Today, China Housing & Land Development, a real estate firm based in Xi'an, the capital city of Shaanxi province, announced Q4 FY11 financials today, offering further evidence that the company is a true leader in the Chinese real estate space:
• Total Revenue - up 49.2% to $47.9M from Q3 FY11, and up 32.8% compared to Q4 FY10 (largely from the JunJing III, Puhua Phase I and Phase II projects)
• Operating Income - down 64.7% to $2.2M, or 4.5% of total revenue from Q3 FY11 (down $800k from Q4 FY10, due mainly to the decrease in gross margin)
• Gross Margin - down 15.3% to 14.4% from Q3 FY11, and down 8.3% from Q4 FY10 (largely due to increased general construction costs, combined with lower than projected contract sales for JunJing III project, as well as declining sales for parking spaces at Puhua Phase I, a typically 4-6% gross margin activity)
• Gross Profit - down 27.7% to $6.9M from Q3 FY11, and down 15.8% from Q4 FY10
• Net Income Attributable - $2.8M or $0.08/share (basic and diluted; or $2.5M excluding the $0.3M from derivative/warrant revaluations), compared to $4.4M in Q3 FY11 ($0.13/share basic and $0.12/share diluted)
• Total Contract Sales - up 45.4% to $44.6M from Q4 FY10
• Total Sales of Gross Floor Area (NYSE:GFA) - up 80% to 480.4k sq. feet from the 267.9k sq. feet in Q3 FY11, and up 45.5% from Q4 FY10
• Average Residential Selling Price (NYSE:ASP) - up 13% to roughly $1k (RMB 6,301), from $885 in Q3 FY11, and off slightly from the average price of $1058 in Q4 FY10 (due largely to the diminished Puhua Phase I parking lot sales)
• SG&A Expense as Percent of Total Revenue - down 2.1% to 7% from Q3 FY11, and down 3.4% from Q4 FY10
• Total Debt Outstanding - up 11% to $191.7M from Q3 FY11, and also up from the $143.9M of Q4 FY10
• Total Debt Less Cash - $64M compared to $57.6M in Q3 FY11, or $62.3M in Q4 FY10
• Net Debt Plus Shareholders' Equity - down 16.4% to 33% from the 46.4% reported in Q3 FY11, and down 5% from Q4 FY10
Chairman of CHLN, Pingji Lu, underscored sequential improvements in GFA/ASP sales and continued growth across the three active Q4 projects (unJing III, Puhua Phase I and Puhua Phase II), but was quick to point out that restrictive government real estate policies continued to impact the business. Increases in overall footprint movement and price point were healthy, sequentially observable signs that the model is sound and continues to grow, despite a 12.8% drop in housing sales volume in Xi'an in Q4 (E-House China/Xi'an Bureau of Statistics).
The outlook for 2012 shows contract sales for Q1 off as much as 37.6%, with projected totals of $16.5-17.5M, and the same values for total recognized revenue (compared to $22.6M in 2011; contract sales estimates reported as compared to revenue, since they are not subject to percentage of completion alterations). Lu indicated that a lack of easing of government restrictions was the primary driver of slowed contract sales, adding that rising costs of labor and construction also played a key role.
Lu also pointed out that the company has the kind of flexibility to shift the timeline for development projects though, allowing for appropriate market conditions and timing to be utilized as a spring board. Good news for the Ankang project, the company's latest development, which was added to the pipeline in Q4 and rests some 124 miles south of Xi'an. Ankang will be CHLN's largest project outside of Xi'an thus far and the company wants to focus on middle income residential units (estimated GFA of 2,615,630 sq. feet) to accommodate China's rapidly expanding middle class.
Lu was confident that the robust pipeline of ongoing developments, combined with the company's ability to shift quickly and take advantage of opportune market conditions, would prove a fertile soil for overall profitability and the new Ankang project, which should start in Q2 this year (approximate build time of three years). Projected revenue generation from Ankang is $171.9M for the life of the project and represents the continued dedication of CHLN to both the real estate sector in China and the company's shareholders, living up to its reputation as the first Chinese real estate firm to be traded on NASDAQ. CHLN has made a real name for itself as a top Tier II/III residential developer and occupies a considerably large market position in Western China, ideally positioned to capitalize off China's growth.
A conference call by the company today which addressed the report is available through April 6, by dialing # 1-858-384-5517 ; passcode: 9714123.
For more information on China Housing & Land Development Inc., please visit the company's website at: www.CHLDInc.com
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