China HGS Real Estate Inc. operates through its wholly owned subsidiary Shaanxi Guangsha Investment and Development Group Co. Ltd. in Hanzhong, China for real estate development in second-tier and third-tier cities. The company today raised its financial guidance for fiscal 2010, fueled by better-than-expected growth in residential property.

For fiscal year ended September 30, 2010, China HGS projects revenues between $49.0 million and $47.5 million, up from original guidance of $46.4 million. Net income is forecast to range between $15.5 million and $16.0 million, up from original guidance of $13.0 million.

The company reported that it expects fully diluted earnings to be between $0.39 and $0.40 per share, reflecting current weighted average shares outstanding.

After evaluating its major projects in Hanzhong City and Yang County, China HGS’ increased guidance reflects stronger-than-expected growth in ASPs (Average Selling Prices), which increased approximately $14.6 to $43.9 per square meter in January 2010.

“During the second quarter of fiscal year 2010, we are experiencing robust growth in ASPs of our real estate projects and expect these prices to continue to trend higher in 2010,” Xiaojun Zhu, chairman and CEO of China HGS stated in the press release. “The key growth drivers for rapid growth in Hanzhong have remained intact and prices for residential properties have steadily increased since 2009.”

Zhu also noted that the real-estate market appears to be free of spectators, and that government regulations are expected to have little impact on the company’s operations.

“Most importantly, we have not witnessed significant speculation in the local real estate market. While the Chinese government has recently tightened the monetary policy, we believe it largely targets tier I and tier II cities and will be of minimal impact to our operations. We are confident in our ability to achieve our guidance for fiscal year 2010,” Zhu stated.