China HGS Reports First Quarter of Fiscal Year 2013 Results - Revenue Up by Over 300% and Profit Up by Over 400%

 China HGS Reports First Quarter of Fiscal Year 2013 Results - Revenue Up by
                     Over 300% and Profit Up by Over 400%

PR Newswire

HANZHONG, China, Feb. 6, 2013

HANZHONG, China, Feb. 6, 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 first quarter of fiscal 2013
ended December 31, 2012.

Highlights for the First Quarter of Fiscal 2013

  o Total revenues for the first quarter of fiscal 2013 were $11.0 million, an
    increase of 339.8% from $2.5 million in the first quarter of fiscal 2012
  o Total gross floor area ("GFA") sold during the first quarter of fiscal
    2013 was 13,028 square meters, more than tripled from 3,877.4 square
    meters sold in the first quarter of fiscal 2012
  o Net income totaled $5.5 million, a significant increase compared to the
    net income of $1.0 million in the first quarter of fiscal 2012
  o Basic and diluted net earnings per share ("EPS") attributable to
    shareholders were $0.12, compared to $0.02 for the first quarter of fiscal
    2012

"We are pleased to report strong financial results for the first quarter of
fiscal 2013. We achieved significantly higher revenues and net income than the
same quarter of last year, demonstrating our improved operational performance
and higher returns on invested capital," commented Mr. Xiaojun Zhu, China
HGS's Chairman and Chief Executive Officer. "Despite the purchase and mortgage
restriction policies imposed on real estate market remained in effect, we
experienced higher sales activities in the quarter driven by our sales and
promotion efforts. These results are very encouraging. We believe the
fundamentals underpinning real estate demand in Tier 3 and Tier 4 cities and
counties remain strong as the population continues to grow in these cities and
counties driven by increased urbanization."

"We now look ahead to 2013 with expectations for somewhat relaxed government
policies on the real estate industry and some rebound in the Chinese housing
market," continued Mr. Zhu. "Given these expectations, we have been focusing
on the investment in three large projects – Mingzhu Beiyuan, Oriental Pearl
Garden, and Yangzhou Pearl Garden. We expect to complete the construction of
these three multi-building large apartment complexes in two to three years. We
have already started pre-sales and signed some sales contracts with buyers. We
expect these three large projects to provide us significant revenue and income
growth in 2014 and beyond," concluded Mr. Xiaojun Zhu.

Financial Results for the First Quarter of Fiscal 2013

Revenues increased by 339.8% to approximately $11.0 million for the first
quarter of fiscal 2013 from approximately $2.5 million for the same period in
the last year. The total GFA sold during the quarter was 13,028 square meters,
representing over three times increase from 3,877 square meters sold in the
same quarter of last year. A significant portion of revenue during the first
quarter of fiscal 2013 was from the sales of our commercial units inventory in
NanDajie Project (Mingzhu Xinju project) with a total GFA of 4,545.88 square
meters for a total contract amount of approximately $5.4 million.

Gross profit was approximately $6.5 million for the first quarter of fiscal
2013 as compared to approximately $1.4 million for the first quarter of fiscal
2012, representing an increase of $5.1 million. The higher gross profit was
mainly attributable to the increase in sales. The overall gross profit as a
percentage of revenue increased to 58.7% during the first quarter of fiscal
2013 from 57.7% for the same quarter of last year, mainly due to higher sales
of commercial units, which have higher average selling price per square meter
compared to that of residential properties.

Total operating expenses increased to $722,065 for the first quarter of fiscal
2013 from $361,213 for the first quarter of fiscal 2012 as a result of more
sales and marketing activities, increased sales commission, higher executive
compensation, taxes, and office expenses. However, as a percentage of total
sales, operating expenses declined to 6.6% from 14.4% in the same quarter of
last year, demonstrating an improved operating efficiency achieved in this
quarter, 

The Company reported net income of approximately $5.5 million for the first
quarter of fiscal 2013, as compared to net income of $1.0 million for the
first quarter of fiscal 2012, representing an increase of $4.5 million. The
higher net income was primarily due to the increase in revenue.

As of December 31, 2012, the Company had total cash and restricted cash
balance of approximately $1.7 million, decreased by $0.5 million compared to
$2.2 million cash and restricted cash balance as of September 30, 2012.

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. 

 

CHINA HGS REAL ESTATE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
                                                                         December 31,      September 30,
                                                                         2012              2012
ASSETS
Current assets:
Cash                                                                     $ 523,868         $  1,104,686
Restricted cash                                                            1,161,158          1,080,985
Accounts receivable                                                        4,654,636          -
Advances to vendors                                                        4,376,112          2,566,422
Loans to outside parties, net                                              5,146              20,957
Real estate property development completed                                 15,912,612         19,534,088
Real estate property under development                                     9,582,760          8,590,275
Other current assets                                                       181,873            171,863
Total current assets                                                       36,398,165         33,069,276
Property, plant and equipment, net                                         1,017,668          1,037,080
Real estate property development completed, net of current portion         6,565,509          6,691,813
Security deposits for land use right                                       22,959,737         22,894,698
Real estate property under development, net of current portion             61,575,793         56,021,787
Total Assets                                                             $ 128,516,872     $  119,714,654

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                                                      $ 4,145,774     $ 3,828,880
Other payables                                                          1,395,244       1,213,394
Construction deposits                                                   301,773         301,318
Customer deposits                                                       13,875,722      11,597,422
Shareholder loan                                                        1,810,000       1,810,000
Accrued expenses                                                        2,402,089       2,305,086
Taxes payable                                                           3,722,182       4,336,458
Total current liabilities                                               27,652,784      25,392,558
Construction deposits, net of current portion                           866,385         864,259
Customer deposits, net of current portion                               18,562,385      17,743,993
Total liabilities                                                       47,081,554      44,000,810
Commitments and Contingencies
Stockholders' equity
Common stock, $0.001 par value, 100,000,000 shares
authorized, 45,050,000 shares issued and outstanding                
December 31, 2012 and September 30, 2012                              $ 45,050        $ 45,050
Additional paid-in capital                                              17,753,749      17,750,337
Statutory surplus                                                       6,549,354       6,549,354
Retained earnings                                                       50,403,306      44,894,229
Accumulated other comprehensive income                                  6,683,859       6,474,874
Total stockholders' equity                                              81,435,318      75,713,844
Total Liabilities and Stockholders' Equity                            $ 128,516,872   $ 119,714,654
 The accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.

 

CHINA HGS REAL ESTATE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME  AND COMPREHENSIVE INCOME 
(Unaudited)
                                                                  Three months ended December
                                                                  31,
                                                                  2012            2011
Real estate sales                                                 $ 11,003,415    $ 2,501,981
Less: Sales tax                                                     (710,717)       (175,905)
          Cost of real estate sales                                 (3,830,244)     (881,900)
Gross profit                                                        6,462,454       1,444,176
Operating expenses
Selling and distribution expenses                                   161,094         42,441
General and administrative expenses                                 560,971         318,772
Total operating expenses                                            722,065         361,213
Operating income                                                    5,740,389       1,082,963
Interest expense                                                    (18,100)        (4,163)
Other income - net                                                  7,952           -
Income  before income taxes                                         5,730,241       1,078,800
Provision for income taxes                                          221,164         48,338
Net income                                                          5,509,077       1,030,462
Other comprehensive income
Foreign currency translation adjustment                             208,985       $ 344,589
Comprehensive income                                              $ 5,718,062     $ 1,375,051
Basic and diluted income per common share
Basic                                                             $ 0.12          $ 0.02
Diluted                                                           $ 0.12          $ 0.02
Weighted average common shares outstanding                      
Basic                                                               45,050,000      45,050,000
Diluted                                                             45,050,000      45,050,000
The accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.

 

CHINA HGS REAL ESTATE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                                                                          Three months ended December 31,
                                                                          2012              2011
Cash flows from operating activities
Net income                                                                $ 5,509,077      $ 1,030,462
Adjustments to reconcile net income to net used in operating activities:
Depreciation                                                                22,404           22,081
Stock based compensation                                                    3,412            12,175
Changes in assets and liabilities:
Restricted cash                                                             (77,263)         (5,750)
Accounts receivable                                                         (4,664,334)      -
Advances to vendors                                                         (1,806,155)      51,748
Loans to outside parties                                                    15,903           579,495
Security deposits for land use rights                                       -                (9,136,065)
Real estate property development completed                                  3,830,244        881,900
Real estate property under development                                      (6,376,199)      (1,898,986)
Other current assets                                                        (9,542)          (15,367)
Accounts payables                                                           306,655          (3,203,189)
Other payables                                                              178,775          310,247
Customer deposits                                                           3,019,617        3,021,626
Construction deposits                                                       (731)            6,272
Accrued expenses                                                            90,860           (122,461)
Taxes payable                                                               (627,900)        (32,172)
Net cash used in operating activities                                     $ (585,177)      $ (8,497,984)
Cash flow from financing activities
Proceeds from shareholder loan                                              -                3,142,332
Repayment of shareholder loan                                               -                (3,142,332)
Net cash provided by financing activities                                 $ -              $ -
Effect of changes of foreign exchange rate on cash                          4,359            25,795
Net decrease in cash                                                        (580,818)        (8,472,189)
Cash, beginning of period                                                   1,104,686        8,837,795
Cash, end of period                                                       $ 523,868        $ 365,606
Supplemental disclosures of cash flow information:
Interest paid                                                             $ -              $ -
Income taxes paid                                                         $ 404,003        $ 18,817
The accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.

SOURCE China HGS Real Estate Inc.

Website: http://www.chinahgs.com
Contact: Randy Xiong, President of Capital Market, +86-091-6262-2612,
randy.xiong@chinahgs.com