China HGS Reports Third Quarter of Fiscal Year 2017 Results

2017-08-11 19:00 4592

HANZHONG, China, Aug. 11, 2017 /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 2017 ended June 30, 2017 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 2017 were approximately $15.7 million, an increase of 25.7% from approximately $12.5 million in the same quarter of fiscal 2016. Total revenues recognized from percentage of completion method were approximately $6.9 million, which accounted for 44.0% of total revenues in the third quarter of fiscal 2017.
Net income for the third quarter of fiscal 2017 totaled approximately $1.6 million, a decrease of approximately 35.6% from the net income of approximately $2.4 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 lower margin residential properties, instead of higher margin commercial properties, sold during the third quarter of fiscal 2017.
Basic and diluted net earnings per share ("EPS") attributable to shareholders for the third quarter of fiscal 2017 were $0.03, compared to $0.05 for the same quarter last year.

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, 2016, 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
	2017		2016
ASSETS
Current assets:
Cash	$	3,294,128	$	6,401,237
Restricted cash		1,206,637		1,493,537
Cost and earnings in excess of billings		12,663,464		11,891,230
Real estate property development completed		89,509,976		113,185,929
Real estate property under development		87,796,734		-
Other current assets		2,070,244		2,722,036
Total current assets		196,541,183		135,693,969
Property, plant and equipment, net		831,638		792,650
Real estate property development completed, net of current portion		1,630,388		1,657,055
Security deposits for land use right		7,812,355		7,940,137
Real estate property under development, net of current portion		158,848,636		207,384,015
Due from local government for real estate property development completed		2,873,982		2,920,990

Total Assets	$	368,538,182	$	356,388,816
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Other loans	$	25,064,535	$	6,125,753
Accounts payable		24,295,058		30,574,497
Other payables		3,912,671		5,200,807
Construction deposits		1,459,073		1,911,158
Billings in excess of cost and earnings		3,305,671		2,110,808
Customer deposits		26,038,232		16,790,208
Shareholder loan		1,810,000		2,709,523
Accrued expenses		2,097,351		3,205,099
Taxes payable		16,182,003		15,843,815
Total current liabilities		104,164,594		84,471,668
Deferred tax liabilities		5,113,166		5,107,887
Customer deposits, net of current portion		2,389,627		10,687,272
Other loans, less current portion		99,911,356		99,843,228
Construction deposits, net of current portion		1,296,561		1,329,820
Total liabilities		212,875,304		201,439,875
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, 2017 and September 30, 2016		45,050		45,050
Additional paid-in capital		129,838,272		129,793,572
Statutory surplus		8,495,631		8,495,631
Retained earnings		23,821,202		20,661,184
Accumulated other comprehensive income		(6,537,277)		(4,046,496)
Total stockholders' equity		155,662,878		154,948,941

Total Liabilities and Stockholders' Equity	$	368,538,182	$	356,388,816

CHINA HGS REAL ESTATE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(LOSS)
(Unaudited)

	Three months ended June 30,				Nine months ended June 30,
	2017		2016		2017		2016

Real estate sales	$	15,715,091	$	12,497,413	$	35,726,739	$	25,205,879
Less: Sales tax		(213,183)		(847,938)		(679,221)		(1,741,251)
Cost of real estate sales		(12,696,093)		(8,183,462)		(28,011,749)		(15,520,371)
Gross profit		2,805,815		3,466,013		7,035,769		7,944,257

Operating expenses
Selling and distribution expenses		147,082		71,959		425,167		288,138
General and administrative expenses		651,773		609,428		2,275,336		1,668,790
Total operating expenses		798,855		681,387		2,700,503		1,956,928

Operating income		2,006,960		2,784,626		4,335,266		5,987,329

Interest expense		(125,750)		(29,917)		(370,320)		(203,057)
Income before income taxes		1,881,210		2,754,709		3,964,946		5,784,272

Provision for income taxes		306,406		310,548		804,928		612,846
Net income		1,574,804		2,444,161		3,160,018		5,171,426

Other comprehensive income (loss)
Foreign currency translation adjustment		2,377,825		(4,745,409)		(2,490,781)		(7,029,987)

Comprehensive income (loss)	$	3,952,629	$	(2,301,248)	$	669,237	$	(1,858,561)

Basic and diluted income per common share
Basic and diluted	$	0.03	$	0. 05	$	0.07	$	0.11

Weighted average common shares outstanding
Basic and diluted		45,050,000		45,050,000		45,050,000		45,050,000

CHINA HGS REAL ESTATE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Nine months ended June 30,
	2017		2016
Cash flows from operating activities
Net income	$	3,160,018	$	5,171,426
Adjustments to reconcile net income to net cash used in operating activities:
Deferred tax provision		86,471		383,850
Stock based compensation		44,700		44,700
Depreciation		38,433		59,658
Changes in assets and liabilities:
Cost and earnings in excess of billings		(952,473)		681,609
Real estate property development completed		21,602,071		6,811,151
Real estate property under development		(42,106,890)		(42,105,175)
Other current assets		600,966		(5,418,847)
Accounts payables		(5,720,568)		(15,187,183)
Other payables		(1,190,529)		(2,373,223)
Billings in excess of cost and earnings		1,214,641		(1,526,997)
Customer deposits		1,376,497		5,257,341
Construction deposits		(428,185)		(1,236,962)
Accrued expenses		(1,049,391)		(1,248,883)
Taxes payable		172,676		310,218
Net cash used in operating activities		(22,737,925)		(50,377,317)

Cash flows from investing activities
Purchases of fixed assets		(89,579)		(8,010)
Net cash used in investing activities		(89,579)		(8,010)

Cash flow from financing activities
Restricted cash		259,829		145,758
Proceeds from shareholder loan		4,067,944		840,077
Repayments of shareholder loan		(4,942,772)		(840,077)
Repayments of bank loans		-		(6,165,703)
Proceeds from other loans		26,470,159		62,793,918
Repayments of other loans		(5,997,059)		(5,559,922)
Net cash provided by financing activities		19,858,101		51,214,051

Effect of changes of foreign exchange rate on cash		(137,706)		(77,278)
Net increase(decrease) in cash		(3,107,109)		751,446
Cash, beginning of period		6,401,237		1,333,919
Cash, end of period	$	3,294,128	$	2,085,365
Supplemental disclosures of cash flow information:
Interest paid	$	4,243,756	$	2,843,145
Income taxes paid	$	681,772	$	369,885