Shareholder Campaigns

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, 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


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.


Contango Income Generator

Our open letter to CIE shareholders is available here.


Contango Income Generator Limited ABN  40 160 959 991 (“CIE” or “company”) is an investment company, listed on the Australian Stock Exchange.  The company is externally managed by Contango Funds Management Limited ABN 52 085 487 421 (“CFML” or “CIE’s Asset Manager”)1.

CIE raised $71,451,000 through an initial public offering in August 2015. Shares were issued at $1.00.

Lanyon Asset Management Pty Limited (“Lanyon”) has been a shareholder of CIE since April 2019 and is a substantial shareholder of CIE (i.e more than 5% of the total shares on issue).

Lanyon is disappointed with the poor performance of CIE and has developed a strategy to improve performance and restore value for all shareholders.

Investment Strategy is fundamentally flawed

When CIE was admitted to the official list of the ASX in August 2015, the then chairman of CIE stated that CIE’s objective was to: “provide Shareholders with a sustainable income stream of dividends with some capital growth over time2 (emphasis added).

CIE subsequently revised its investment strategy in October 2018 “to distribute 6.5% of the pre-tax Net Tangible Assets (NTA) per annum, while maximising franking where possible. We select companies that, in aggregate, generate a sustainable dividend income. The portfolio is characterised by a strong and diverse portfolio of companies that exhibit good cash flows and business models3.

Whilst the stated objective of the 6.5% targeted distribution was initially maintained, CIE no longer stated as an objective to achieve “some capital growth over time” as stated in the prospectus in 2015.

In Lanyon’s opinion, this objective appears to have been omitted because CIE and CIE’s Asset Manager realised that it was impossible to deliver the objective of capital growth (or even preservation of capital) with this unrealistic objective of 6.5% income.

Lanyon does not believe that CIE had any realistic or genuine prospect of achieving this investment objective.

In August 2019, CIE acknowledged that the dividend policy was unsustainable and the Board, in conjunction with the investment manager, revised the dividend policy as follows:

  1. to pay quarterly dividends that provide investors with an attractive and sustainable income stream that is franked to the maximum possible extent; and
  2. to the extent that the Company is not able to pay a dividend, it undertakes to return an appropriate amount of capital to shareholders via an on-market buyback4.

The company also amended the investment strategy, with the Board noting that such change “provided the manager with more flexibility to invest in growth stocks and companies outside the mid-cap sector so as to enhance the Company’s ability to achieve its dividend objectives5.

Since these revisions in August 2019, the value of the portfolio (as measured by the CIE Net tangible assets before tax) has declined from $0.9546 to $0.7397, a decline of 29.1%.  This is significantly below the decline in the S&P/ASX All Ordinaries Index of 14.1%.

The changes made to dividend policy and investment strategy have not improved returns to shareholders

Investment Performance has been abysmal

Given the flawed investment strategy, it is of little surprise to Lanyon that investment performance has been woeful.

Since listing, the company provided monthly comparisons of performance relative to the S&P/ASX All Ordinaries Accumulation Index.   In September 2018, CIE ceased providing comparisons of its performance to the index.  We expect this is because performance of the company has been abysmal and the Board of CIE did not wish to highlight the poor performance to its shareholders.

The closing share price of CIE’s shares on Friday 5th June 2020 was $0.62.  In the almost 5 years since the company listed, shareholders have seen their $1.00 initial investment decline 38% to $0.62.  The compares to an increase of 14.1% for the S&P/All Ordinaries Index over that same time frame.

When dividends are included, the S&P/ASX All Ordinaries Accumulation Index has delivered a return of +39.8%.   CIE has paid total dividends of $0.277 over the last 5 years.  Even when dividends are included, CIE performance has been consistently below the broader market.

We have included CIE performance relative to the index in the table below.

CIE has consistently underperformed the broader market, as measured by the S&P/ASX All Ordinaries Accumulation Index, over all time periods.

CIE has persistently traded at a discount to NTA

CIE has persistently traded at a discount to the value of its net tangible assets (“NTA).  This has further impaired the value for all CIE shareholders.

The company most recent disclosed NTA is $0.7398 at 31 May 2020.  The CIE share price at 31 May 2020 was $0.59.  CIE therefore currently trades at a 20.2% discount to the value of its tangible assets.

Since listing, CIE has persistently traded at a discount to NTA.  The average discount since listing in August 2015 has been -7.5%.9

At the company’s most recent Annual General Meeting on 13 November 2019, the Chairman stated “Both the Board and the investment manager, Contango Asset Management, remain committed to improving the performance of the portfolio and closing the Company’s share price discount to net tangibles assets (NTA).   The Board continues to consider and, where appropriate, adopt strategies to ensure these objectives and commitments are met. Examples of these initiatives include: moving to quarterly dividend payments from semi-annual, lowering the cash target weight to 5% from 15% and more recently, amending the investment strategy and dividend policy, as announced to the ASX on 20 August 2019”.

At the time of that announcement, CIE traded at a discount of 9.2%   All of these initiatives have proved to be totally ineffective with the discount not only persisting but increasing from the discount of 9.2% at that time to a discount of over 20% today.

The company’s Asset Manager is in turmoil

The company is externally managed by Contango Funds Management Limited, a wholly owned subsidiary of ASX-listed Contango Asset Management Limited (ASX: CGA)

  • Cash burn is high

CGA is required to provide quarterly cash flow reports to the ASX.    The cash flow report of CIE’s Asset Manager filed with the ASX on 17 April 202010 showed that CIE’s Asset Manager:

  • recorded a net cash outflow of $383,000 for the three months ended 31 March 2020; and
  • recorded a net cash outflow of $2,826,000 for the nine months ended 31 March 2020.

CIE’s Asset Manager has also estimated its cash outflows for the current financial quarter (Q4 2020) to be $1,347,000.11  Lanyon would expect, given the significant falls in Australian and global equity markets, that the cash receipts of CIE’s Asset Manager for the prior quarter ending 30 June 2020 would be lower than the receipts for the previous quarter. Lanyon expects that CIE’s Asset Manager will have a further significant cash outflow for the current financial quarter.

Lanyon estimates that the company has only 6 quarters of funding available.12

Lanyon has doubts regarding the long-term viability of CIE’s Asset Manager and whether it will have sufficient cash to continue funding its operations.

It is also of note that CIE’s Asset Manager’s share price has declined from $1.86 in February 2016 to $0.30 at 8 June 2020, a decline of 83.8%13.

  • Staff have exited from CIE’s Asset Manager

Following the resignation of former chief investment officer and managing director of CIE’s Asset Manager on 27 October 201714, there has been an exodus of staff at CIE’s Asset Manager.

A number of staff left between November 2017 and February 2018, following which, in March 2018, CIE’s Asset Manager closed its Melbourne head office. Lanyon understands that the current investment team of CIE’s Asset Manager now comprises four members.

This is significantly below the staffing levels at the time of CIE’s initial public offering, when it was stated that CIE’s Asset Manager’s “team comprises 12 experienced investment professionals, including equity specialists with expertise across Australian and global markets. There is also an additional 7 personnel in various functions including risk, compliance and support staff15.

  • CIE’s Asset Manager’s new business focus does not include the management of CIE’s assets

CIE’s Asset Manager’s chairman, Roger Amos, stated in the 2018 annual report that: “Throughout the year, the Company reviewed its strategic objectives and operating model with a view to focus on the areas of its operations that were growing. As a result, the Company’s focus has moved away from institutional wholesale mandates, to the distribution of products to retail clients, including via Switzer Asset Management Limited (SAML). Consequently, the Company restructured its operations, including reducing headcount and relocating its head office to Sydney16.

CIE’s Asset Manager’s managing director, Martin Switzer, stated in the 2018 annual report that:  “The business made the strategic decision to transition from an institutionally focused fund manager to a specialist listed investment house targeting the self-directed and independent financial adviser (IFA) channels of the retail market. The rationale for the new strategy was to focus on the parts of the business and industry that are experiencing growth and to concentrate our efforts on where we believe we have a competitive advantage. In 2018 the business has shifted its focus from a product manufacturer to a marketing and distribution platform offering high-quality fund managers access to the retail channel of the $2 trillion superannuation industry17.

Lanyon notes that this indicates a focus shift away from institutional and wholesale mandates, which would include CIE’s Asset Manager’s role as manager of CIE’s investments.

Proposal to restore value for all shareholders

Lanyon is a large shareholder in CIE owning in excess of 5% of all the shares on issue.  Lanyon has been disappointed with the performance of CIE and the significant erosion in the value of its shareholding.

Lanyon has developed a strategy to restore value for all shareholders.

Lanyon has been contacted by and is currently in dialogue with a number of significant CIE shareholders who are supportive of our proposals.

  • New directors

Lanyon is considering providing CIE a notice under Section 249D of the Corporations Act 2001 (Cth) requesting that the directors of CIE call and arrange to hold a general meeting. CIE woud be required to call the meeting within 21 days of receipt of the notice and the meeting must be held no later than two months after receipt of the notice. The resolutions proposed at this general meeting may include:

  • the appointment of Mr. Ken Williams as director (to serve as Chairman);
  • the appointment of Mr. David Prescott as a director;
  • the removal of Mr. Mark Kerr as a director;
  • the removal of Mr. Don Clarke as a director; and
  • the termination of CIE’s investment management agreement.

Both Ken Williams and David Prescott have significant experience in the investment management industry and are experienced ASX-listed company directors. Bios for both Ken Williams and David Prescott are included below.

  • Revised investment strategy

Upon successful appointment, the new board members would immediately seek to terminate the existing investment manager agreement with CFML and appoint Lanyon as the replacement manager.  The replacement agreement would be on the same terms as the existing agreement.

Upon appointment as CIE’s manager, Lanyon would seek to revise the investment strategy.  The revisions would include the removal of the highly unusual and self-imposed investment restrictions imposed by CIE to exclude the investment in any of the top 30 ASX-listed companies (by market capitalisation).  Lanyon would also seek to broaden the universe of permissible investments to include any companies listed on the Australian Stock Exchange and also international securities.

Lanyon also intends to offer a mechansim whereby existing shareholders can exit their shareholding at a price that closely approximates the net tangible assets of the company.  Further detail on the mechanics of the exit scheme will be provided in due course.

Lanyon is a specialist, long-only, equities investment manager that aims to deliver both capital preservation and long term capital growth from a concentrated portfolio of listed equity securities.  Lanyon’s portfolios typically comprise 15-25 securities. Lanyon does not short securities or use derivatives.

Lanyon’s longest running fund, the Lanyon Australian Value Fund was established 10 years ago. The fund invests in Australian equities and has held significant cash balances, often in excess of 50% of fund assets. This has significantly reduced the risks faced by investors and has assisted Lanyon in delivering its capital preservation and long-term capital growth objective. In contrast to CIE, Lanyon has been able to both preserve capital and to deliver investment returns significantly higher than the S&P/All Ordinaries Accumulation Index.

The Lanyon Australian Value Fund invests in the same asset class (ASX listed equities) as CIE and therefore investment results should be directly comparable.

A summary of the performance of the Lanyon Australian Value Fund, the S&P/ASX All Ordinaries Accumulation Index and the total return of CIE is included below.


Ken Williams B Econ (Hons), M App Fin, MAICD

Ken is currently the Chairman of Statewide Super, an industry super fund that service over 137,000 members, 22,000 employers and manage more than $10.2 billion in funds under management.   Ken was appointed as Independent Chairman on 1 January 2017. He is also a member of Statewide Super’s Investment and Remuneration & Nomination Committees.

Ken holds a Masters of Applied Finance, a Bachelor of Economics with Honours and was the recipient of a Mitsui Education Foundation Scholarship (Japan) and an Australian Commonwealth Treasury Scholarship.

With over 25 years’ experience in corporate finance, specialising in treasury and financial risk management, he also has extensive Board experience. His Directorship experience has spanned both large and small listed and private companies, not-for-profit organisations and superannuation funds including employer appointed Director of the Qantas Superannuation Fund, employer appointed Director of the Normandy Mining Superannuation Fund and independent Director of Local Super. He has also Chaired the Audit & Risk Committee of the APRA regulated Mortgage Insurance Company.  Ken was previously Chairman of AWE Limited (ASX: AWE) and Havilah Resources (ASX: HAV).

During his career, Ken has held senior finance executive roles with Normandy Mining Limited, Qantas Airways Limited and Renison Goldfields Limited.

Ken is also a director of the Lifetime Support Authority.

David Prescott  B.Ec , Finsia, CFA

David is the founder and Managing Director of Lanyon.  He has over 20 years funds management experience working for firms in Australia and the UK.  David was previously Head of Equities at institutional fund manager, CP2 (formerly Capital Partners).

David is a director of two ASX listed companies:  BSA Limited (ASX:BSA) and 8iP Emerging Companies Limited (ASX: 8EC).

David has an Economics degree from the University of Adelaide, a Graduate Diploma in Applied Finance and Investment from the Securities Institute of Australia (FINSIA) and is a CFA charterholder.

  1. CMFL is a wholly owned subsidiary of Contango Asset Management Limited (ASX: CGA).
  2. CIE’s Replacement Prospectus dated 3 July 2015.
  3. CIE’s ASX announcement titled “Investment Update and NTA Statement” released 8 October 2018.
  4. CIE’s ASX announcement titled “Dividend details” released 20 August 2019.
  5. CIE’s ASX announcement titled “Dividend details” released 20 August 2019.
  6. CIE’s ASX announcement titled “Investment update and NTA statement 31 August 2019” issued to the ASX on 6 September 2019.
  7. CIE’s ASX announcement titled “Investment update and NTA statement 31 May 2020” issued to the ASX on 4 June 2020.
  8. CIE’s ASX announcement titled “Investment update and NTA statement 31 May 2020” issued to the ASX on 4 June 2020.
  9. Source: Bloomberg.
  10. CGA’s ASX announcement titled “Appendix 4C – quarterly” released 17 April 2020.
  11. CGA’s ASX announcement titled “Appendix 4C – quarterly” released 17 April 2020.
  12. CGA’s ASX announcement titled “Appendix 4C – quarterly” released 17 April 2020.
  13. The information in this chart was prepared based on trading data obtained from IRESS. IRESS has not consented (and has not been asked to consent) to the use of that trading data in this Statement. The trading data has been used in reliance on the relief provided in ASIC Corporations (Consents to Statements) Instrument 2016/72.
  14. CGA’s ASX announcement titled “Update” released 27 October 2017.
  15. CIE’s Replacement Prospectus dated 3 July 2015.
  16. CGA’s Annual Report 2017-18 released 12 October 2018.
  17. CGA’s Annual Report 2017-18 released 12 October 2018.
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