China Housing & Land (NASDAQ:CHLN)

Highlights for Q1 2012:

• Total revenue in the first quarter of 2012 decreased 50.9% to $23.5 million from $47.9 million in the fourth quarter of 2011 and increased 4.2% from $22.6 million in the first quarter of 2011.
• Total gross floor area ("GFA") sales were 17,090 sq. meters during the first quarter of 2012, compared to 44,631 sq. meters in the fourth quarter of 2011 and 28,438 sq. meters in the first quarter of 2011.
• Average residential selling price ("ASP") in the first quarter of 2012 was RMB 7,407, compared with RMB 6,301 in the fourth quarter of 2011, and RMB 6,115 in the first quarter of 2011.
• Gross profit increased 2.1% to $7.0 million from $6.9 million in the fourth quarter of 2011 and increased 22.8% from $5.7 million in the first quarter of 2011. First quarter 2012 gross margin was 29.9% compared to 14.4% in the fourth quarter of 2011 and 25.4% in the first quarter of 2011.
• SG&A expenses as a percentage of total revenue increased to 12.9%, compared to 7.0% in the fourth quarter of 2011 and decreased from 15.2% in the first quarter of 2011.
• Operating income increased 58.8% to $3.4 million from $2.2 million in the fourth quarter of 2011, and increased 159.8% from $1.3 million in the first quarter of 2011.
• Net income attributable to the Company in the first quarter of 2012 was $2.2 million, or $0.06 per diluted share.

Mr. Pingji Lu, China Housing's Chairman, commented, "Despite the expected slowdown in real estate market, our financial results for the first quarter were stronger than expected in a seasonally slower quarter for China Housing. We adjusted our product supply at our Puhua projects in the first quarter making a larger number of lower cost units with lower average GFA available to drive sales. Our three active projects in the first quarter, JunJing III, Puhua Phase I and Puhua Phase II, continued to generate the majority of total revenue. Average selling prices at JunJing III were higher than our prior quarter resulting in gross profit margin above 30%. Our three active projects resulted in GFA sales of 14,994 square meters and average selling price ofRMB 7,074. According to E-House (China) Real Estate Research Institute, total GFA sales inXi'an were 1.8 million sq. meters from 2.5 million sq. meters in the fourth quarter 2011 and the average residential sale price in Xi'an was RMB 7,703 per square meter from RMB 7,903 in the fourth quarter 2011."

"We continue to monitor the property market environment in Xi'an and to adjust our product supply to meet consumer demand. We are currently focusing more of our marketing efforts on first time home buyers who are more consistent buyers during times of market uncertainly and a greater portion of our existing and upcoming development projects are geared toward this group."

"Our projects are progressing as planned and the consumer lending environment is improving. We have four new projects currently scheduled to commence pre-sales in 2012 along with two other projects scheduled for construction in 2013. Although we do not anticipate additional action by the government to reduce speculation in the local market for the remainder of this year, our growth outlook remains uncertain at this point in time. We are hopeful we'll see a gradual improvement in demand in Xi'an as the market environment stabilizes. As this happens, we expect to experience a corresponding level of revenue growth."

2012 Outlook

Total recognized revenue for the 2012 second quarter is expected to reach $20 to $22 million, compared to $20.3 million in the same period of 2011. The Company is reporting contract sales estimates compared to revenue as they are not subject to percentage of completion alterations.

Fourth Quarter 2011 Results

• Total revenue in the fourth quarter of 2011 increased 49.2% to $47.9 million from $32.1 million in the third quarter of 2011 and increased 32.8% from $36.1 million in the fourth quarter of 2010.
• Total gross floor area ("GFA") sales were 44,631 sq. meters during the fourth quarter of 2011, compared to 24,793 sq. meters in the third quarter of 2011 and 30,680 sq. meters in the fourth quarter of 2010.
• Average residential selling price ("ASP") in the fourth quarter of 2011 was RMB 6,301, compared with RMB 5,574 in the third quarter of 2011, and RMB 6,661 in the fourth quarter of 2010.
• Gross profit decreased 27.7% to $6.9 million from $9.5 million in the third quarter of 2011 and decreased 15.8% from $8.2 million in the fourth quarter of 2010. Fourth quarter 2011 gross margin was 14.4% compared to 29.7% in the third quarter of 2011 and 22.7% in the fourth quarter of 2010.
• SG&A expenses as a percentage of total revenue decreased to 7.0%, compared to 9.1% in the third quarter of 2011 and decreased from 10.4% in the fourth quarter of 2010.
• Operating income decreased 64.7% to $2.2 million from $6.1 million in the third quarter of 2011, and decreased from $3.0 million in the fourth quarter of 2010.
• Net income attributable to the Company in the fourth quarter of 2011 was $2.8 million, or $0.08 per diluted share. Excluding the $0.3 million gain associated with the revaluation of derivatives and warrants, net income was $2.5 million.

Mr. Pingji Lu, China Housing's Chairman, commented, "While we were pleased to see sequential improvements both in GFA sales and ASP's , our business continued to experience the impact of restrictive government policies on the real estate market that have impacted home purchases in Xi'an. We had three active projects in the fourth quarter, including JunJing III, Puhua Phase I and Puhua Phase II. Total GFA sales reached 44,631 square meters and average selling prices were RMB 6,301, both of which were sequential improvements. According to data from E-House (China) and the Xi'an Bureau of Statistics, during the fourth quarter of 2011, housing sales volume in Xi'an decreased 12.8% to 2.5 million square meters from 2.8 million square meters in the third quarter 2011 and average selling prices increased 6.6% to RMB 7,903 per sq. meter compared to RMB 7,412 in the third quarter of 2011."

"We added one new development project to our pipeline in the fourth quarter. The Ankang project, located approximately 200 kilometers south of Xi'an is now our largest project outside of Xi'an. We intend to develop middle income residential units on the site with an estimated gross floor area ("GFA") of 243,000 square meters. The development period of the project is currently expected to begin in the second quarter of 2012 and is estimated to last approximately three years. We plan to start presales in the third quarter of 2012 and anticipate that this new development project will generate revenue of approximately RMB1.1 billion (US$171.9 million) over the life of the project."

"If there is no easing of the aforementioned restrictive government policies, we expect contract sales to remain slow this year. However, labor costs and construction costs continue to rise which together can result in higher apartment sales prices. We have the ability to modify the timeline of our development projects based on market conditions and will monitor the latest trends to control the roll out of our construction projects. We have an active pipeline of projects and look forward to expanding our position as market conditions improve."

2012 Outlook

Total contract sales for the 2012 first quarter are expected to reach $16.5 to $17.5 million, a 37.6% - 33.8 % decrease compared to $26.4 million in the same quarter of 2011. Total recognized revenue for the 2012 first quarter is expected to reach $16.5 to $17.5 million, compared to $22.6 million in 2011. The Company is reporting contract sales estimates compared to revenue as they are not subject to percentage of completion alterations.

Third Quarter 2011 Results

• Total revenue in the third quarter of 2011 increased 58.5% to $32.1 million from $20.3 million in the second quarter of 2011 and decreased 5.7% from $34.0 million in the third quarter of 2010.
• Net income attributable to the Company in the third quarter of 2011 was $4.4 million, or $0.13 per basic share and $0.12 per diluted share. Excluding the $1.8 thousand gain associated with the revaluation of derivatives and warrants, net income was $4.3 million.

First Quarter Results:

• Total revenue in the first quarter of 2011 decreased 37.4% to $22.6 million from $36.1 million in the fourth quarter of 2010 and decreased 32.8% from $33.6 million in the first quarter of 2010.
• Total gross floor area ("GFA") sales were 28,438 sq. meters during the first quarter of 2011, compared to 30,680 sq. meters in the fourth quarter of 2010 and 61,666 sq. meters in the first quarter of 2010.
• Average residential selling price ("ASP") in the first quarter of 2011 was RMB 6,115, compared with RMB 6,661 in the fourth quarter of 2010, and RMB 5,027 in the first quarter of 2010.
• Gross profit decreased 30.0% to $5.7 million from $8.2 million in the fourth quarter of 2010 and decreased 11.6% from$6.5 million in the first quarter of 2010. First quarter 2011 gross margin was 25.4% compared to 22.7% in the fourth quarter of 2010 and 19.3% in the first quarter of 2010.
• SG&A expenses as a percentage of total revenue increased to 15.2%, compared to 10.4% in the fourth quarter of 2010 and 7.6% in the first quarter of 2010.
• Operating income decreased 56.7% to $1.3 million from $3.0 million in the fourth quarter of 2010, and decreased from$3.0 million in the first quarter of 2010.
• Net income attributable to the Company in the first quarter of 2011 was $2.5 million, or $0.07 per basic share and $0.05per diluted share.  Excluding the $1.9 million or $ 0.06 gain on basic EPS associated with the revaluation of derivatives and warrants, net income was $0.6 million or $0.02 per basic share.

Mr. Pingji Lu, China Housing's Chairman, commented, "The first quarter was challenging for our business as sales fell short of expectations due to the impact of additional mortgage and purchase restrictions imposed by the local Xi'an government in the first quarter. Potential buyers waited for the new guidelines to determine whether they could meet new mortgage requirements as well as see if prices would soften.  The Xi'an government has also extended the number of days required to secure the necessary construction permits which has delayed the timing of our new development projects. According to data from E-House (China) and the Xi’an Bureau of Statistics, during the first quarter of 2011, housing sales volume in Xi’an decreased 31.4% sequentially to 3.0 million sq. meters, but average selling prices held steady increasing 7.7% to RMB 7,220 per sq. meter compared to RMB 6,704 in the fourth quarter of 2010."

Total contract sales in 2011 are expected to reach $250 to $290 million, a 140%-179% increase compared to $148 million in 2010.  Total recognized revenue in 2011 is expected to reach $200 to $220 million, a 43%-57% increase compared to $140 million in 2010. Gross margin in 2011 is expected to reach 30%-35%. The Company is reporting contract sales estimates compared to revenue as it is not subject to percentage of completion alterations.

Highlights for Q4 2010:

• Total revenue in the fourth quarter of 2010 increased 5.9% to $36.1 million from $34.0 million in the third quarter of 2010 and increased 37.0% from $26.3 million in the fourth quarter of 2009.
• Total gross floor area ("GFA") sales were 30,680 sq. meters during the fourth quarter of 2010, compared to 39,833 sq. meters in the third quarter of 2010 and 61,786 sq. meters in the fourth quarter of 2009.
• Average residential selling price ("ASP") in the fourth quarter of 2010 was RMB 6,661, compared with RMB 5,694 in the third quarter of 2010, and represents a 42.5% increase from RMB 4,675 in the fourth quarter of 2009.
• Gross profit decreased 25.0% to $8.2 million from $10.9 million in the third quarter of 2010 but increased 74.6% from $4.7 million in the fourth quarter of 2009. Fourth quarter 2010 gross margin was 22.7% compared to 32.0% in the third quarter of 2010 and 17.8% in the fourth quarter of 2009.
• SG&A expenses as a percentage of total revenue increased to 10.4%, compared to 8.4% in the third quarter of 2010 and 12.6% in the fourth quarter of 2009.
• Operating income decreased 56.7% to $3.0 million from $7.0 million in the third quarter of 2010, and increased from $(0.17 million) in the fourth quarter of 2009.
• Net income attributable to the Company in the fourth quarter of 2010 was $2.4 million, or $0.07 per basic share and $0.15 per diluted share.  Excluding the $0.4 million or $0.01 impact on basic EPS associated with the revaluation of derivatives and warrants, net income was $2.1 million, or $0.06 per basic share.

Mr. Pingji Lu, China Housing's Chairman, commented, "We are pleased to have met our full year revenue forecast.  Once again, JunJing II Phase Two and Puhua Phase One were the primary revenue contributors in our business during the fourth quarter. Xian's residential sales in the fourth quarter of 2010 totaled 4.4 million square meters with an average selling price of RMB 6,704, a 49.3% increase in sales volume and 5.1% increase in sales price compared to the third quarter of 2010. Our fourth quarter results were consistent with the general growth trends in Xi'an. Demand for our development projects remained healthy as all three of our current projects under construction achieved sizeable ASP improvements over the prior quarter.  

We believe 2011 could be a very productive year for our business. Much of our growth will be achieved from further sales of our current projects under construction as well as from our three development projects scheduled for pre-sales in 2011.  Further, we plan to expand our development projects into surrounding areas near Xi'an. We recently announced our acquisition of a development project in nearby Hu county and plan to expand into at least one additional surrounding city this year. We also aim to concentrate on developing properties that can generate rental income and provide more stable cash flows for our business going forward. We intend to further establish China Housing as a leading developer in Xi'an and its surrounding area and are optimistic that 2011 can be a record year of growth for our company."

2011 Outlook

• Total contract sales in 2011 are expected to reach $250 to $290 million, a 140%-179% increase compared to $148 million in 2010.  
• Total recognized revenue in 2011 is expected to reach $200 to $220 million, a 43%-57% increase compared to $140 million in 2010. Gross margin in 2011 is expected to reach 30%-35%.

The Company is reporting contract sales estimates compared to revenue as it is not subject to percentage of completion alterations.

Highlights for 3Q10:

• Total revenue in the third quarter of 2010 decreased 7.1% to $34.0 million from $36.6 million in the second quarter of 2010 but increased 42.3% from $23.9 million in the third quarter of 2009.
  
• Total gross floor area ("GFA") sales were 39,833 sq. meters, compared to 46,459 sq. meters in the 2010 second quarter period and 32,436 sq. meters in the 2009 third quarter period.
  
• Average residential selling price ("ASP") in the third quarter was RMB 5,694, compared with RMB 5,641 in the second quarter of 2010, and represents a 13.9% increase from RMB 5,001 in the third quarter of 2009.
  
• Gross profit increased 5.8% to $10.9 million from $10.3 million in the second quarter of 2010 and 47.3% from $7.4 million in the third quarter of 2009. Third quarter 2010 gross margin was 32.0% compared to 28.2% in the second quarter of 2010 and 31.0% in the third quarter of 2009.
  
• SG&A expenses as a percentage of total revenue decreased to 8.4%, compared to 10.3% in the 2010 second quarter and 10.5% in the 2009 third quarter period
  
• Operating income increased 22.8% to $7.0 million from $5.7 million in the second quarter of 2010, and increased 118.8% from $3.2 million in the third quarter of 2009.
  
• Net income attributable to the Company in the third quarter of 2010 was $6.5 million, or $0.20 per basic share and $0.15 per diluted share.  

• Excluding the $1.4 million or $0.04 impact on basic EPS associated with the revaluation of derivatives and warrants, net income was $5.1 million, or $0.15 per basic share.

Mr. Pingji Lu, China Housing's Chairman, commented, "We were generally pleased with our performance in the third quarter.  JunJing II Phase Two and Puhua Phase One were the primary contributors to our performance.  Sales would have been even higher in the third quarter were it not for government approval delays related to JunJing III that required us to delay recognizing revenue related to this project until the fourth quarter.  We believe that overall demand for housing, average selling prices and transaction volume trends in the Xi'an market continue to improve.  According to data from E-House (China) and the Xi'an Bureau of Statistics, Xian's residential sales in the third quarter of 2010 totaled 3.1 million square meters with an average selling price of RMB 6,560, a 2% increase in sales volume and 12% increase in sales price compared to the second quarter of 2010. In the third quarter of 2009, residential sales totaled 3.3 million square meters with an average sales price of RMB 5,280 per square meter. When compared to the 2009 third quarter, total residential sales volume in Xi'an decreased 7%, while sales prices increased 24%."

We are focused on layering on additional ASP and gross margin improvement. These trends can continue to trend higher in the coming quarters as we develop and sell more mid-to-high level apartment units at our current projects under development.  We are also evaluating the opportunity to design and create move-in ready apartments for specific high-end projects under development such as Park Plaza."

2010 Outlook

• Total contract sales in 2010 are expected to reach US$168 to $205 million, a 62%-97% increase compared to $103.9 million in 2009.  

• Total recognized revenue in 2010 is expected to reach US$135 to $165 million, a 56%-91% increase compared to $86.6 million in 2009. The Company is reporting contract sales estimates compared to revenue as it is not subject to percentage of completion alterations.

"We believe that we'll enter 2011 positioned for even greater financial success. Provided that current conditions remain stable, we believe we have an opportunity to increase our revenue and contract sales growth by an average of 30% each year for the next several years. We remain encouraged with the overall progress in our business and believe our portfolio of current and future development projects can position China Housing and Land as a leading developer in the western China region," concluded Mr. Lu.

China Housing & Land Development, Inc. announced that it has filed a Form S-3 shelf registration statement with the Securities and Exchange Commission to register 1,974,866 shares of common stock. This announcement relates to the Company's June 2010 8-k debt restructuring filing in which it was expected to retire approximately US$11 million of non convertible portion of the US$20 million 5% Senior Secured Convertible Notes, which were issued to certain investors in January 2008.

China Housing will retire up to US$11 million Non Convertible Notes through the issuance of 1,974,866 common shares at US$5.57 per share upon the investors' request within five business days after the Form S-3 is effective. China Housing's stock is trading at US$2.26 as of October 15, 2010.

Highlights for 2nd Q 2010:

• Total revenues increased 9.0% to $36.6 million compared to $33.6 million in the first quarter of 2010, and increased 61.1% from $22.7 million in the second quarter of 2009.
  
• Contract sales decreased 15.4% to $38.4 million compared to $45.4 million in the first quarter of 2010 and increased 90.1% from $20.2 million in the second quarter of 2009.
  
• Operating income increased 91.7% to $5.7 million from $3.0 million in the first quarter of 2010, and increased 51.6% from $3.8 million in the second quarter of 2009.
  
• Net income attributable to the Company in the second quarter of 2010n was $5.6 million, or $0.17 per basic share and $0.13 per diluted share.  Excluding a $1.4 million, or $0.04 gain associated with the revaluation of derivatives and warrants, net income was $4.2 million, or $0.13 per basic share and $0.13 per diluted share.

Mr. Pingji Lu, China Housing's Chairman, commented, "Our second quarter results were respectable given the challenging market environment. JunJing II Phase Two and Puhua Project continued to serve as the main revenue drivers in our business. Our average selling price trends were favorable in the second quarter increasing 12.2% sequentially and 27.3% from our prior year second quarter largely due to an improved product mix associated with our Puhua Project. Our project sales direction is trending more toward slightly higher end projects such as Puhua which can result in ongoing ASP and gross margin improvements in the coming quarters."

"We are also encouraged with several important initiatives that can benefit our business performance moving forward. This includes a central government program that offers lower interest rates to first time apartment buyers and upgraders. We also hope to benefit from our establishment of a road show marketing team that travels to nearby provinces to target high income working professionals to purchase our apartments in Xi'an. Industry research shows that average selling prices and transaction volume in the Xi'an market continued to remain stable."

2010 Outlook

"Our original full year guidance projection included construction expansion into surrounding provinces. However, central government policies have led to more hesitation in the broader real estate market which has diminished our plans to expand into other nearby provinces at present. This pullback directly resulted in a reduction of our annual revenue growth expectations for this year. We continue to view other real estate projects outside of Xi'an as compelling investment opportunities and will evaluate further expansion initiatives outside of Xi'an as overall real estate market sentiment continues to improve.

2010 total contract sales are expected to reach US$168 to $205 million, a 62%-97% increase compared to $103.9 million in 2009. Total recognized revenue in 2010 is expected to reach US$135 to $165 million, a 56%-91% increase compared to $86.6 million in 2009. The Company is reporting contract sales estimates compared to revenue as it is not subject to percentage of completion alterations.

Mr. Pingji Lu, China Housing's Chairman, commented, "We posted strong first quarter results in what is traditionally one of our seasonally slower quarters. The overall real estate market condition in Xi'an has improved since the beginning of 2010 and through the first quarter, which is demonstrated in the pre-sales results of our current projects under construction.

Since government policies raised purchase hesitation in the Xi'an real estate market, the sales for the coming months have become less visible. That said, we are still confident with our project pipeline and market positioning and maintain our previous financial outlook for 2010. The Company will keep monitoring the market condition and adjust our business strategy if necessary.

China Housing & Land Development reported 2009 second quarter financial results. The Company exceeded estimates on a non-GAAP basis.  Non-GAAP earnings per share were $0.10 vs. an $0.08 estimate.  The company also beat revenue estimates. The stock is down and may offer a trading opportunity.

China Housing & Land Develop issued preliminary sales data for its 2009 second quarter. 

Preliminary Second Quarter sales contract data

• Junjing II Phase One, Phase Two and other existing projects- $23.9 million
• Non-Junjing II projects- $4.0 million
• The average price per square meter has increased from the first quarter.

This is encouraging news and may imply that the company can exceed analyst second quarter estimates:

• Revenues Estimate-  $14.2 million
• Earnings Per Share Estimate- $0.04

Per some of the press release verbiage, there is a caveat preventing The GeoTeam® from definitively assuming that China Housing & Land Develop will exceed estimates:

"Generated sales contracts for the 2009 second quarter are reported under the percentage of completion accounting method for revenue recognition and may not be fully recognized in the second quarter."

Historical Information is still needed on the relationship between contract sales data and actual reported sales data.

Source: PR Newswire