China HGS Reports Third Quarter of Fiscal Year 2013 Results

HANZHONG, China, Aug. 14, 2013 /PRNewswire-FirstCall/ -- 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 third quarter of fiscal 2013 ended June 30, 2013.

Highlights for the Third Quarter of Fiscal 2013

• Total revenues for the third quarter of fiscal 2013 were approximately $7.2 million, an increase of 47% from approximately $4.9 million in the same period of fiscal 2012.
• Total gross floor area ("GFA") sold during the three months ended June 30, 2013 was 13,287 square meters, more than 11% from 11,947 square meters sold in the same period of fiscal 2012.
• Net income for the third quarter of fiscal 2013 totaled approximately $2.3 million, representing a 77% increase from the net income of approximately $1.3 million in the same period of fiscal 2012.
• Basic and diluted net earnings per share ("EPS") attributable to shareholders for the third quarter of fiscal 2013 was $0.05, compared to $0.03 for the same period of fiscal 2012.

"We continued to show improved performance over the last year, reflecting a healthy housing demand in the markets we are serving. We have also experienced solid sales activities during this quarter in our pre-sales of the new residential high-rise buildings that are still under constructions. However, due to the full accrual accounting method we are using to recognize revenues, those pre-sale activities are not reflected in our reported revenues. This, combined with reduced sellable inventory levels, has caused our sequential comparison unfavorable," Mr. Xiaojun Zhu, China HGS's Chairman and Chief Executive Officer commented.

"Going forward, we will continue to focus on and speed up the construction of our three on-going development projects: Mingzhu Beiyuan, Oriental Pearl Garden, and Yangzhou Pearl Garden. Upon completion of these high-rise residential buildings, our sellable inventory will be replenished, which, we expect, will accelerate the growth of our revenues long term," concluded Mr. Xiaojun Zhu.

Financial Results for the third Quarter of Fiscal 2013

Revenues increased by 47% to approximately $7.2 million for the third quarter of fiscal 2013 from approximately $4.9 million for the same period of last year. The total GFA sold during the third quarter of fiscal 2013 was 13,287 square meters, representing an increase of 11% from 11,947 square meters sold for the third quarter of fiscal 2012. During the third quarter of fiscal 2013, the Company completed and delivered one high-rise building in Yangzhou Pearl Garden project and recognized approximately $2.7 million in revenue from the sold units in this building.

Gross profit was approximately $3.1 million for the third quarter of fiscal 2013 as compared to approximately $1.9 million for the same period of last year. The overall gross profit as a percentage of real estate sales before sales tax was 43.7%, increased from 38.2% for the same quarter of last year due to higher sales of higher margin commercial units in both Mingzhu Garden and Yangzhou Pear Garden projects during this quarter.  

Total operating expenses increased by 58.7% to approximately $0.7 million for the third quarter of fiscal 2013 from approximately $0.5 million for the same period of last year. The increase in operating expenses consisted of an increase in selling expense and general and administration expenses, mainly attributable to more promotions, sales commission, consulting, marketing and real estate development activities as well as higher executive compensation, taxes and office expense. As a percentage of total sales, the operating expenses slightly increased to 10.1% for this quarter from 9.4% for the same quarter of last year.

The Company reported net income of approximately $2.3 million for the third quarter of fiscal 2013, as compared to net income of approximately $1.3 million for the same period of last year. The increase of approximately $0.9 million in our net income was primarily due to the increases in revenue and gross profit.

As of June 30, 2013, the Company had total cash and restricted cash balance of approximately $4.1 million, increased by approximately $1.9 million compared to approximately $2.2 million cash and restricted cash balance as of September 30, 2012. Since most of our customers are first-time home buyers and our affordable housing units are in the pre-sales stage, we expect our cash flow will continue improving during the balance of fiscal 2013.

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, 2012, 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: [email protected]

SOURCE China HGS Real Estate Inc.