Edited Transcript of CIH.OQ earnings conference call or presentation 22-Aug-19 12:00pm GMT

Income tax expenses were RMB 8.2 million in the second quarter of 2019, an increase of 28.1% from RMB 6.4 million in the corresponding period of 2018. Net income was RMB 51.5 million in the second quarter of 2019, an increase of 31.7% from RMB 39.1 million in the corresponding period of 2018.

In the first half of 2019, CIH reported total revenues of RMB 253.1 million in the first half of 2019, an increase of 36.1% from RMB 185.9 million in the corresponding period of 2018. Revenues from information and analytics services, SaaS, were RMB 114.2 million in the first half of 2019, an increase of 19.1% from RMB 95.9 million in the corresponding period of 2018, primarily due to an increase of number of customers. Revenues from marketplace services were RMB 138.9 million in the first half of 2019, an increase of 54.3% from RMB 90.0 million in the corresponding period of 2018.

Cost of revenue was RMB 47.4 million in the first half of 2019, an increase of 5.6% from RMB 44.9 million in the corresponding period of 2018, primarily due to an increase in personnel cost to support our business expansion. Selling and marketing expenses were RMB 45.2 million in the first half of 2019, an increase of 36.6% from RMB 33.1 million in the corresponding period of 2018, mainly due to an increase in personnel cost resulting from the growing number of selling and marketing personnel headcount.

General and administrative expenses were RMB 24.8 million in the first half of 2019, an increase of 44.2% from RMB 17.2 million in the corresponding period of 2018, mainly due to an increase in personnel cost to support our business expansion. Research and development expenses were RMB 11.6 million in the first half of 2019, an increase of 54.7% from RMB 7.5 million in the corresponding period of 2018, mainly due to an increase in staff costs driven by the growth of the research and development team.

Operating income was RMB 124.1 million in the first half of 2019, an increase of 49.2% from RMB 83.2 million in the corresponding period of 2018. Income tax expenses were RMB 18.4 million in the first half of 2019, an increase of 41.5% from RMB 13 million in the corresponding period of 2018. Net income was RMB 104.7 million in the first half of 2019, an increase of 39% from 75.4 — RMB 75.3 million in the corresponding period of 2018.

Based on current operations and market conditions, CIH’s management remains confident that the total revenue for the year of 2019 is expected to be between approximately RMB 580 million and approximately RMB 610 million. This represents a year-to-year increase from approximately 37.8% to approximately 44.9%. These estimates represent the management’s current and preliminary view, which are subject to change.

Thank you for joining us today, and we’re now open for questions. Operator, please go ahead.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have a question from Gerard Chua of Resurgence.

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Gerard Chua, Resurgence Investment Management Limited – Equity Research Analyst [2]

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I’d just like to check. I think, previously when we spoke, you mentioned that the commercial real estate initiatives are in the works and in the process of being rolled out. Can I just check if these have been already launched or not yet? Or what’s the status there?

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Jessie Yang, China Index Holdings Limited – IR Director [3]

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Okay. Give me a few minutes to translate. Thanks.

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Yu Huang, China Index Holdings Limited – President, CEO & Director [4]

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(foreign language)

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Jessie Yang, China Index Holdings Limited – IR Director [5]

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[Interpreted] Okay. So with regards to commercial real estate, there is nothing new. It has already — we have already had services since pre-listing separately of China Index Holdings on NASDAQ. So before the Fang spin-off, there exists a commercial listing, including buildings and retail for both sale and lease. And this, after CIH has become independent, has achieved 3x growth. Another area of commercial real estate services include database services. And before, this is not charged separately to clients. However, in the second quarter, this was reorganized and upgraded as a product. And they have already seen revenues from the commercial real estate database.

In the third quarter, we plan to release the office version of the commercial real estate database, specifically by the end of August. And we expect to see an increase in the number of clients. And in terms of tools, we are developing tools for agents — real estate agents in the commercial real estate area as well as for businesses to help them with their listings. And this, we expect to launch in quarter 3. And thank you for your question.

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Gerard Chua, Resurgence Investment Management Limited – Equity Research Analyst [6]

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Okay. Could I just squeeze in maybe one more in a more general sense? I think CIH is growing very quickly. But one thing that’s really lacking is, I mean, just coverage on you guys. Nobody really knows — there’s no real analyst reports and everything. Is management looking to change that? Or is there any initiatives going forward that you would try and get the word out that you guys are separately listed and an independent company?

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Jessie Yang, China Index Holdings Limited – IR Director [7]

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Okay. One moment.

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Yu Huang, China Index Holdings Limited – President, CEO & Director [8]

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(foreign language)

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Jessie Yang, China Index Holdings Limited – IR Director [9]

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Okay. So because we are a newly listed company, we do want to have first a track record in terms of revenues so that analysts and investors can have time to learn about us and to see what we can do. We are actually working on implementing our plans for getting the word out to the investor community. And we are currently focusing on growing the business and gaining market share. However, we do want to hand-in-hand also engage the investor community and get the word out so that more people can find out about China Index Holdings.

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Operator [10]

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(Operator Instructions) We have one from [Xian Li].

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Unidentified Analyst, [11]

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(foreign language)

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Yu Huang, China Index Holdings Limited – President, CEO & Director [12]

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(foreign language)

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Unidentified Analyst, [13]

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(foreign language)

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Yu Huang, China Index Holdings Limited – President, CEO & Director [14]

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(foreign language)

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Jessie Yang, China Index Holdings Limited – IR Director [15]

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[Interpreted] Let me just translate for the English listeners. So the question was about SaaS tools and how we differentiate ourselves in the market and our main products.

And the answer was that we have 20 years of data aggregation and data collection history, and data needs time and history to be collected, and we’ve been in this industry for a long time. Because we’ve been a long-term player in this industry, we have researched and understood the industry very well. Our DNA is in technology and online platforms, and we combine big data and industry tools to help solve the problems most urgently faced by market participants. We want to help those in the industry. For example, landowners, we have a landowner product. And what it does is it helps buyers and sellers in terms of decision-making to purchase land as well as land auctions. For example, buyers can see clearly plots of land through aerial photograph and use tools which are built upon big data and big data analytics to generate a one-click report. And this helps them determine the viability of whether to buy and invest in the land. And it increases the efficiency of these decision-makers by as much as 60% to 70% in terms of savings and time so that they can spend the 30% to 40% of the time on important decision-making.

And we are working on building office — office-building SaaS tools to help real estate agents in the commercial real estate area to increase their efficiency in sale — in selling and leasing their office space and help them solve the main problems that they face every day. Thank you.

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Operator [16]

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Our next question comes from the line of [Yung Chan] of Harvest.

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Unidentified Analyst, [17]

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(foreign language)

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Yu Huang, China Index Holdings Limited – President, CEO & Director [18]

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(foreign language)

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Unidentified Analyst, [19]

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(foreign language)

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Yu Huang, China Index Holdings Limited – President, CEO & Director [20]

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(foreign language)

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Jessie Yang, China Index Holdings Limited – IR Director [21]

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[Interpreted] Thank you. The question was congratulations on achieving 30% to 40% growth. Does management have confidence to maintain this growth? And what are some strategies of growth for moving forward?

As (inaudible) [growth will come from different places,] one would be from clients. And currently, we have clients who renew subscriptions with us, as high as 70%. And there’s always — also going to be growth in clients — in new clients of around 20%.

And in terms of products, we are working continuously on upgrading our existing products as well as rolling out new products, such as the land SaaS tool mentioned earlier as well as the office-building SaaS tool. We’re already seeing revenue growth in the first half of 2019 for these new tools, and we expect continued growth in the second half.

In terms of database, we are working on building the foundation of our existing database by increasing the number of data types and diversifying the granularity of the data as well as the description of the data.

We are also planning on increasing the coverage of the number of cities. For the second half of 2019, we plan to add 12 new cities. In the short term, perhaps the contribution to revenue may be limited. However, it will be more apparent in the long term. We see the market as a big opportunity, especially commercial real estate. We see that it requires more professional and more detailed data analysis. And at the moment, there are no main competitors.

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Operator [22]

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(Operator Instructions) No question as of this time. Please continue.

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Jessie Yang, China Index Holdings Limited – IR Director [23]

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Okay. So thank you, everyone, for joining the China Index Holdings second quarter earnings call today. And we look forward to speaking with you soon for our third quarter 2019 earnings call.

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Operator [24]

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Thank you. Ladies and gentlemen, that does conclude the conference for today, and thank you for participating. You may now all disconnect.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]