China Hgs Real Estate Inc (NASDAQ:HGSH) recently reported strong results of operations for its fiscal year ended September 30, 2014. The company reported strong 83% YoY increase in its FY14 total revenues to $124.3 million. Net income increased 56% to $32.4 million or $0.72 per basic and diluted share in FY14 from $20.8 million or $0.46 per basic and diluted share in FY13.
Why are analyst so optimistic about HGSH?
China HGS focuses on development of real estate properties in the People’s Republic of China. Its operations include construction and sale of commercial properties, parking lots and residential apartments.
The company is currently working on Shanty area reforming projects, supported by the central government to enhance the quality of urbanization and facilitate sustained economic development. The State Council has also indicated its intentions to improve investment allocations for shantytown reforms. City governments are also directed to adapt restrict measurement to local conditions and facilitate easy financing for first-time home buyers.
China Hgs Real Estate Inc (NASDAQ:HGSH) is eyeing to leverage such encouraging government initiatives and will diversify its product development while stepping up sales efforts. In mid-August, the company signed its first ‘Shanty-Area Rebuilding Framework Agreement’ with the government of Hanzhong City in Hantai District. A month later, the company signed its second agreement with the same local government.
The estimated investment in these projects is expected to exceed $1.3 billion. Pursuant to these agreements, the company is developing the shanty areas surrounding the Lianhuachi Area and Liang Zhou Road in Hanzhong City.
Mr. Xiaojun Zhu, Chairman and CEO of China HGS, said that the Company achieved continuous growth in fiscal 2014, amid slow recovery in the whole property sector in China. The company recognized related revenue of $99.6 million for its long-term real estate development projects. It accounted for 80% of total revenue in FY14 and grew 262% from FY13.
The company is diversifying its revenue along with enhancing cost and operational synergies and improving cash flows. It is positive about long-term outlook for the local real estate market with increasing urbanization level, average selling price for its real estate projects and disposable income of its customers.
China Hgs Real Estate Inc (NASDAQ:HGSH) perfectly displays the cycle of volatility at work as it rallies and drops with élan followed by a totally comatose period, concluding that with the next bout of violent moves. Most of this year 2014 has been spent in a grinding downmove, days of absolutely no movement sometimes. Then the month of August came with a very sharp rally and a sharp drop in September. Currently the price is consolidating in a sideways phase and even the huge 46% rally yesterday will be wasted if the technical resistance of $4.80-$5.00 is not overcome very soon.