IFM Investments Limited (CTC)

Q4 2010 Earnings Conference Call

March 7, 2011, 8:00 AM ET


Kevin Yung - Executive Vice President

Donald Zhang - Founder, Chairman and Chief Executive Officer

Harry Lu - Founder, Vice Chairman and President

Kevin Wei - Chief Financial Officer



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Good evening and thank you for standing by for Century 21 China Real Estate's fourth quarter and fiscal year 2010 earnings conference call. At this time all participants are in listen-only mode. After Management's prepared remarks, there will be a question-and-answer session. Today's conference call is being recorded. I would now like to turn the meeting over to your host for today's conference, Mr. Kevin Yung, Executive Vice President of Century 21 China Real Estate. Please proceed.

Kevin Yung

Thank you, everyone for joining us for Century 21 China Real Estate's fourth quarter and fiscal year 2010 earnings call.

With us today are Donald Zhang, our founder, chairman and chief executive officer, Harry Lu, our founder, vice chairman and president, and Kevin Wei, our chief financial officer.

Before we continue please allow me to read you IFM Investments' Safe Harbor statement. Some of the statements during this conference call are forward-looking statements made under the Safe Harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the SEC. IFM Investments Limited does not undertake any obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

For those of you unable to listen to the entire call at this time, a recording will be available via webcast for one week on our corporate website at At this point, I would like to turn the call over to Mr. Donald Zhang.

Donald Zhang

Thank you Kevin. Good day to everyone and thank you for joining us on this call.

During the fourth quarter of 2010 we saw higher than expected revenue as transaction volumes continued to recover following the decline in Q2 of last year. In 2010, the market was impacted by the tight policy environment which dampened sales. Nevertheless, we continued to strengthen our business, opening stores in targeted markets to increase market share and take advantage of the market downturn while also incubating new service offerings that offer additional revenue streams.

By the end of the fiscal year 2010, including our franchise network, we increased our store count to more than 1,500 with over 20,800 sales professionals and staff, and more than 6.7 million property listings. In the fourth quarter, transaction volumes in our key markets began to recover, especially towards the end of the quarter as the market adapted to the government’s autumn policies. However, in January and February the central and local government enacted a new round of policy initiatives in key tier-1 and tier-2 cities. These policies are intended to suppress property prices, but are noticeably harsher than the initiatives we saw over the last couple of years and have significantly decreased transaction volumes. This has been true for Beijing in particular where the impact has been most severe.

Despite the tough policy environment we remain confident that the secondary real estate market has strong potential in the long term. In the near term, however, we will take a cautious approach to network expansion as we deepen our exposure to more sheltered market segments. To date, we have made good progress in the primary and commercial markets, as well as enhancing our mortgage management business, our entrusted loan business and our property fund. Let me now turn the call over to Harry. Thank you.

Harry Lu

Thank you Donald.

As Donald says, in the fourth quarter we saw continued recovery in demand as the market adapted to previous government measures and transaction volumes increased towards the latter part of the period. However, demand going into 2011 was been significantly affected by new property restrictions which were announced in January and February. The policies are closely linked to China’s household registration system, and make it more difficult for newcomers to the affected cities to purchase properties.

Just to give you a general overview of the new policy environment, according to the new regulations, in most cities including Shanghai and Shenzhen, residents registered in that city can own no more than two properties while residents registered elsewhere can own no more than one property. In addition, residents registered elsewhere may only buy property if they have a twelve months of consecutive, documented tax filings or social welfare in the city in which they want to buy. This effectively removes many newcomers, who are an active group, from the property purchase market.

In Beijing the regulations are harsher for residents not registered in Beijing with a requirement for five years’ of consecutive tax receipts or social welfare records. As a result of the particular severity of the measures in Beijing, the Beijing residential property market has been more strongly affected than other that of other cities. We are not in a position to predict how long this new policy environment will continue. But we believe the transaction volume will remain at a depressed level for at least two more quarters. And we will maintain a cautions approach to store expansion during this period, focusing on increasing productivity of existing stores as well as generating revenue from complimentary businesses.

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