Author Topic: 0032.HK - Cross Harbour Holdings  (Read 7717 times)

misterkrusty

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0032.HK - Cross Harbour Holdings
« on: September 28, 2015, 04:26:20 PM »
Anyone looked at this?  It's a Hong Kong based/traded company that owns concessions on two tunnels as well as a couple other auto-related businesses.  Although the concessions will eventually expire, one can easily get to a fair value of about 3x the current ~10 HKD per share.  Currently, half the market cap is in net cash & securities, with an EV/FCF of just over 2x (note: I'm referring to look-thru FCF ... one need to look at the financials for each tunnel to figure it out).  In other words, it's dirt cheap.

The "catch", if you will, is that the company is controlled by a Chinese tycoon and pays out only a skimpy dividend (= a mid-teens % of the FCF referenced above).  For reference, the average payout across all HK-listed stocks is over 46%, and for tunnel operators specifically the payout is much higher - north of 75% if I recall correctly. 

Until recently, Cross Harbour used its FCF to pay down debt, which make me happy.  But now that the debt is gone, cash is piling up and management's investment returns have been pretty weak.  They'll probably do a single digit IRR on their investments in the tunnels.  They've also got a portfolio of HK/Singapore/US securities that hasn't shown much of a return either.  And then there's the yacht ... that's right, management feels they need a yacht.  I feel otherwise.  Every few years they trade in the company yacht for a bigger, better version.  The current one cost roughly USD 17 million, I think. 

I know some smart HK-based investors who are trying to persuade mgmt to return more cash to shareholders.  Note that there is no dividend tax in HK, so this might not be such a tough sell. 

Also, for what it's worth, the net cash & securities per share should exceed the current price in about 2 years' time.  If nothing else, this might be a catalyst for the shares.  I did a bloomberg screen for HK-listed stocks trading at/below net cash & securities and found only 16 (out of the 1,600 companies listed on the HK stock exchange).  All were much smaller than Cross Harbour and many were losing money.
« Last Edit: September 28, 2015, 04:58:14 PM by Parsad »


misterkrusty

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brown91

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Re: 0032.HK - Cross Harbour Holdings
« Reply #2 on: November 06, 2016, 02:59:52 PM »
misterkrusty,

Are you still following this company? If so, any thoughts on the Y.T. distribution?

misterkrusty

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Re: 0032.HK - Cross Harbour Holdings
« Reply #3 on: November 07, 2016, 10:08:08 AM »
i had stopped following because I decided there was little chance of CC Kiu doing the right thing for minority shareholders, but maybe this distribution changes things.  very interesting.  what do you think?

Scunny Bunny

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Re: 0032.HK - Cross Harbour Holdings
« Reply #4 on: November 16, 2016, 11:55:21 PM »
At the first Sohn/Hearts and Minds conference in Sydney, Australia last Friday, David Prescott from Lanyon Asset Management gave this as his tip. (No presentation available) Basic thesis was that you get the tunnel for nothing with seven years of concession remaining. Last years of infrastructure concessions tend to see massive free cash flow and ramped up toll charges. At a 10% DCF Lanyon project the 50% of tunnel holding to be worth HK$9.42/share. Add this to cash, equity investments and subsidiaries less liabilities of K$10.70 a share gives projected target of K$19.20 a share.

Denistry

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Re: 0032.HK - Cross Harbour Holdings
« Reply #5 on: April 09, 2019, 08:57:10 PM »
At the first Sohn/Hearts and Minds conference in Sydney, Australia last Friday, David Prescott from Lanyon Asset Management gave this as his tip. (No presentation available) Basic thesis was that you get the tunnel for nothing with seven years of concession remaining. Last years of infrastructure concessions tend to see massive free cash flow and ramped up toll charges. At a 10% DCF Lanyon project the 50% of tunnel holding to be worth HK$9.42/share. Add this to cash, equity investments and subsidiaries less liabilities of K$10.70 a share gives projected target of K$19.20 a share.

Thanks  Scunny Bunny, very insightful.
Was wondering if anyone is still following this given the recent decline in stock price.
« Last Edit: April 09, 2019, 11:31:31 PM by Denistry »

Janeo

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Re: 0032.HK - Cross Harbour Holdings
« Reply #6 on: June 26, 2019, 05:32:14 AM »
At the first Sohn/Hearts and Minds conference in Sydney, Australia last Friday, David Prescott from Lanyon Asset Management gave this as his tip. (No presentation available) Basic thesis was that you get the tunnel for nothing with seven years of concession remaining. Last years of infrastructure concessions tend to see massive free cash flow and ramped up toll charges. At a 10% DCF Lanyon project the 50% of tunnel holding to be worth HK$9.42/share. Add this to cash, equity investments and subsidiaries less liabilities of K$10.70 a share gives projected target of K$19.20 a share.

Interesting development:
https://www.afr.com/business/banking-and-finance/lanyon-goes-activist-on-cheapest-infrastructure-company-in-the-world-20190625-p5213z

RVP

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Re: 0032.HK - Cross Harbour Holdings
« Reply #7 on: May 12, 2020, 04:26:10 PM »
This remains undervalued (~40% discount to cash and securities). The business is stable and cash has continued to build up on the balance sheet.

Yesterday it was announced that Lanyon's David Prescott and David Kennan of Black Krane Capital will be running for two seats on the board:

https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0511/2020051101492.pdf   

RVP

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Re: 0032.HK - Cross Harbour Holdings
« Reply #8 on: August 24, 2020, 06:02:11 AM »
Interim results released:

https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0821/2020082100480.pdf

Pretty solid across the board - resilient earnings, cash continues to relentlessly pile up.

One significant development the market has totally missed (because not yet reflected at cut-off date for the period): they're sitting on/ have likely monetized massive gains in Evergrande Health (the "Tesla of China"). They did not sell a single share as of June 30 (valued at $563M). It's basically triple that for the good part of July until now and up 25X from their cost! This is a completely speculative holding, and management has gotten heat in the past regarding their investment here. But there is no doubt tremendous value has been minted as a result of its speculative surge, putting their investment performance easily in the top 10% quartile globally YTD.   

DW1234

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Re: 0032.HK - Cross Harbour Holdings
« Reply #9 on: August 28, 2020, 02:48:35 AM »
I took a quick look.

So they currently trade at about 0.44 book, right? For that you seem to get:

- Holding business owned by a CEO who doesn't seem to care much for shareholders. A (big) holding discount seems warranted.
- Very low dividend, and they're not buying back shares.
- A massive chinese Tesla position. I am neutral on Tesla but a lot of their recent outperformance vs. the Hang Seng index is correlated to this position. I'd say it's fair to assume they won't create a lot of alpha on average?
- 3 years left of toll CF, which is impaired by Covid for the time being.
- A failed attempt from Prescott/Kennan to get on the board and make some changes.
- A lot of HK exposure, which is a bit more risky.

Is 0.44 book the right price for this? I'd say it's probably still a bit cheap, but I feel like if you're going to buy in HK there are tons of other opportunities. Curious to hear where I'm wrong.