-- Fiscal year 2009 revenue climbs 65.0% to $28.5 million,
year-over-year -- Net income increases 83.7% to $11.1 million,
year-over-year HANZHONG, China, Jan. 4 /PRNewswire-Asia-FirstCall/
-- China HGS Real Estate Inc. (OTC:CAHS) (BULLETIN BOARD: CAHS)
("China HGS" or "the Company"), a leading residential property
developer in Hanzhong, China, today reported financial results for
the fiscal year ended September 30, 2009. Fiscal Year 2009
Highlights -- Revenues increased 65.0% year-over-year to $28.5
million -- Gross profit increased 65.4% to $13.4 million with gross
margin of 47.0% -- Operating income increased 81.3% to $11.4
million -- Net income increased 83.7% to $11.1 million, or $0.28
per diluted share "Our record revenue and net income growth during
the year reflects our leading market position in Hanzhong and our
growing recognition as a prominent real estate developer. During
the year, our efficient pricing strategy and marketing efforts
enhanced our market reputation driving rapid growth in sales of our
completed residential units," commented Mr. Xiaojun Zhu, chairman
and CEO of China HGS. "With the broad property market recovery in
China, we have experienced increasing pre-sales of our residential
projects and favorable pricing environment enhancing our overall
profitability." Fiscal Year 2009 Results Revenues for fiscal year
ended September 30, 2009 increased to $28.5 million, up 65.0% from
$17.2 million for the fiscal year ended September 30, 2008. China
HGS's strong revenue growth during the year was attributable to
increase in sales of the completed residential units at its two
projects located in Yang County and Hanzhong City. Sales from the
Company's Mingpin Plaza project in Hanzhong contributed $11.4
million or 40.2% of the year's total revenue. Sales from the
Company's Weinan Lijing Garden, Mingzhu Garden, and Yangzhou Pearl
Garden projects contributed approximately 21.7%, 20.0% and 18.2% of
the year's total revenue, respectively. Gross profit for the fiscal
year ended September 30, 2009 was $13.4 million, up 65.4% from $8.1
million in the same period a year ago. Gross margin was 47.0%,
slightly above 46.9% for the same period a year ago. Total
operating expenses for fiscal year ended September 30, 2009 totaled
approximately $2.0 million, up 9.7% from $1.8 million in the same
period a year ago. Selling expenses rose 35.6% to $0.4 million due
to rapid sales growth and increase in advertising expenses. General
and administrative expenses ("G&A") amounted to $1.6 million,
up 5.3% year-over-year. The increase in G&A expenses was
primarily attributable to sales growth, expenses related to going
public, and related consulting services. As a percentage of
revenue, operating expenses accounted for 6.9% of the year's
revenue, a significant decline from 10.4% in the same period a year
ago. Operating income was $11.4 million for fiscal year ended
September 30, 2009, up 81.3% from $6.3 million in the same period a
year ago. Operating margin was 40.1%, compared to 36.5% in the same
period a year ago. Interest expense for fiscal year ended September
30, 2009 was $121,372, up 31.4% from the same period a year ago.
The increase in interest expense was a result of higher interest
rate on the Company's short term bank loan. Net income for fiscal
year ended September 30, 2009 was $11.1 million, or $0.28 per
diluted share, up 83.7% from $6.0 million, or $0.15 per diluted
share, in the same period a year ago. Financial Condition As of
September 30, 2009, China HGS had $0.8 million in cash and cash
equivalents, down from $2.1 million at the end of fiscal year 2008.
The decline in the Company's cash reserves was a result of growth
and expansion of construction activity and increase in land
acquisition costs. The Company expects cash flow from operating
activities to turn positive in the first quarter of fiscal year
2010. At the end of fiscal year 2009, the Company had working
capital of $29.1 million and no long-term debt. Shareholders'
equity stood at $29.9 million, up from $18.3 million at the end of
fiscal year 2008. Recent Events In December 2009, China HGS
announced that the Company has experienced rapid growth in sales of
units at its Yangzhou Pearl Garden project in Yang County, Shaanxi
Province, China. Business Outlook China's second-tier and
third-tier cities are experiencing strong GDP growth and rising
level of disposable income which continues to drive demand for
residential real estate market. China HGS successfully sold all of
the 192 apartment units of Phase I of the Yangzhou Pearl Garden
Project and has sold or reserved approximately 87.3% of the total
apartment units of Phase II. As of September 30, 2009, China HGS
has approximately $42.5 million of real estate projects under
development, up 87.3% from the prior year. The Company's major
projects under development include Mingzhu Xinju in Hanzhong City
and Yangzhou Pearl Garden in Yang County. During the quarter ended
December 31, 2009, China HGS recorded sales of approximately $12.1
million or GFA of 40,582 square meters from its Yangzhou Pearl
Garden Project and Mingzhu Xinju Project. In the next three years,
the Company plans to maintain its leading position in the Hanzhong
market and expand into nearby markets with solid economic growth,
including Xi'an City in Shaanxi Province, to capitalize on the
available high-growth opportunities. "The recovery in the real
estate market and sales pricing combined with strong fundamentals
of the Hanzhong market indicate positive future growth
opportunities for China HGS," said Mr. Xiaojun Zhu. "With our solid
project pipeline and abundant land reserves for future development,
we expect the ongoing positive trend of our financial performance
to continue into fiscal year 2010 and through fiscal year 2011. We
believe our aggressive marketing efforts, disciplined cost control,
growing market recognition and competitive pricing strategy will
further contribute to our revenue growth and profitability."
Guidance for Fiscal 2009 China HGS expects revenue for first
quarter of fiscal year 2010 ending December 31, 2009 to be $12.5
million (RMB85.2 million) and net income of $3.5 million (RMB23.8
million), or $0.09 per diluted share. The Company expects revenue
for fiscal year 2010 ending September 30, 2010 to be $46.4 million
(RMB317.0 million) and net income of $13.0 million (RMB88.7
million), or diluted earnings per share of $0.37. About China HGS
Real Estate Inc. China HGS Real Estate Inc., through its
wholly-owned subsidiary, Shaanxi Guangsha Investment and
Development Group Co., Ltd., specializes in real estate development
in China's second-tier and third-tier cities. The Company's real
estate properties include multi-layer, sub-high-rise, and high-rise
apartment buildings. The Company possesses the national grade II
real estate qualification and was ranked as the No. 1 property
developer in Hanzhong, Shaanxi Province in terms of market share in
2007 and 2008 successively. Forward-looking Statements: This press
release contains certain statements that may include
'forward-looking statements'. All statements other than statements
of historical fact included herein are 'forward-looking
statements'. These forward looking statements are often identified
by the use of forward-looking terminology such as 'believes,'
'expects' or similar expressions, involve known and unknown risks
and uncertainties. Although the Company believes that the
expectations reflected in these forward-looking statements are
reasonable, they do involve assumptions, risks and uncertainties,
and these expectations may prove to be incorrect. You should not
place undue reliance on these forward-looking statements, which
speak only as of the date of this press release. The Company's
actual results could differ materially from those anticipated in
these forward-looking statements as a result of a variety of
factors, including those discussed in the Company's periodic
reports that are filed with the Securities and Exchange Commission
and available on its website http://www.sec.gov/ . All
forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by
these factors. Other than as required under the securities laws,
the Company does not assume a duty to update these forward-looking
statements. --Financial Tables Follow-- CHINA HGS REAL ESTATE INC.
(FORMERLY CHINA ARGO SCIENCES CORP.) CONSOLIDATED BALANCE SHEETS As
of September 30, 2009 2008 ASSETS Current assets: Cash & cash
equivalents $820,783 $2,121,060 Restricted cash 412,373 596,258
Accounts receivable - net of allowance for doubtful accounts --
7,294 Loans to outside parties, net of allowance 1,762,022 210,037
Real estate property development completed 2,392,003 13,657,042
Real estate property under development 42,522,287 22,699,749 Other
current assets 71,985 29,175 Total current assets 47,981,453
39,320,615 Property, plant and equipment, net 713,008 401,635 Total
Assets $48,694,461 $39,722,250 LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: Short-term loans $672,751 $1,312,891 Accounts
payable 730,838 1,251,733 Other payables 1,021,147 1,072,600
Customer deposits 14,900,334 17,398,247 Accrued expenses 125,742
40,279 Taxes payable 1,380,694 339,009 Total current liabilities
18,831,506 21,414,759 Stockholders' equity Common stock, $0.001 par
value, 100,000,000 shares authorized, 45,050,000 shares and
39,000,000 shares issued and outstanding as of September 30, 2009
and 2008, respectively 45,050 39,000 Additional paid-in capital
17,632,348 127,682 Statutory surplus 2,330,259 2,023,641 Retained
earnings 7,904,531 14,224,594 Accumulated other comprehensive
income 1,950,767 1,892,575 Total stockholders' equity 29,862,955
18,307,491 Total Liabilities and Stockholders' Equity $48,694,461
$39,722,250 CHINA HGS REAL ESTATE INC. (FORMERLY CHINA ARGO
SCIENCES CORP.) CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS
ENDED SEPTEMBER 30, 2009 2008 Real estate sale, net of sales tax of
$1,745,490 and $1,155,106, respectively $28,459,176 $17,249,539
Cost of real estate sales, exclusive of depreciation 15,084,017
9,161,948 Gross profit 13,375,159 8,087,591 Operating expenses
Selling and distribution expense 353,907 261,030 General and
administrative expense 1,618,926 1,537,524 Total operating expenses
1,972,833 1,798,554 Operating income 11,402,326 6,289,037 Other
expenses Interest expenses 121,372 92,347 Other expenses 309 53,442
Total other expenses 121,681 145,789 Income before income taxes
11,280,645 6,143,248 Provision for income taxes 223,095 123,517 Net
income $11,057,550 $6,019,731 Other comprehensive income Foreign
currency translation adjustment $58,191 $1,287,479 Comprehensive
income $11,115,741 $7,307,210 Basic and diluted income per common
share Basic $0.28 $0.15 Diluted $0.28 $0.15 Weighted average common
shares outstanding Basic 39,513,836 39,000,000 Diluted 39,513,836
39,000,000 CHINA HGS REAL ESTATE INC. (FORMERLY CHINA ARGO SCIENCES
CORP.) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
SEPTEMBER 30, 2009 2008 Cash flows from operating activities Net
income $11,057,550 $6,019,731 Adjustments to reconcile net income
to net cash used in operating activities: Depreciation 66,589
35,348 Loss on disposal of fixed assets 309 42,191 Changes in
assets and liabilities: (Increase) decrease in - Restricted cash
185,205 187,971 Accounts receivable 7,304 -- Loans to outside
parties (1,549,723) (194,051) Real estate property development
completed 11,287,430 (8,612,453) Real estate property under
development (19,742,469) 4,412,656 Other current assets (42,686)
(16,356) Increase (decrease) in - Accounts payables (523,516)
(1,372,573) Other payables (54,137) 526,568 Customer deposits
(2,539,616) (5,867,984) Accrued expenses 85,264 (70,190) Taxes
payable 1,039,661 317,074 Net cash used in operating activities
(722,835) (4,592,068) Cash flow from investing activities Purchase
of fixed assets (376,898) (401,928) Proceeds from disposal of fixed
assets -- 114,674 Net cash used in investing activities (376,898)
(287,254) Cash flow from financing activities Proceeds from
(repayment for) shareholder loans (438,263) 421,905 Repayment of
short-term loans (204,523) (70,317) Capital contribution 438,722 --
Net cash provided by (used in) financing activities (203,063)
351,588 Effect of changes of foreign exchange rate on cash and cash
equivalent 2,520 432,045 Net decrease in cash and cash equivalents
(1,300,276) (4,095,689) Cash and cash equivalents, beginning of
year 2,121,060 6,216,749 Cash and cash equivalents, end of year
$820,783 $2,121,060 Supplemental disclosures of cash flow
information: Interest paid $109,420 $96,895 Income taxes paid
$14,002 $42,190 Non-cash financing activities: Capital contribution
converted from dividend payable $5,483,508 $-- Capital contribution
converted from retained earnings $10,788,349 $-- Capital
contribution converted from surplus $799,137 $-- For more
information, please contact: Company Contact: Mr. Ran Xiong, Deputy
GM Email: Tel: +86-916-2622612 Investor Relations Contact: CCG
Investor Relations Crocker Coulson, President Email: Tel:
+1-646-213-1915 (NY office) Elaine Ketchmere, Partner Email: Tel:
+1-310-954-1345 (LA office) DATASOURCE: China HGS Real Estate Inc.
CONTACT: Ran Xiong, Deputy GM, , +86-916-2622612; Investors,
Crocker Coulson, President, , +1-646-213-1915 (NY office), or
Elaine Ketchmere, Partner, , +1-310-954-1345 (LA office), both of
CCG Investor Relations
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