Gulf Keystone is in the tightest of tight corners. It is overloaded with debt, which is due to be repaid next year, and only a trickle of cash is coming in from the Kurds, who are struggling to fund a war against Islamic State and a migrant crisis. The latest monthly payment is overdue, and the company is locked in negotiations with debt holders about a financial restructuring.

A sudden influx of funds from the Kurds would be something of a miracle, while the situation in the region also seems to be putting off any potential bidder or cash rich partner coming to the rescue, with the company having said there is a “low likelihood of an asset transaction in the near future”.

By far the likeliest scenario is a financial restructuring involving a debt-for-equity swap and a rights issue for existing shareholders at the same price that debt converts to equity. It’s hard to see that price being much above 1p a share, so barring that miracle, the shares appear set to plummet rather than rocket.

Blinkx

Online video platform Blinkx (LSE: BLNX) posted revenue of $247m and a pre-tax profit of $18m for its financial year ended March 2014. However, partly as a result of advertisers’ increasing intolerance of fraudulent activity in the digital advertising supply chain, and partly as a results of an industry shift from desktop to mobile and programmatic trading, Blinkx’s revenues and profits have since crashed.

In its latest results, released last week, the company posted revenue of $167m and a pre-tax loss of $94m. However, much of the loss was down to a non-cash goodwill impairment charge on various past acquisitions, and there are signs that Blinkx might just have developed a viable business model out of the mess of the last few years.

The company’s new core business showed year-on-year revenue growth of 12%, while news today that it has signed up to gain a new “Certified Against Fraud” seal shows management’s confidence that the business is fit for purpose.

At a current share price of 21p, Blinkx has a market cap of £80m or so, which, with about £55m of cash on the balance sheet, values the operating business at £25m. However, with analysts forecasting continuing pre-tax losses for at least the next two years and the next financial statements (half-year) not out until the autumn, it’s hard to see the share price rocketing higher any time soon.

GTS Chemical

“Certification” was also the subject of the latest news release from London-listed Chinese chemical and oil producer GTS Chemical (LSE: GTS). The company says a certificate from the American Petroleum Institute “will add greatly to our marketing efforts”.

Not that GTS seems to need any additional help. In the face of the well-documented slowing growth in China, with notable weakness in the industrial sector, GTS said in a pre-close statement for the year ended December 2015 that its revenues have grown 32% year-on-year to ¥929m (almost £100m).

At a current share price of 53p, GTS is valued at £54m and trades on just 4.5 times the house broker’s forecast earnings. On the face of it, on this super-cheap rating, and with a pile of cash on the balance sheet, a dividend promised and full-year results due, GTS’s shares could be set to rocket higher.

However, AIM-listed China companies have had an appalling record in recent years as either poor businesses or outright fraudsm with revenue growth, balance sheet cash and early dividends all rapidly disappearing, and investors left holding worthless shares. Whether GTS will prove to be one of the exceptions to the rule remains to be seen, but the market is clearly pricing the business as a very high-risk proposition. A risk too far in my book.

The post Are shares of Gulf Keystone Petroleum Limited, Blinkx plc and GTS Chemical plc Hldg about to rocket? appeared first on The Twelfth Magpie.

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G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

A very important development

Shares in GTS Chemical (LSE: GTS) have soared by around 17% today after it announced that it has received a certificate of registration from the American Petroleum Institute for conformance with the API Specification Q1.

This specification should further establish GTS’s brands, which in turn could attract more distributors and differentiate the company from its competitors. And with its being received for the quality management on nine of GTS’s products — including the core business divisions of ammonium sulphite, ammonium bisulfite and lubricating oil — it could prove to be a very important development for the company.

Looking ahead, GTS is forecast to post a fall in earnings in the current year of 6%. While this could hurt investor sentiment in the short run, the speciality chemicals company is due to increase its bottom line by 13% next year. This puts it on a forward price to earnings (P/E) ratio of just 3.9, which indicates that its shares are cheap and could be due for an upward rerating over the medium to long term.

Disappointing performance 

Also among today’s major movers is Stanley Gibbons (LSE: SGI), with the antiques and stamp collector posting a fall in its share price of around 9%. Given the company’s woes during the course of the year, this is perhaps unsurprising since investor sentiment is now rather weak. In fact, Stanley Gibbons’ shares have fallen by 84% since the turn of the year and there could be more pain to come. That’s because the company is set to endure a challenging period, with profitability forecast to come under pressure in the next financial year.

While Stanley Gibbons has the potential to turn its disappointing performance around, its risk/reward ratio seems to be relatively unappealing. That’s especially the case since there are a number of other smaller companies that are on the cusp of improved financial performance and which offer good value for money at the present time.

In a stronger position

Meanwhile, shares in Redx Pharma (LSE: REDX) have been down by as much as 10% today despite the drug development company having released no significant news flow. Of course, Redx recently conducted a £10m placing and the proceeds are set to be used to progress the company’s drug pipeline and to also further develop Redx’s other assets in immune-oncology, infection and immunology. And with the net proceeds strengthening the company’s balance sheet, Redx seems to be in a stronger position after the placing.

Clearly, Redx’s share price performance since the start of the year has been very poor. Its valuation has declined by around 55% and while it has significant long term potential, it may prudent for risk averse investors to look for greater stability and consistency elsewhere in the health care space.

The post Why are GTS Chemical plc Hldg (+17%), Stanley Gibbons Group plc (-9%) and Redx Pharma plc (-10%) among today’s major movers? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Should investors go for the boring blue chip or the potentially sexier small cap?

Johnson Matthey

Speciality chemicals group Johnson Matthey has several divisions. All revolve around platinum, the largest being Emission Control Technologies (catalytic convertors and so on). The group has operations in over 30 countries and employs 13,000 people.

Johnson Matthey recently disposed of two businesses, and returned a big chunk of cash to shareholders. Management is focusing on high value added, high technology products and services “where we can apply our expertise in complex chemistry to create long term value for our shareholders”.

For the six months ended 30 September, a slowdown in upstream oil and gas markets significantly impacted on Johnson Matthey’s diagnostic services business, while a decline in platinum metals group prices badly hurt its refining and recycling business.

Nevertheless, as a result of strong performances elsewhere in the diversified company, group profit declined only a modest a 3%. Management expects a return to growth in its 2015/16 fiscal year, and forecasts put the company on an attractive-looking price-to-earnings (P/E) ratio of 12.5, with a dividend yield of 3.3%.

Johnson Matthey looks a decent buy at current levels, but could GTS Chemical provide investors with even brighter prospects?

GTS Chemical

In a trading update this morning for the year ended 31 December, GTS Chemical posted some impressive numbers. Revenue was up 32%, and the company said it had maintained its gross margin. The company delivered an impressive first-half net profit increase of 34%, and today’s revenue growth and margin news bodes well for full-year profit.

House broker earnings and dividend forecasts put GTS on a bargain-basement P/E of just 5.9, with a yield of 2.8%, but I have to say I have serious reservations about the company.

GTS is a People’s Republic of China business, which joined AIM as a Jersey-incorporated holding company. In recent years, we’ve seen a large number of such companies delist or be kicked off the market, leaving shareholders wiped out. Reasons have ranged from failures to produce accounts, resignations of UK non-executive directors and advisors, cash disappearing in bizarre circumstances, and so on.

GTS was brought to AIM with the help of reporting accountants and auditors UHY Hacker Young. China companies with which Hacker Young has been associated have an abysmal track record.

Now, perhaps investors in GTS will fare better than those in Hacker Young’s many previous People’s Republic clients, including China Rerun, which was booted off AIM last year after its nominated advisor and a UK non-exec resigned when the company failed to submit to an independent review of its financial reporting “systems and controls”.

Unfortunately, so many AIM China companies have turned out to be black holes for investors’ cash that it’s reached the stage where this sub-sector of the market appears of such high risk as to be more or less uninvestable. As such, Johnson Matthey would be my preferred choice, if I were looking to buy shares in a chemicals company.

The post Is Small-Cap GTS Chemical PLC Hldg A Better Buy Than Blue-Chip Johnson Matthey PLC? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.