Kurdistan-based Gulf Keystone Petroleum (LSE: GKP) undoubtedly owns valuable assets. At the last year-end, total assets on the balance sheet amounted to $956m (c. £650m). Yet the current share price is around 4.8p, valuing the company at just £47m.

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.


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.

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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.