IFM Investments' (Century 21 China Real Estate) CEO Discusses Q4 2011 Results - Q&A Session Transcript

IFM Investments Ltd. (CTC)

Q4 2011 Earnings Call

March 15, 2012 8:00 AM ET

Executives

Donald Zhang – Co-founder, Chairman and CEO

Harry Lu – Co-founder, Vice Chairman and President

Kevin Wei – CFO

Analysts

Cai Liping – William Blair

Ella Ji – Oppenheimer

Presentation

[Prepared Remarks]

Question-and-Answer Session

Operator

(Operator Instructions). The first question comes from the line of Cai Liping from William Blair. Please go ahead.

Cai Liping – William Blair

Hi good evening everyone. The first question is regarding the pricing change you are seeing for secondary properties. Are you seeing our service are being more willing to lower price and is that a main reason more transactions you are seeing following the Chinese New Year?

Harry Lu

Actually what we see, you know, the data we show actually is for the end of last year. But right after the Chinese New Year – but right now after the Chinese New Year we’ve just seen our transaction volume actually pick up and you know, because you know, the price is still remain in a relatively low level.

But at this stage we don’t see that further down of the price at least for in our recent period. You know see that the price is also being stabilized at this moment. That’s for secondary market. But we’ve just seen some of the developers are pretty lower price tag, try to, you know attract more buyers to sell the party. But in secondary, the transaction volume pick up and the price has been stable for a while.

Cai Liping – William Blair

Okay, I see. And from your – from CTC’s perspective, are margins similar if you do new home transactions from your store versus secondary property transactions?

Harry Lu

Yeah, it’s pretty similar.

Cai Liping – William Blair

Okay. And then, for 2012, do you see the potential to further lower your store-count from the current level or do you expect to maintain the current 300 something stores?

Harry Lu

At this moment when we look at the market, the whole market developer, we believe our store-count will remain pretty stable.

Cai Liping – William Blair

Okay, all right, all right, thank you.

Operator

Thank you. And your next question comes from the line of Ella Ji, Oppenheimer. Please go ahead.

Ella Ji – Oppenheimer

Hi good evening. A quick follow-up prior question, in terms of the commission expenses that you pay for your sales people are they similar for primary transactions versus secondary?

Harry Lu

At this moment.

Kevin Wei

Sorry Harry, go ahead, go ahead, yeah.

Harry Lu

Yeah. At this moment for the business the commission will collect by provided service to serve new home through our existing secondary network, the commission in our structure is pretty similar.

Ella Ji – Oppenheimer

Okay, great. And also it’s very impressive to see that you have made a good cost to savings in this quarter. So, going forward, will you continue closing underperforming stores or are you pretty much happy with your network at this moment?

Harry Lu

That will really depend on the home market development, but the firm at this moment from where we stand here probably our store-count will be pretty stable right now.

Ella Ji – Oppenheimer

Okay.

Harry Lu

So, yeah, we’re probably going to remain, you know, pretty much in the same level of store-count. Yeah, I mean, for – the numbers were definitely lower than what you see that for the – by the end of last year. Kevin, do we just quote the store-count recently right now?

Kevin Wei

Yes 340 is the second wheel of this year.

Harry Lu

Okay.

Ella Ji – Oppenheimer

Okay, great. That’s helpful. And then, in terms of those transactions you made since February, the purpose of those purchases are these mostly for own residence or for investments?

Harry Lu

Actually majority of them are still is, like you know, people will purchase home for themselves. You know, especially in the early stage of this rebound, with majority of home buyer is, like new home buyer buying smaller units. But recently we do see some buyers buying some, you know, relatively large units as well.

Ella Ji – Oppenheimer

Okay, thank you. And lastly, would you give us an update in terms of E-Houses transaction? And also, you know, if we assumed the transaction is successfully completed, could you comment you know, how do you plan to do the primary businesses in the, you know, Beijing area, you know, E-House is also a primary agency in the same market.

Harry Lu

I think for E-House, basically you know, we already disclosed have the list of press release talking about after we signed these term sheet. You know, we did have this discussion and then, you know, we are pending you know a discussion between founder and the avenue capital (inaudible) settlement talk. You know, once we you know, finish this settlement talk we’re going to resume this negotiation within this discussion.

But talking about in future, we believe you know, we already kind of set the model right now to sell the new home through our existing secondary network which is quite different compared with what E-House has right now. You can look at the commission we collect from developer is more than 2% and but you know typical commission they get from developer is 1%.

We are more like, you know, the using our precision network to kind of bring our own customer to please the developer to have them move their products and that’s a big difference. We’re going to keep doing that in the future. So, I think that that model would be quite different with existing primary agency business.

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