Boyuan Construction Group Inc fka BOY

[Myth]

BOYUAN CONSTRUCTION GROUP, INC.


Attention Business/Financial Editors
Boyuan reports FY 2010 second quarter financial results

- Grows revenue, improves margins and expands into new markets -

TORONTO, March 1 /CNW/ - Boyuan Construction Group, Inc., (TSX-V: BOY &
BOY.DB) a fast-growing construction company in China of commercial,
residential and municipal infrastructure projects, reported its financial
results for the three-month and six-month periods ended December 31, 2009. All
figures are in U.S. dollars unless otherwise stated.

<<
Financial Highlights
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Q2 2010 Q2 2009 Change 6-Month 6-Month Change
2010 2009
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Revenue $37.6M $23.4M +60.8% $72.6M $44.7M +62.6%
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Gross profit $6.7M $3.2M +110.7% $12.4M $6.2M +99.4%
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Gross profit margin 17.8% 13.6% 17.1% 13.9%
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Net income $3.5M $2.4M +47.9% $3.3M $4.4M -25.2%
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Adjusted net income(1) $3.5M $2.4M +47.9% $6.5M $4.4M +48.2%
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Earnings per share -
diluted $0.14 $0.10 +40% $0.14 $0.18 -22.2%
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Adjusted Earnings per
share - diluted(2) $0.14 $0.10 +40% $0.26 $0.18 +44%
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>>

"We are very pleased with our second quarter results," said Mr. Cai Liang
Shou, Chairman of Boyuan Construction Group, Inc. "Since the start of the 2010
fiscal year, we have been able to capitalize on the strong demand for our
construction and engineering services in each of our markets. This has
resulted in significant year-over-year improvements to our revenue, gross
profit margins and adjusted net income, providing further evidence of the
strength of our business model and the high quality of our projects."

<<
Business Highlights in Q2 and Subsequent to Quarter End

- Continued expansion of operations into Shandong, one of China's
fastest growing regions.
- Following overwhelming shareholder approval at its annual meeting in
Toronto, the Company changed the location of its registered office to
Ontario and ratified its stock option plan.
- Signed four new construction project contracts with an aggregate
value of $76.6 million. The agreements encompass residential,
commercial and hotel construction projects on Hainan Island and
Shandong Province, Boyuan's newest market.
>>

Review of Financial Results

Revenue for the second quarter ended December 31, 2009 was $37.6 million,
up 60.8% from $23.4 million for Q2 of FY2009. Revenue for the first six months
of FY2010 was $72.6 million, compared to $44.7 million for the same period in
FY2009.
Boyuan recognizes revenue on the percentage-of-completion method. The
significant year-over-year growth in revenue was primarily attributable to an
increase in the number of successful project bids by the Company as well as to
an increase in demand for construction and engineering services in the Yangtze
River Delta region and Hainan Island, Boyuan's core markets. Subsequent to
quarter end, Boyuan has experienced strong demand for its services from
Shandong province, a new market for the Company. Higher demand for
construction and engineering services is due to ongoing urban migration and an
expansion of China's middle class, which drive the need for new housing,
commercial and public infrastructure projects.
Cost of construction for the second quarter of FY2010 was $30.9 million
compared to $20.2 million for Q2 of FY2009. Cost of construction for the first
six months of FY 2010 was $60.2 million, up from $38.4 million for the
comparable period in FY2009. The increase was primarily as a result of higher
expenses associated with greater project volume and an expanded work force.
Cost of sales includes all direct material, labor, subcontract and other
related costs, such as equipment repairs.
Gross profit for the second quarter of FY2010 was $6.7 million, or 17.8%
of revenue, compared to $3.2 million, or 13.6% of revenue, for the same period
of FY2009. Gross profit for the first six months of FY2010 was $12.4 million,
or 17.1% of revenue, compared to $6.2 million, or 13.9% of revenue, for the
same period of FY2009. The year-over-year improvement in gross profit margins
in Q2 by 410 basis points was due to a higher percentage of revenue
contributed from higher margin projects, particularly in Hainan Island, where
the Company experiences strong demand for its services but faces limited
competition, and a lower than average gross margin in Q2 FY2009. Historically,
the norm for the Company's gross margins is 15%.
Net income for the second quarter of FY2010 was $3.5 million, or $0.14
per fully diluted share, compared to net income of $2.4 million, or $0.10 per
fully diluted share, for Q2 of FY2009.
Net income for the six-month period was $3.3 million, down 25.2% from
$4.4 million for the same period of FY2009. The decline is attributable to a
non-cash stock-based compensation charge of $3.2 million that the Company
incurred in the first quarter of FY2010. As previously reported, the charge
related to the fair value transfer of shares under the make good provision of
a financing agreement signed in July 2009. The charge is in full compliance
with Canadian generally accepted accounting principles.
As specified by the Company's make-good provision of the July financing
agreement, Boyuan forecasted an after-tax net income of $8.5 million for the
fiscal year ended June 30, 2009. As a condition of the make-good provision,
Boyuan's Chairman put 3.2 million shares in escrow and would have transferred
1.6 million shares to investors if the forecast target had not been met. As
reported previously, the Company generated $9.6 million in adjusted after tax
net income for FY 2009. As a result, 1.6 million shares previously held in
escrow were returned to Chairman Shou during the quarter, resulting in a make
good charge of $3.2 million.
Excluding the make-good provision charge, adjusted net income for the six
month period ended December 31, 2009 was $6.5 million, or $0.26 per share
diluted, which compares to $4.4 million, or $0.18 per share diluted, for the
same period in FY2009. The Company believes that adjusted net income is more
representative of its profitability and performance since the make good charge
is a non-cash accounting charge and not related to its business activities.
The Company had cash, cash equivalents and restricted cash totaling $4.9
million and working capital of $35.3 million for the period ended December 31,
2009. This compares to a cash, cash equivalents and restricted cash balance of
$5.5 million and working capital of $22.4 million at June 30, 2009.

Outlook

"Recent economic indicators in China remain relatively strong, suggesting
continued optimism for the construction industry over the short term," said
Mr. Shou. "Our opportunities for growth, in particular, are encouraging given
that we operate in tier two level cities where the competitive landscape is
fragmented and local economies are less affected by economic trends, such as
rising property values, found in major cities, such as Shanghai or Beijing."
Boyuan's consolidated statements for the three and six month periods
ended December 31, 2009 and related management's discussion and analysis
(MD&A) will be filed with securities regulatory authorities
within applicable timelines and will be available via SEDAR at
www.sedar.com.

http://www.cnxmarketlink.com/en/releases/archive/March2010/01/c5765.html