Very undervalued from this release:) BOYUAN REPORTS FY2011 THIRD QUARTER FINANCIAL RESULTS
Monday, May 16, 2011
- Net income increases by 47% -
TORONTO, May 16 /CNW/ - Boyuan Construction Group, Inc., (TSX: BOY & BOY.DB) a fast-growing construction company in China of commercial, residential and municipal infrastructure projects, reported today its financial results for the three and nine-month periods ended March 31, 2011. All figures are in U.S. dollars unless otherwise stated.
Selected Third Quarter Financial Highlights
In thousands except share and % data Q3 2011 Q3 2010 Change
Revenue $41,042 $31,048 +32.2%
Gross profit $6,935 $5,159 +34.4%
Gross profit margins 16.9% 16.6%
EBITDA1 $6,001 $3,930 +52.7%
Net income $3,167 $2,156 +46.9%
Earnings per share - diluted $0.10 $0.09 +11.1%
March 31, 2011 June 30, 2010
Total Assets $131,545 $93,869 +40.1%
Cash, equivalents, and restricted cash $20,399 $8,726 +133.8%
"During the third quarter we grew revenue by 32%, EBITDA by 53% and net income by 47%, while initiating more than $32 million worth of projects," said Mr. Cai Liang Shou, Chairman of Boyuan Construction Group. "This strong growth, which was achieved even though the third quarter is traditionally our weakest due to the Chinese New Year holiday period, provides continuing evidence that demand for construction services remains very robust in our core markets, particularly since China's rate of urbanization and the rise of the middle class shows no signs of abating."
Q3 Operational and Financial Highlights
Current project backlog now totals over $245 million
Initiated construction on a 66,000 square meter residential project in Haiku, Hainan Province valued at $21.4 million
Initiated construction on a 60,000 square meter residential project in Hainan Province valued at $10.9 million
Total new project value for the nine-month period was $111.1 million, which is included in the current project backlog
Highlights Subsequent to Quarter End
Initiated construction on a 140,000 square meter residential project in Sanya, Hainan Province valued at $43.1 million - Boyuan's second largest project to date
Selected 9-Month Financial Highlights
In thousands except share and % data 9-Month 2011 9-Month 2010 Change
Revenue $129,550 $103,663 +25.0%
Gross profit $21,579 $17,549 +23.0%
Gross profit margin 16.7% 16.9%
EBITDA $17,671 $11,421 +54.7%
Net income $9,319 $5,463 +70.6%
Earnings per share - diluted $0.37 $0.24 +54.2%
Review of Financial Results
Revenue for the third quarter ended March 31, 2010 was $41.0 million, up 32.2% from $31.1 million for Q3 of FY2010. Revenue for the first nine months of FY2011 was $129.6 million, compared to $103.7 million for the same period in FY2010.
Boyuan recognizes revenue on the percentage-of-completion method, measured by the ratio of costs incurred up to a given date to estimated total costs for each contract. The significant year-over-year growth in revenue was primarily attributable to an increase in the number of successful project bids with higher contract value 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. The growth was also due to the Company's decision to expand into Shandong province, an emerging market with growing demand for construction and engineering services.
Higher demand for construction and engineering services is due to ongoing urban migration and an expansion of China's middle class, which drives the need for new housing, commercial and public infrastructure projects.
Cost of construction for the third quarter of FY2011 was $34.1 million compared to $25.9 million for Q3 of FY2010. Cost of construction for the first nine months of FY 2011 was $108.0 million, up from $86.1 million for the comparable period in FY2010. The increase was primarily as a result of higher expenses associated with greater project volume and an expanded work force including the continued work on the Company's largest construction project to date, a residential development in Hainan province valued at $44.3 million. Cost of sales includes all direct material, labor, subcontract and other related costs, such as equipment repairs.
Gross profit for the third quarter of FY2011 was $6.9 million, or 16.9% of revenue, compared to $5.2 million, or 16.6% of revenue, for the same period of FY2010. Gross profit for the first nine months of FY2011 was $21.6 million, or 16.7% of revenue, compared to $17.5 million, or 16.9% of revenue, for the same period of FY2010. The stable year-over-year gross margins are attributable to the Company working on similar types of projects with similar margins compared to the same period as last year. The majority of those projects are primarily located in Hainan Island, where the Company experiences strong demand for its services but faces limited competition. Historically, Boyuan's gross profit margins have been in the range of 15% to 16%.
Interest expense for Q3 FY2011 was $1.1 million, up 107% or $0.6 million over the same period last year. On a year-to-date basis, interest expense for FY2011 was $3.0 million, up from $1.7 million for FY2010. The growth was primarily due to two items, an increase in bank loans and bank notes payable needed to fund start-up costs for new projects and to the Company's convertible debenture financing activities. On a year-to-date basis as of March 31, 2011, Boyuan has signed new agreements for construction development projects valued at $111.1 million. Revenue for the projects will be recognized as the projects are completed, typically a duration of up to two years.
The Company also incurred a minimum total return (MTR) charge of $0.3 million and $1.0 million, respectively, for the three- and nine-month periods ended March 31, 2011. The Company did not incur any MTR charges in FY2010. MTR charges were determined based on the provisions of previous financing activities. Investors of the Company's convertible debentures issued on February 2009 were entitled to a MTR right of 25% per annum on their units. The calculation is based upon the twenty day volume weighted average price of the Company's common shares, less interest paid or payable on the convertible debentures, calculated on the first, second and third anniversary of February 27, 2009 and payable, if triggered, on February 27, 2013. The MTR expense recorded in Q3 FY2011 was a non-cash accrued expense based on calculations on March 31, 2011.
On February 27, 2011, the redemption of one third of the 11.75% debenture outstanding was not exercised by the holders. Based on the redemption date of February 27, 2013 and effective interest rates of 28.94% and 32.64%, the principal amount of the one third outstanding debentures at February 27, 2011 was recalculated and the reduced amount was accounted for as valuation gain of $0.7 million in this period.
After-tax net income for the third quarter of FY2011 was $3.2 million, or $0.10 per fully diluted share, compared to net income of $2.2 million, or $0.09 per fully diluted share, for Q3 of FY2010. The increase was principally due to higher revenues from increased sales and the valuation gain on the 11.75% debenture, partially offset by higher interest expenses, the MTR charge as well as to a stock-based compensation charge of $0.3 million in Q3 FY2011. The increase in fully diluted earnings per share for the period was tempered by a 20% increase year-over-year in the weighted average number of common shares outstanding and dilution relating to the issuance of a CDN$15 million debenture during the year. After-tax net income for the nine-month period was $9.3 million, up 70.6% from $5.5 million for the same period of FY2010.
The Company had working capital of $65.6 million, including cash, restricted cash and cash equivalents of $20.4 million for the period ended March 31, 2011. This compares to $40.3 million and $8.7 million, respectively, at June 30, 2010.
"We continue to be very encouraged by our short-term prospects," added Mr. Shou. "The recent measures imposed by the Chinese central government to slow the growth of prices in real estate markets in tier one cities have had very little impact on us as we operate in tier two and tier three cities."
"Over the longer term, we believe there will be opportunities for us to expand beyond our core markets and capitalize on the strong demand for construction services throughout the east coast of China, particularly with the high rate of urban migration taking in the region. We also remain very committed to upgrading our qualification and engineering standards, both of which will allow us to bid on larger scale projects with potentially higher margins," continued Mr. Shou.
Boyuan's consolidated statements for the three and nine-month periods ended March 31, 2011 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.
Conference Call Notice
The Company will hold a conference call to discuss its 2011 third quarter financial results on May 16, at 10:00 a.m. ET. Mr. Paul Law, Boyuan's Chief Financial Officer, will host the call.
All interested parties can join the call by dialing 647-427-7450 or 1-888-231-8191. Please dial in 15 minutes prior to the call to secure a line.
The conference call will be archived for replay until May 23, 2011 at midnight. To access the archived conference call, please dial1-800-642-1687 or 416-849-0833 and enter the reservation number 65258329#.
A live audio webcast of the conference call will be available from the investor relations section of the Company's website, www.boyuangroup.com, or from www.newswire.ca. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above web site for 30 days.
About Boyuan Construction Group, Inc.
Based in Jiaxing City, China, Boyuan Construction Group, Inc. is in the business of commercial building and residential construction, municipal infrastructure and engineering projects. In its last three fiscal years ending June 30, 2010, Boyuan completed more than 80 projects for a number of private and public sector clients including Cargill and the Dalian Shide Group, a billion dollar conglomerate whose partners include DuPont, Mitsubishi and General Electric. Boyuan's current project backlog includes residential, commercial, industrial and mixed-use developments. From its operating bases in Zhejiang Province and in Hainan Province, Boyuan focuses on construction projects in China's fast-growing regions of the Yangtze River Delta, Hainan Province and Shandong Province. For more information visit www.boyuangroup.com or follow us on Twitter @ www.twitter.com/boyuangroup.
Caution Regarding Forward-Looking Information:
Certain information contained in this press release constitutes forward-looking information, which is information relating to future events or the Company's future performance and which is inherently uncertain. Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. The Company believes the expectations reflected in the forward-looking information are reasonable but no assurance can be given that these expectations will prove to be correct and readers are cautioned not to place undue reliance on forward-looking information contained in this press release. Some of the risks and other factors which could cause results to differ materially from those expressed in the forward-looking information contained in this press release have been identified in the Company's AIF for the fiscal year ended June 30, 2010 and in the Company's other public disclosure documents filed with certain Canadian securities regulatory authorities and available at www.sedar.com. The forward-looking information contained in this press release is made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as otherwise required by law.
1 EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. EBITDA is not a defined performance measure under generally accepted accounting principles (GAAP).
For further information:
Boyuan Construction Group, Inc.
Mr. Paul Law, CFO
+(852) 9329 5088
TMX Equicom Or TMX Equicom
Joe Racanelli Philip Dale
(416) 815 0700 ext. 243 (416) 815 0700 ext. 253
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