China HGS Reports Third Quarter of Fiscal Year 2014 Results

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Aug 08, 2014, 07:00 ET

HANZHONG, China, Aug. 8, 2014 /PRNewswire/ -- 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 2014 ended June 30, 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

Total revenues for the third quarter of fiscal 2014 were approximately $28.9 million, an increase of 302% from approximately $7.2 million in the same quarter of fiscal 2013. Total revenues recognized from percentage of completion method were approximately $24.2 million, which accounted for 84% of total revenues in the third quarter of fiscal 2014.
Net income for the third quarter of fiscal 2014 totaled approximately $8.2 million, an increase of approximately $5.9 million from the net income of approximately $2.3 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.
Basic and diluted net earnings per share ("EPS") attributable to shareholders for the third quarter of fiscal 2014 were $0.18, increased by 260% from $0.05 for the same quarter last year.

"We continued to deliver satisfactory results this quarter as compared to the same period of last year," said Mr. Xiaojun Zhu, Chairman and Chief Executive Officer of China HGS. "The overall real estate market in China remains soft, however, it is generally stable in the Tier 3 and Tier 4 cities. We are also pleased to experience some increase in our average selling prices ("ASP") compared to the third quarter of last year. We believe that the demand for real estate in Tier 3 and Tier 4 cities and counties in China remained solid as the government policy such as the reform of "Hu-Kou" policy will continue to drive migrants to favor Tier 3 and Tier 4 cities and counties. We remain focused on providing quality housing with affordable pricing for growing new urban residents in these regions," 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: [email protected]

CHINA HGS REAL ESTATE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
	June 30,		September 30,
	2014		2013
ASSETS
Current assets:
Cash	$	2,672,883	$	5,878,101
Restricted cash		1,702,740		1,332,807
Advances to vendors		-		109,134
Cost and earnings in excess of billings		6,888,871		2,178,270
Real estate property development completed		6,733,547		11,607,164
Real estate property under development		-		1,580,670
Other current assets		656,522		368,377
Total current assets		18,654,563		23,054,523

Property, plant and equipment, net		919,806		977,739
Real estate property development completed, net of current portion		3,163,831		7,619,811
Security deposits for land use right		3,248,652		3,259,240
Real estate property under development, net of current portion		231,621,911		142,916,601
Accounts receivable-Local government		3,164,770		-
Total Assets	$	260,773,533	$	177,827,914

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loan – current portion	$	9,745,955	$	4,888,860
Short-term loan -other		15,286,531		-
Accounts payable		25,173,845		22,527,686
Other payables		10,263,258		1,863,922
Construction deposits		367,560		357,447
Billings in excess of cost and earnings		8,656,785		5,109,758
Customer deposits		5,883,390		6,130,466
Shareholder loan		7,462,654		1,810,000
Accrued expenses		3,066,621		2,896,539
Taxes payable		10,664,083		6,612,707
Total current liabilities		96,570,682		52,197,385
Long-term bank loan, less current portion		12,994,607		11,407,340
Deferred tax liabilities		2,323,962		650,067
Customer deposits, net of current portion		24,472,081		13,410,081
Construction deposits, net of current portion		1,004,087		1,013,877
Total liabilities		137,365,419		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 June 30, 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		87,924,885		63,257,918
Accumulated other comprehensive income		8,701,600		9,109,617
Total stockholders' equity		123,408,114		99,149,164
Total Liabilities and Stockholders' Equity	$	260,773,533	$	177,827,914

CHINA HGS REAL ESTATE, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)
	Three months ended June 30,				Nine months ended June 30,
	2014		2013		2014		2013

Real estate sales	$	28,854,104	$	7,174,974	$	92,902,437	$	37,561,349
Less: Sales tax		1,746,835		489,971		5,700,706		2,349,413
Cost of real estate sales		17,538,690		3,549,401		58,077,310		18,057,656
Gross profit		9,568,579		3,135,602		29,124,421		17,154,280

Operating expenses
Selling and distribution expenses		154,007		184,518		522,273		643,526
General and administrative expenses		557,779		542,836		1,684,253		2,221,352
Total operating expenses		711,786		727,354		2,206,526		2,864,878

Operating income		8,856,793		2,408,248		26,917,895		14,289,402

Interest income		3,401		-		12,406		-
Interest (expense)		(17,793)		(18,100)		(164,304)		(54,300)
Other income (expenses) - net		-		(319)		-		7,640
Income before income taxes		8,842,401		2,389,829		26,765,997		14,242,742

Provision for income taxes		681,130		127,284		2,099,030		704,400
Net income	$	8,161,271	$	2,262,545	$	24,666,967	$	13,538,342

Other comprehensive income (loss)
Foreign currency translation adjustment		124,287		1,337,601		(408,017)		2,015,309

Comprehensive income	$	8,285,558	$	3,600,146	$	24,258,950	$	15,553,651

Basic and diluted income per common share
Basic	$	0.18	$	0.05	$	0.55	$	0.30
Diluted	$	0.18	$	0.05	$	0.55	$	0.30

Weighted average common shares outstanding
Basic		45,050,000		45,050,000		45,050,000		45,050,000
Diluted		45,125,144		45,115,382		45,125,144		45,115,382

CHINA HGS REAL ESTATE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	Nine months ended
	June 30,
	2014		2013
Cash flows from operating activities
Net income	$	24,666,967	$	13,538,342
Adjustments to reconcile net income to net cash used in operating activities:
Deferred tax provision		1,681,415		-
Depreciation		54,933		67,151
Stock based compensation		-		7,612
Changes in assets and liabilities:
Accounts receivable		(3,174,981)		(2,474,262)
Advances to vendors		109,130		1,517,734
Loans to outside parties		-		(943,110)
Cost and earnings in excess of billings		(4,732,899)		-
Real estate property development completed		9,297,037		8,512,382
Real estate property under development		(87,876,687)		(33,833,410)
Other current and non-current assets		(290,275)		(120,144)
Accounts payables		2,728,118		8,968,016
Other payables		8,432,511		622,260
Billings in excess of cost and earnings		3,575,124		-
Customer deposits		10,913,504		5,127,523
Construction deposits		4,793		152,481
Accrued expenses		179,365		282,239
Taxes payable		4,085,999		446,139
Net cash provided by (used in) operating activities		(30,345,946)		1,870,953

Cash flow from financing activities
Restricted cash		(375,470)		(136,176)
Proceeds from shareholder loan		7,577,486		-
Repayment of shareholder loan		(1,906,593)		-
Proceeds from bank loan		8,147,834		-
Repayment of bank loan		(1,629,567)		-
Proceeds from short-term loan		15,335,854		-
Net cash provided by financing activities		27,149,544		(136,176)

Effect of changes of foreign exchange rate on cash		(8,816)		49,333
Net increase (decrease) in cash		(3,205,218)		1,784,110
Cash, beginning of period		5,878,101		1,104,686
Cash, end of period	$	2,672,883	$	2,888,796
Supplemental disclosures of cash flow information:
Interest paid	$	1,143,784	$	-
Income taxes paid	$	291,776	$	243,474
Non Cash transaction:
Transfer of security deposit for land use rights to real estate under development	$	-	$	12,589,971