There aren’t too many chemicals companies on the London market. At the large-cap end, we have FTSE 100 group Johnson Matthey (LSE: JMAT), whose shares are trading at 2,400p, valuing the business at £4.6bn. At the small-cap end, there is AIM-listed GTS Chemical (LSE: GTS), whose shares have risen 11% to 68.5p on a trading update today, valuing the business at £70m.

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.

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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.