China HGS Reports Third Quarter of Fiscal Year 2013 Results

         China HGS Reports Third Quarter of Fiscal Year 2013 Results

Revenue and Net Income Up by Over 47% and 77% respectively

PR Newswire

HANZHONG, China, Aug. 14, 2013

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

  oTotal 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.
  oTotal 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.
  oNet 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.
  oBasic 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.

SafeHarborStatement

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: randy.xiong@chinahgs.com



CHINA HGS REAL ESTATE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
                                                 June 30         September 30
                                                 2013            2012
Current assets:
Cash                                             $  2,888,796    $ 1,104,686
Restricted cash                                     1,244,516      1,080,985
Accounts receivable                                 2,507,409      -
Advances to vendors                                 1,088,969      2,566,422
Loans to outside parties, net                       977,196        20,957
Real estate property development completed          12,781,082     19,534,088
Real estate property under development              3,866,508      8,590,275
Other current assets                                297,674        171,863
Total current assets                                25,652,150     33,069,276
Property, plant and equipment, net                  993,523        1,037,080
Real estate property development completed,         5,437,809      6,691,813
net of current portion
Security deposits for land use right                11,082,178     22,894,698
Real estate property under development, net of      108,911,490    56,021,787
current portion
Total Assets                                     $  152,077,150    119,714,654
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                                 $  13,007,469   $ 3,828,880
Other payables                                      1,872,648      1,213,394
Construction deposits                               301,677        301,318
Customer deposits                                   5,220,783      11,597,422
Shareholder loan                                    1,810,000      1,810,000
Accrued expenses                                    2,642,683      2,305,086
Taxes payable                                       4,890,993      4,336,458
Total current liabilities                           29,746,253     25,392,558
Construction deposits, net of current portion       1,045,952      864,259
Customer deposits, net of current portion           30,009,838     17,743,993
Total liabilities                                   60,802,043     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
June 30, 2013 and September 30, 2012             $  45,050       $ 45,050
Additional paid-in capital                          17,757,949     17,750,337
Statutory surplus                                   6,549,354      6,549,354
Retained earnings                                   58,432,571     44,894,229
Accumulated other comprehensive income              8,490,183      6,474,874
Total stockholders' equity                          91,275,107     75,713,844
Total Liabilities and Stockholders' Equity       $  152,077,150  $ 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 June 30,     Nine months ended June 30,
               2013           2012           2013            2012
Real estate    $ 7,174,974    $ 4,882,304    $ 37,561,349    $ 10,262,731
sales
Sales tax        (489,971)      (297,536)      (2,349,413)     (667,020)
Cost of real     (3,549,401)    (2,718,411)    (18,057,656)    (4,739,640)
estate sales
Gross profit     3,135,602      1,866,357      17,154,280      4,856,071
Operating
expenses
Selling and
distribution     184,518        88,326         643.526         170,199
expenses
General and
administrative   542,836        369,969        2,221,352       1,183,614
expenses
Total
operating        727,354        458,295        2,864,878       1,353,813
expenses
Operating        2,408,248      1,408,062      14,289,402      3,502,258
income
Interest         -              2,013          -               16,013
income
Interest         (18,100)       (18,100)       (54,300)        (54,300)
(expense)
Other income
(expenses) -     (319)          12,613         7,640           12,613
net
Income before    2,389,829      1,404,588      14,242,742      3,476,584
income taxes
Provision for    127,284        71,259         704,400         167,542
income taxes
Net income     $ 2,262,545    $ 1,333,329    $ 13,538,342    $ 3,309,042
Other
comprehensive
income
Foreign
currency       $ 1,337,601    $ 61,848       $ 2,015,309     $ 866,297
translation
adjustment
Comprehensive  $ 3,600,146    $ 1,395,177    $ 11,553,651    $ 4,175,339
income
Basic and
diluted income
per common
share
Basic          $ 0.05         $ 0.03         $ 0.30          $ 0.07
Diluted        $ 0.05         $ 0.03         $ 0.30          $ 0.07
Weighted
average common
shares
outstanding
Basic            45,050,000     45,050,000     45,050,000      45,050,000
Diluted          45,115,382     45,050,000     45,115,382      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)
                                           Nine months ended

                                           June 30,
                                           2013            2012
Cash flows from operating activities
Net income                                $ 13,538,342    $ 3,309,042
Adjustments to reconcile net income to
net cash provided by (used in )
operating activities:
Depreciation                                 67,151          63,572
Stock Based Compensation                     7,612           21,093
Changes in assets and liabilities:
Restricted cash                              (136,176)       (246,873)
Accounts receivable                          (2,474,262)     -
Advances to vendors                          1,517,734       4,084,292
Loans to outside parties                     (943,110)       1,083,510
Real estate property development             8,512,382       (8,068,104)
completed
Real estate property under development       (33,833,410)    691,386
Other current assets                         (120,144)       (132,172)
Security deposits for land use rights        -               (11,693,808)
Accounts payables                            8,968,016       (4,639,102)
Construction Deposits                        152,481         43,755
Other payables                               622,260         679,934
Customer deposits                            5,127,523       7,965,987
Accrued expenses                             282,239         (4,130)
Taxes payable                                446,139         (277,728)
Net cash provided by (used in) operating     1,734,777       (7,119,346)
activities
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        49,333          79,548
rate on cash
Net increase (decrease)in cash              1,784,110       (7,039,798)
Cash, beginning of period                    1,104,686       8,837,795
Cash, end of period                        $ 2,888,796     $ 1,797,997
Supplemental disclosures of cash flow
information:
Interest paid                              $ -             $ -
Income taxes paid                          $ 243,474       $ 24,137
Non Cash transaction::
Transfer of security deposit for land
use rights to real estate
under development                          $ 12,589,971    $ -


The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements

SOURCE China HGS Real Estate Inc.
 
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