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China HGS Reports First Quarter of Fiscal Year 2014 Results -- Revenues Up by Approximately 29%

HANZHONG, China, Feb. 7, 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 first quarter of fiscal 2014 ended December 31, 2013 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 first quarter of fiscal 2014 were approximately $14.1 million, an increase of 28.5% from approximately $11.0 million in the same quarter of fiscal 2013. Total revenues recognized from percentage of completion method were approximately $12.9 million, which accounted for 91.6% of total revenues in the first quarter of fiscal 2014.
  • Net income for the first quarter of fiscal 2014 totaled approximately $3.1 million, a decrease of approximately $2.4 million from the net income of approximately $5.5 million in the same period of last year. The decreased profit margin in this quarter compared to the same quarter of last year was primarily due to the mix of sold properties. More residential properties, which have lower average selling price per unit, were sold in this quarter, while more commercial properties, which have higher average selling price per unit, were sold in the same quarter of last year.   
  • Basic and diluted net earnings per share ("EPS") attributable to shareholders for the first quarter of fiscal 2014 were $0.07, compared to $0.12 for the same quarter last year.  

"I am pleased with the recent sales progress under presale stage," said Mr. Xiaojun Zhu, Chairman and Chief Executive Officer of China HGS. "We believe that the demand for real estate in Tier 3 and Tier 4 cities and counties in China remained solid as a result of continuous urbanization and growing personal income. The government recently also announced intention to promote migration to Tier 3 and Tier 4 cities, while restrict migration to Tier 1 and Tier 2 cities. We expect that new policies forthcoming for further urbanization in China will focus more on development of Tier 3 and Tier 4 cities, which will attract more first-time home buyers to these less crowded cities from non-city population. As a leading regional developer, the Company will continue to focus its development on selected Tier 3 and Tier 4 cities, maximize the benefits of new government policies, and provide quality housing with affordable pricing for growing new urban residents in these cities," 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)



December 31


September 30



2013


2013

ASSETS

Current assets:









     Cash 


$


3,233,673


$


5,878,101

     Restricted cash




1,302,610




1,332,807

     Advances to vendors




198,144




109,134

     Cost and earnings in excess of billings




5,391,207




2,178,270

     Real estate property development completed




11,413,583




11,607,164

     Real estate property under development




1,708,660




1,580,670

     Other current assets




459,689




368,377

     Total current assets




23,707,566




23,054,523

Property, plant and equipment, net




962,283




977,739

Real estate property development completed, net of current portion




7,330,449




7,619,811

Security deposits for land use right




3,272,144




3,259,240

Real estate property under development, net of current portion




170,227,294




142,916,601

     Total Assets


$


205,499,736


$


$177,827,914

 

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:









     Bank loan – current portion


$


4,908,216


$


4,888,860

     Accounts payable




26,864,280




22,527,686

     Other payables




3,639,846




1,863,922

     Construction deposits




373,139




357,447

     Billings in excess of cost and earnings




6,081,624




5,109,758

     Customer deposits




7,051,799




6,130,466

     Shareholder loan




6,145,591




1,810,000

     Accrued expenses




2,803,811




2,896,539

     Taxes payable




5,956,308




6,612,707

     Total current liabilities




63,824,614




52,197,385

Long-term bank loan, less current portion




19,632,865




11,407,340

Deferred tax liabilities 




958,212




650,067

Customer deposits, net of current portion




17,452,508




13,410,081

Construction deposits, net of current portion




1,017,892




1,013,877

     Total liabilities




102,886,091




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 









     December 31, 2013 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




66,315,034




63,257,918

     Accumulated other comprehensive income




9,516,982




9,109,617

     Total stockholders' equity




102,613,645




99,149,164

     Total Liabilities and Stockholders' Equity


$


205,499,736


$


177,827,914

 


CHINA HGS REAL ESTATE, INC.


CONDENSED CONSOLIDATED STATEMENTS OF INCOME  AND COMPREHENSIVE INCOME 


(Unaudited)








Three months ended December 31,




2013



2012


Real estate sales


$

14,140,563



$

11,003,415


Less: Sales tax



(946,688)




(710,717)


          Cost of real estate sales



(9,145,841)




(3,830,244)


Gross profit



4,048,034




6,462,454


Operating expenses









Selling and distribution expenses



114,350




161,094


General and administrative expenses



540,229




560,971


Total operating expenses



654,579




722,065


Operating income



3,393,455




5,740,389


Interest income



4,559




-


Interest expense



(18,100)




(18,100)


Other income - net 



-




7,952


Income  before income taxes



3,379,914




5,730,241


Provision for income taxes



322,797




221,164


Net income



3,057,117




5,509,077


Other comprehensive income









Foreign currency translation adjustment



407,365




208,985


Comprehensive income


$

3,464,482



$

5,718,062


Basic and diluted income per common share









Basic


$

0.07



$

0.12


Diluted


$

0.07



$

0.12


Weighted average common shares outstanding









Basic



45,050,000




45,050,000


Diluted



45,127,025




45,050,000


 

CHINA HGS REAL ESTATE, INC.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)





Three months ended December 31,





2013



2012


Cash flows from operating activities













Net income 



$


3,057,117




$


5,509,077


Adjustments to reconcile net income to net cash used in operating

activities:













             Deferred tax provision





304,878






-


     Depreciation





19,283






22,404


     Stock based compensation





-






3,412


Changes in assets and liabilities:













     Restricted cash





35,394






(77,263)


     Accounts receivable





-






(4,664,334)


     Advances to vendors





(88,377)






(1,806,155)


     Loans to outside parties





-






15,903


     Cost and earnings in excess of billings





(3,197,042)






-


     Real estate property development completed





557,801






3,830,244


     Real estate property under development





(26,805,615)






(6,376,199)


     Other current assets





(89,649)






(9,542)


     Accounts payables





4,237,763






306,655


     Other payables





1,764,531






178,775


     Billings in excess of cost and earnings





949,475






-


     Customer deposits





4,875,305






3,019,617


     Construction deposits





14,245






(731)


     Accrued expenses





(103,277)






90,860


     Taxes payable





(681,032)






(627,900)


Net cash used in operating activities





(15,149,200)






(585,177)




























Cash flow from financing activities













     Proceeds from shareholder loan





4,325,754






-


     Proceeds from bank loan





8,161,800






-


Net cash provided by financing activities





12,487,554






-















Effect of changes of foreign exchange rate on cash 





17,218






4,359


Net decrease in cash 





(2,644,428)






(580,818)


Cash, beginning of period





5,878,101






1,104,686


Cash, end of period



$


3,233,673




$


523,868


Supplemental disclosures of cash flow information:













Interest paid



$


355,757




$


-


Income taxes paid



$


185,313




$


404,003


 

SOURCE China HGS Real Estate Inc.

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