IFM Investments' CEO Discusses Q1 2013 Results - Earnings Call Transcript

| About: IFM Investments (CTC)
This article is now exclusive for PRO subscribers.

IFM Investments Limited (NYSE:CTC) Q1 2013 Earnings Call May 13, 2013 8:00 AM ET

Executives

Donald Zhang – Chairman and Chief Executive Officer

Harry Lu – Vice Chairman and President

Nick Beswick – IR-Brunswick Group

Analysts

Ella Ji – Oppenheimer & Co. Inc.

[No presentation session for this event]

Question-and-Answer Session

Operator

Thank you, ladies and gentlemen. We will now begin the question-and-answer session. (Operator Instructions) Your first question comes from the line of Ella Ji from Oppenheimer. Please start your question.

Ella Ji – Oppenheimer & Co. Inc.

Yes. Thank you and congratulations on the great quarter. First, the question is with regards to our market outlook. If we assume that there’s no more new policies on a market, would you elaborate your expectation for the second half of the year comparing to the first half of the year? Do you think, overall, the market volume will be trending flat, or up, or slightly down? Thank you.

Harry Lu

Okay, thank you Ella. I think when we look at a new policy, when we start to implement especially in city of Beijing, we did see the transaction volume, actually drop quite significantly in a form that around like 45,000 level to around like, a 6,000 or below 6,000 level. But we do believe that the month of April probably would be like a [broaden] month for city like Beijing after the new policy already was there and the people are getting used to this new policy. And you will see the transactional volume recover to normal more level compared with the month of April. But the rest of the country right now basically most of the city, they didn’t really implement this 20% capital gain income policy, but you do see in most of the city because the people are – kind of hesitate after all those news came out.

So you did see transaction volume in city like Shanghai was dramatically lower compared with the March, but when you compare with the later half of last year, it’s only a [so-called] reasonable slow down, it’s not like what we see in Beijing. So generally speaking, we do believe the rest of the year step by step; you’re going to see transaction volume become more normal once the people are digested this new policy. So we believe the transaction volume will come in back and then we do see the traffic towards our store volume is still there, and the people are still interesting in buying secondary properties and not to mention, nowadays, center of the city – they have less option. You really want to purchase property in the center of the city. So yes, basically, we see later part of this year, transaction volume will recover to more normal level. Does that answer your question, Ella?

Ella Ji – Oppenheimer & Co. Inc.

Yes, that’s very helpful. And I wonder if you can also comment on with regards to the mortgage environment. Are you seeing that heightening of the mortgage or how is the situation already there? Thanks.

Harry Lu

The mortgage is actually being pretty – the supply of mortgage is being in pretty stable in most of the major city like Beijing and Shanghai, although you probably noticed that they increased the down-payment requirements for people who are purchasing the second home in the city of Beijing, but that has a very minimal impact on all buildings because there will people can always get another kind of financing loan, consumer financing loan from bank instead of pretty much, only depend on the mortgage loan. So they can still get some certain percentage of consumer financing loan to compensate whatever (inaudible) new policy to increase this down-payment. So obviously the impact on our business is a very, very minimal on that part. And other than that the most of city is still see the supply of mortgage is pretty normal. People can still apply to the mortgage, you will qualify, is still very easy to get mortgage once they’re qualified for those mortgage.

Ella Ji – Oppenheimer & Co. Inc.

Got it. And then, I just want to confirm your expansion strategy for the year. It seems that you are adding sales staff for now, while putting on hold with regards to the store expansion. Is that right, can you just confirm if that is the strategy for you for the rest of the year?

Harry Lu

Yes…

Ella Ji – Oppenheimer & Co. Inc.

Could you also, sorry, please go ahead…

Harry Lu

I’m sorry, please go ahead.

Ella Ji – Oppenheimer & Co. Inc.

Could you also remind me how many sales staffs did you add for this quarter?

Harry Lu

I think (inaudible) will give you the exact numbers, but yes it is our strategy that to make sure we will see that the market transaction volume is no more or is healthy. We’re going to adding more new staffs, so that to train them to make sure in a sense though we have a more people with productivity, so that in order to improve our probabilities. So we’re only going to open new office once we realize we have too many good agents, so we don’t had a space for to work on them. We’re going to new store. So we’re going to add people first and store later. So we only going to add a store, but we really believe it’s necessary because we have too many of good agents, so that we can minimal our financial risk in business environment like this. Kevin, you may want to…

Kevin Wei

To help answer, Ella, your question about the number of sales staff, for average sales staff for the Q1 is 5,760 but in the month of March, we added that number up to 6,200, we just give you a color on that number the additional sales staff that we hired.

Harry Lu

And I guess the reason for us to add these staffs is not only for the month of March, we believe it’s very important for us to have enough sales staffs in our team for rest of the year and that’s what we try to do.

Ella Ji – Oppenheimer& Co. Inc.,

Those people are not temporarily sales staff only for the March or April; they will remain in your company, right?

Harry Lu

Exactly, yes.

Ella Ji – Oppenheimer & Co. Inc.

Okay, got it. And then lastly, I think you said if the G&A is higher because you have a higher bad debt provision. Is that general practice in a 2% of revenue or is that any single cases or any several cases that in which situation you need to raise your bad debt provision?

Harry Lu

No, I mean it’s a general provision that for our secondary brokerage business that we generally accrued about 2% of our revenue. So since our revenue continue to get higher in the first quarter of this year, so we naturally we accrued a more bad debt. But also on the primary sector as well since we have been conducting such business for a little bit longer time now, so we have a better history generally for the bad debt for the primary section is based on the agent and as well as the collectability. So since we have some a little bit longer receivables for the primary sections now in this quarter we also accrued some of the additional bad debt provision relates a little bit long overdue receivables.

Ella Ji – Oppenheimer& Co. Inc.,

Are you confident that – how much confidence you have that you can collect those receivables eventually?

Harry Lu

We are confident to receive all the net receivables at the end of the March. And so we those represent a net receivables, so the bad debt provisions were picking up those net receivable already. So the bad debt provision portion is the amount that we think those had a risk so that we book some additional launch for the first quarter.

Ella Ji – Oppenheimer& Co. Inc.,

Okay, got it. Thank you very much and congratulations again.

Kevin Wei

Thank you

Harry Lu

Thank you, Ella.

Operator

Thank you. (Operator Instructions) Thank you. We are now approaching the end of the conference call. I would now turn the call over to the CFO of Century 21 China Real Estate, Mr. Kevin Yung, for his closing remarks. Thank you.

Kevin Yung

Well, thank you everyone for joining us for today’s earnings call. We’re looking forward to speaking with everyone again soon. Have a good day. Thank you.

Operator

Thank you. Ladies and gentlemen that does conclude our conference for today. Thank you for participating. You may all disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!