. Ran Xiong, Deputy
GM Email: Phone: +86-916-2622612 Investor Relations Contact: CCG
Investor Relations Crocker Coulson, President Email: Phone:
+1-646-213-1915 (NY office) Elaine Ketchmere, Partner Email: Phone:
+1-310-954-1345 (LA office) DATASOURCE: China HGS Real Estate Inc.
CONTACT: Ran Xiong, Deputy GM, , +86-916-2622612, of China HGS Real
Estate Inc.; Investor Relations Contact: Crocker Coulson,
President, , +1-646-213-1915 (NY office), or Elaine Ketchmere,
Partner, , +1-310-954-1345 (LA office), both of CCG Investor
Relations
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