Cross-Harbour Holdings

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

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In May 2020, together with Black Crane Capital, Lanyon proposed that David Prescott and Peter Kennan (CEO and CIO of Black Crane Capital) join the board of directors of the company.  David and Peter would serve for nil fee.

David and Peter would push to create substantial value for all shareholders, including the sale of the company yacht and the sale of groups Treasury Management Business, with proceeds paid to all shareholder as a special dividend of ~$15.50 per share.  They would also look to increase the ongoing annual dividend payments to shareholders.  The Group would continue owning the tunnel and tolling operations and the driving school, which were once the Company’s core business and which they believe should return to being so in the future.

A copy of our open letter to all shareholders is available here.

32_Letter to shareholders_May 2020

A copy of our Media Release from June 2020  is available here.

Links:

www.crossharbour.com.hk

www.westernharbourtunnel.com

www.legco.gov.hk/yr17-18/english/panels/tp/papers/tpcb4-1461-1-e.pdf

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