The Cross-Harbour (Holdings) Limited (0032:HK) (“CHH”) is a Hong Kong listed investment holding company.
CHH maintains (1) a substantial net cash balance sheet and (2) an investment portfolio comprising listed equity securities, listed debt securities, unlisted fund investments and interest bearing instruments. CHH holds (3) a 50% stake in Western Harbour Tunnel Company Limited (WHTCL), a Hong Kong toll road concession. WHTCL owns the franchise to operate the Western Harbour Crossing from 1993 up to 2023. The company also owns (4) some subsidiary assets, including a stake in a driver training school and an electronic toll clearing business.
Lanyon Asset Management is currently the second largest shareholder in The Cross-Harbour (Holdings) Limited (source: Bloomberg, Lanyon estimates). The company’s largest shareholder is Mr. Cheung Chung Kiu, the Chairman of CHH, with a current stake of 6.51%. Mr. Cheung has recently been increasing his investment (as indicated in this disclosure of interests) and has purchased 54% of all shares traded from 10 May 2019 to 6 June 2019 (source hkex.com.hk, Bloomberg).
Lanyon’s estimate of the value for CHH is $25.50 and implies over 135% upside to the current share price. We believe CHH shares are materially undervalued. Our valuation estimate is as follows:
- Offer for WHTCL
On Wednesday 5 June, 2019, Lanyon made a cash offer to acquire the 50% interest in the WHTCL from CHH. A copy of our non-binding, indicative proposal is available here. Lanyon_CHH_WHT offer
It is our strong belief that this proposal was in the best interests of CHH shareholders.
On 11 June 2019, Lanyon’s offer was rejected by CHH.
- Strategy to restore value for all shareholders, including payment of a special dividend
On Tuesday 13 August, 2019, Lanyon wrote to the Board of CHH outlining a number of critical steps the company needed to take to restore value for all shareholders.
We have outlined a strategy that would enable the payment of a special dividend of HK$16.80 per share (or 160% of the current market capitalisation) whilst retaining key assets, including the 50% stake in WHTCL. A copy of our letter is available here. Lanyon_CHH_August 2019_FINAL