BOYUAN REPORTS FIRST QUARTER FY2011 RESULTS

High demand for construction services drives revenue and gross profit gains

TORONTO, Nov. 15 /CNW/ - Boyuan Construction Group, Inc., a fast-growing construction company in China of commercial, residential and municipal infrastructure projects, reported its financial results for the three-month period ended September 30, 2010.  All figures are in U.S. dollars unless otherwise stated.

Selected First Quarter Financial Highlights

In thousands except for share and % data	Q1 FY2011	Q1 FY2010	Change
Revenue	$43,044	$35,003	+23.0%
Gross profit	$7,053	$5,679	+24.2%
Gross profit margins	16.4%	16.2%
Net income	$2,805	($206)	+$3,011
Adjusted net income^1	$2,805	$3,037	-7.6%
Adjusted earnings per share - diluted^2	$0.10	$0.12	-16.7%
	Sept 30, 2010	June 30, 2010
Total Assets	$110,939	$93,869	+18.2%
Cash, equivalents,  and restricted cash	$14,489	$8,726	+66.0%

"Our first quarter was marked by the signing of our largest contract to date, a residential construction project valued at $44.3 million," said Mr. Cai Liang Shou, Chairman of Boyuan Construction Group, Inc. "This significant milestone illustrates our ability to steadily win contracts of increasing value given our excellent track record of completing quality projects on time and budget.  Equally important, it shows that our core markets are ripe with major  opportunities for our construction and engineering services, particularly on Hainan Island and in  tier-two cities throughout Shandong province and in the Yangtze River Delta."

Q1 Operational and Financial Highlights

• EBITDA³ was $5.9 million and excluded taxes of $1.5 million, interest expenses of $1.2 million, which included a minimum total return expense of $0.6 million related to a debenture financing of February, 2009, and amortization expenses of $0.3 million.
• Project backlog grew to $215 million, up from $125 million at September 30, 2009.
• Initiated a residential construction project on Hainan Island valued at $44.3 million, which represents Boyuan's largest contract value for a single development to date.

Highlights Subsequent to Quarter end

• Closed a public offering of $15 million of convertible unsecured subordinated debentures. 

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¹  Adjusted net income is not a recognized measure under Canadian GAAP. It excludes a stock-based compensation charge of $3.2 million related to the fair value transfer of shares under the "make-good provision" of a financing agreement signed in July, 2009. The Company believes that adjusted net income is more representative of its performance in Q1 FY2010 as the make good charge is a non-cash accounting charge and not related to its business activities.
²  Adjusted earnings per share is not a recognized measure under Canadian GAAP. It is calculated by dividing the Company's adjusted net income by the number of outstanding shares (diluted).  By comparison, earnings per share (diluted) for Q1  FY2011  were $0.10 and negative $0.04 for Q1 FY2010.
³  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).

Review of First Quarter Financial Results
Revenue for the three-month period ended September 30, 2010 was $43.0 million, up 23% from $35.0 million for the corresponding period of FY2010.  Revenue is recognized on the percentage-of-completion method. The significant year-over-year growth was primarily attributable to an increase in the number of successful project bids by the Company as well as an increase in demand for construction and engineering services in the Yangtze River Delta 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 in Boyuan's principal markets is due to ongoing urban migration and the expansion of China's middle class, both of which drive the need for new housing, commercial and public infrastructure projects.

Cost of construction for Q1 FY2011 was $36 million, up 22.9% from $29.3 million for Q1 FY2010. The increase was primarily the result of higher expenses associated with greater project volume and an expanded work force.  In particular, higher direct material costs of 31.1%, or $6.0 million, and higher labor costs of 8.7%, or $0.6 million, over the corresponding period of last year were due to the start of the Hainan Island residential project, the Company's largest to date. Cost of construction includes all direct material, labor, subcontract and other related costs, such as equipment repairs.

Gross profit for Q1 FY2011 was $7.1 million, representing a margin of 16.4% on revenue. Gross profit for the corresponding period of last year was $5.7 million, representing a margin of 16.2% on revenue. The year-over-year improvement in gross margins by 20 basis points was primarily due to a higher volume of projects on Hainan Island, where the Company is experiencing strong demand for its construction and engineering services but is encountering limited competition.  Historically, Boyuan's gross profit margins have been in the range of 15% to 16%.

Interest expense was $1.3 million in the three-month ended September 30, 2010, an increase of $0.7 million over the same period last year. The increase was due to increase in bank loans and bank notes payable. Also included in the interest expense this period was a minimum total return ("MTR") charge of $0.6 million. 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 will be 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 Q1 FY2011 was a non-cash accrued expense based on calculations on September 30, 2010.

Net income after taxes for Q1 FY2011 was $2.8 million or $0.10 per share fully diluted.  This compares to a net loss of $0.2 million, or $0.04 per fully diluted share, for the same period of FY2010.   The Company incurred a net loss in Q1 of last year due to a non-cash, stock-based compensation charge of $3.2 million related to the fair value transfer of shares under the make-good provisions of two separate financing agreements signed respectively in March and July of 2009.  As specified by the Company's make-good provisions, Boyuan forecasted an after-tax net income of $11.5 million in March 2009 and $12.4 million in July 2009, respectively, for the fiscal year ending June 30, 2010.  Excluding the stock-base compensation charge, Boyuan had adjusted net income for Q1 FY2010 of $3.0 million, or $0.12 per fully diluted share.  Adjusted net income is not a recognized measure under GAAP, but is more representative of the Company's operational and financial performance in Q1 of last year.

Boyuan had working capital of $44.6 million, including cash, equivalents, and restricted cash totalling $14.5 million as at September 30, 2010. This compares to $39.9 million and $8.7 million, respectively at June 30, 2010.

Outlook
"We are very pleased with the success of our recent convertible debenture offering," added Mr. Shou.  "Historically, every dollar in equity has allowed us to drive  growth of approximately $3 in the form of new contract wins. Raising proceeds of $15 million positions us very well to capitalize on emerging opportunities, particularly with speciality high-margin projects in China's tier-two cities, and grow our revenue pipeline by up to $45 million over the next year."

China currently has 60 cities each with a population of one million or more.  It is estimated that the number of cities with a population of one million or more will grow to 220 by 2025.

Boyuan's consolidated statements for the quarter ended September 30, 2010 and related management's discussion and analysis (MD&A) are available via SEDAR at www.sedar.com and the Company's website, www.boyuangroup.com

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 on Hainan Island, Boyuan focuses on construction projects in China's fast-growing regions of the Yangtze River Delta, the city of Sanya and Shandong Province. For more information visit www.boyuangroup.com or follow us on Twitter at 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.  All information other than statements of historical fact may be forward-looking information.  Forward-looking information is often, but not always, identified by the use of words such as "seek", "anticipate", "budget", "plan", "continue", "estimate", "expect", "forecast", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar words or phrases (including negative variations) suggesting future outcomes or statements regarding an outlook. Forward-looking information contained in this press release includes, but is not limited to, the Company's expectations the completion of the Offering and the proposed use of proceeds of the offering.  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 include, but are not limited to: risk of macro-economy cycle, risk from competition, risk from insufficient marketing to secure new projects, risk in obtaining additional financing, risk involving permits and licences, reliance on key management member, risk from supply of raw materials, risk of financial leverage, risk of bad debts in accounts receivables, risk involved in real estate development, foreign exchange fluctuations, political and economic conditions in China and other risks included in the final prospectus in respect of the offering, 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. 

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