China Housing & Land Development, Inc (NASDAQ:CHLN)
Q4 2013 Earnings Conference Call
March 24, 2014 8:30 AM ET
Bill Zima - ICR
Pingji Lu - Chairman
Xiaohong Feng - CEO and Managing Director
Cangsang Huang - CFO and Managing Director
Jing Lu - COO and Board Secretary
Good day everyone and welcome to the China Housing & Land Development Incorporated Fourth Quarter 2013 Earnings Conference. Today's conference is being recorded.
At this time for opening remarks and introductions, I’d like to turn the call over to Mr. Bill Zima of ICR. Please go ahead sir.
Good day everyone, and thank you operator and welcome everyone to the China Housing earnings conference call. The Company's results released earlier today and are available on the Company's Investor Relations Web site at www.chldinc.com as well as on the respective wire services.
Before we continue, please note that the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties and as such our results may differ materially from the views expressed today. Further information regarding those and other risks and uncertainties is included in our Registration Statement and in the Form 10-K and other documents filed with the SEC. China Housing does not assume any obligation to update any forward-looking statements except as required under applicable law.
On our call today is Mr. Pingji Lu, Chairman of the Board; Mr. Xiaohong Feng, Chief Executive Officer; Ms. Jing Lu, Chief Operating Officer; and Mr. Cangsang Huang, Chief Financial Officer.
Management will provide some remarks about the general business climate, a review of the Company’s financial results, and then supply some prospectus on the Company’s outlook going forward.
At this time, I’d like to turn the call over to Mr. Feng. Please go ahead, sir.
Hello, everyone, and thank you for joining us for the call today. Our financial performance this quarter was better than our original estimations. Fourth-quarter revenue totaled $56.1 million which was 126% increase from $24.8 million in the third quarter and decreased by 9% from the $61.5 million in the fourth quarter of prior year. Fourth quarter 2013 contract sales totaled $40 million compared with $18.6 million in the third quarter of 2013 and $22.9 million in the fourth quarter of 2012.
We are making progress, balancing our unit inventory more effectively so that we can offer a broader array of apartment units to prospective low, mid and high-end buyers. Ensuring greater unit availability in each of these tiers is important as we face more challenging conditions as overall market demand appears to be softening.
As conditions become more challenging all units for first time buyers tend to perform better, however it’s important for us to maintain sufficient inventory for mid tier and high-end customer as well as the main pockets of demand for these customers also. For our projects under planning, we're actively observing buyer patterns so we can accelerate the most relevant projects by buyer category to ensure they roll out the right apartment units that will adequately suit buyer demand.
According to data provided by eHow China’s Real Estate Research Institute, total GFA sales in Xi’an includes the 2.8 million square meters in the fourth quarter of 2013, compared with 2.6 million square meters in the third quarter of 2013 and 2.7 million square meters in the fourth quarter of 2012.
Average residential sales prices in Xi’an increased to RMB 7,772 per square meter compared to RMB 7,552 in the third quarter of 2013 and RMB 7,820 in the fourth quarter of 2012. For CHLN we experienced average residential sales prices of projects of RMB 6,600 per square meter compared to RMB 6,369 in the third quarter of 2013 and RMB 5,137 in the fourth quarter of 2012.
The majority of our revenue was generated by our Park Plaza, Puhua Phase Three and Ankang projects in Puhua Phase Two East region during the fourth quarter while our completed projects that include Puhua Phase One and Puhua Phase Two East region also generated some additional revenues.
Looking at our potential first quarter performance and expectations for the full year, we expect 2014 will be a better sales year than 2013 for China Housing. Through our Park project Puhua Phase Three and Ankang Phase Four projects we offer low to meet end units while high-end unit demand is being largely met through our Puhua Phase Two and future Golden Bay project. We are building a better spectrum of housing units to ensure we meet demand at all levels in an uncertain market environment.
Now I’d like to turn the call to our COO Jing Lu to more thoroughly review our operational performance in the fourth quarter.
Thank you, Mr. Xiaohong. Our fourth quarter 2013 GFA sales were 28,582 square meters an increased from the 27,853 square meters in the same quarter of last year where our revenue increased sequentially to 56.1 million from the 24.8 million in the third quarter and 61.5 million in the fourth quarter of the last year.
Look at our individual projects, Park Plaza continues to generate the highest level of the recognized which -- which is recognized directly in the fourth quarter. Sequential Quarter 17.8 million in the revenue GFA sold and contract sales to our Park Plaza project with the high risk of the [indiscernible] Ankang project and we sold 6,842 square meters during the quarter because of the contract sales up to 9.9 million.
Third quarter average selling price at projects was RMB 18,728 per square meters and that increased the [indiscernible] of last quarters the project was over meting the recognized seismic [indiscernible] those GFA remaining. Our Puhua Phase Three project was our third largest revenue contributed, responsible for over 11.44 million in recognized revenue Puhua Phase Three record GFA sales of the 5,511 square meters and contract sales up to 6.1 million.
Fourth quarter’s ASP was RMB 6,754 compared to the 6,560 in the last quarter, the projects over the fixed rate dollar in [indiscernible] GFA remaining. Our Ankang projects report 8.3 million in recognized revenue, the GFA sales of the 9,334 square meters and the contract sales of 8.1 million the ASP increased directly during the quarter. The demand remained relatively gentle this project was over 18,000 unsold GFA remaining.
The Puhua Phase Two East was responsible for over 6.4 million in recognized revenue. The project recorded GFA sales up to 4,066 square meters and the contract sales up to 4.7 million the ASP was RMB 7,099 from RMB 6,560 in the last quarter. The project has over 91,000 unsold GFAs remaining. Our fourth quarter gross margin up 22.4 million marks as a sequential improvement over the third quarter’s 19.8%.
Looking at our new projects, we currently have three projects under planning based on the unsuccessful of the real fleet marketing kiosk we observed a opened market condition and the train moving the cautiously according to the Chinese [indiscernible] rail review out and with three new projects. In general we do not expect to commence the pre-sale on the any of our new projects until the third half of the year and is very early. As we rolled any new projects we will ensure our new inventory is envisioned to meet the need of the buyer at a low, mid, high-end of the range.
In the first half of this year we expect to rely on the sales activity from our existing projects. And just expect the additional contribution from our three projects under planning, the Golden Bay, Puhua Phase Four, and the Textile City, started sometime in the second half of this year. If our timeline change due to the marketing environment we would make you aware of the related development.
We also expect our gross margin to gradually improve when we commence the pre-sale of our Golden Bay project which was higher end of the project with higher stock price than most of the other units at our existing projects with investment projects.
At this point, I would like to turn this call over to our CFO, Mr. Cangsang Huang, to review our fourth quarter financial performance.
Thank you, Jing. Let’s review our financial results and outlook in more detail.
Total revenue in the fourth quarter of 2013 increased 126.2% to 56.1 million from 24.8 million in the third quarter of 2013 and decreased 8.8% from 61.5 million in the fourth quarter of 2012. Other revenue increased to 8.9 million from 3.8 million in the third quarter of 2013 and decreased from 21.3 million in the fourth quarter of 2012. Other revenue was mainly consisting of interest income and construction contract income which will fluctuate according to the construction plan, but overall the other revenue increased about 10% compared to 2012.
In the fourth quarter of 2013, the majority of the Company's real estate revenue came from its Puhua Phase Two and Three, Park Plaza and Ankang projects. Fourth quarter 2013 contract sales totaled 40 million compared with 18.6 million in the third quarter of 2013 and 22.9 million in the fourth quarter of 2012. Total GFA sales were 28,582 square meters during the fourth quarter of this year compared with 17,847 square meters in the third quarter of 2013 and 27,853 square meters in the fourth quarter of 2012. The Company's average selling price in the fourth quarter of 2013 was RMB 6,600, compared with RMB 6,369 in the third quarter of 2013, and RMB 5,137 in the fourth quarter of 2012.
Gross profit for the three months ended December 31, 2013 was 12.6 million, representing an increase of 157.1% from 4.9 million in the third quarter of 2013 and a 40.3% decrease from 21.1 million in the fourth quarter of last year 2012. Gross profit margin for the quarter was 22.4%, compared to 19.8% in the third quarter of ’13 and the 34.3% in the fourth quarter of 2012. The sequential decrease in the gross profit margin was mainly due to that we made some adjustments on a total estimate cost of Park Plaza, Puhua Phase Two and Three, according to the actual situation, and we call it the accumulated impact in the fourth quarter of 2013. The full year gross margin of 2013 is 23% due to the increased cost.
SG&A expense was 5.1 million in the fourth quarter of 2013, compared with 3.8 million in the third quarter of ’13 and 5.7 million in the fourth quarter of 2012. SG&A expenses as a percentage of total revenue was 9.1%, compared with 15.2% in the third quarter of ’13 and 9.3% in the fourth quarter of 2012. The sequential decrease in SG&A expenses was mainly due to the [indiscernible] of advertising expenses and a decrease of sales commission because of decrease of lending. Operating income in the fourth quarter of 2013 was $50 million representing 10.6% operating margins, this compares to an operating loss of $600,000 in the third quarter of 2013 and an operating income of 14.8 million or 24.1% of the total revenue in the fourth quarter of 2012.
The year-over-year decrease in operating income was mainly due to the reduced sales revenue and lower profit margin. Net income attributable to China Housing in the fourth quarter of 2013 was 3.9 million or $0.11 per diluted share this performance compared to a net loss $800,000 or $0.02 per diluted shares in the third quarter of 2013 and a net income of 11.5 million or $0.33 per diluted share in the fourth quarter of 2012.
As of December 31, 2013 China Housing reported 21.3 million in unrestricted cash compared to 6.1 million as of December 31, 2012. The increase was primarily due to that we obtained some loans from commercial banks at the end of 2013 total debt outstanding as of December 31, 2013 was 300.7 million compared with 202.6 million on December 31, 2012. Net debt outstanding as of December 31, 2013 was 151.8 million compared with 85.9 million on December 31, 2012.
The net Company’s net debt as a percentage of total capital was 54.1% on December 31, 2013 increased from 36.6% of December 31, 2012. As we look ahead to the first quarter of 2014, we anticipate the total recognized revenue to reach 15 million to 17 million compared with 54.4 million in the same period of 2013. The Company is reporting revenue which are subject to percentage of Company self alterations.
This concludes our prepared remarks today. Operator, we are ready to take questions please.
Thank you. (Operator Instruction) And it appears there are no questions at this time.
Alright, thank you everyone for listening to our fourth quarter 2013 conference call. We are looking forward to updating you in the next quarter. Thank you.
Thank you. That does conclude today’s presentation. Thank you for your participation.
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