The Motley Fool

Are African Potash Ltd, Drax Group Plc & Gulf Keystone Petroleum Limited Set To Double?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

There are certain decisions you might regret in life and even more so in finance — but would you ever regret not to have bought African Potash (LSE: AFPO)Drax (LSE: DRX) and Gulf Keystone Petroleum (LSE: GKP) at their current valuations today? Let’s give it some serious thought. 

Price target 7.4p?

African Potash was up 20% today in early trade, hitting a 52-week high of 3.63p. The rise was spurred by a fresh trading update, according to which agreement was reached with third parties “to establish a sale price of $500 per metric tonne in respect of 50,000MT fertiliser product to be sold pursuant to the memorandum of understanding announced on 24 August 2015.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Moreover, a trade finance facility of up to $50m “is currently being arranged” through its banking advisor Loita Capital Partners, which removes some uncertainty on its short-term funding requirements. If you think that it’s all too good to be true, consider that its stock could double to over 7p (based on its current price-to-tangible book value). As I noted earlier this month, though, you should hold AFPO only as part of a properly diversified portfolio. 

Paying up for what exactly? 

It’s easy to forget that Drax traded around 650p a share only 12 months ago, but it’s impossible to ignore that its current valuation of 244p a share — only 7p higher than its 52-week low — is simply the result of the government’s new policy that removes the climate change levy (CCL) exemption for renewable electricity.

Its funding requirements are relatively sound yet I am not convinced that its current valuation, based on trading multiples for cash flows and earnings, offers a particularly appealing entry point right now, not even following today’s trading update concerning its withdrawal from the White Rose CCS project.

There are stronger income investments in the market. However, I am not talking about Gulf Keystone Petroleum, which, though, has proven to be much more resilient than I thought in recent weeks.  

The Value Of Money 

Drawing a parallel between the real life and finance, GKP reminds me of a kid that will always need a helping hand to get out of his troubles. It might not be his fault, but one way or another a parent must put hand in his pocket at some point to bail him out — it could end up in a similar way for GKP shareholders. 

GKP was unlucky in recent months because its debtors were not willing to pay their bills when they came due, but that is a risk that anybody runs when dealing in countries whose leaders can simply make up their minds without having to provide any proper explanation to the international community. Well, much bigger countries than Kurdistan have done so in the past, and nobody blinked. 

GKP is at mercy of its debtors, and I doubt any future update will lead me to think that its stock price can double to 55p from its current level over the next 12 months. In fact, the cash that it is still owed will have to be collected instead from shareholders in a new equity funding round, in my opinion. 

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Alessandro Pasetti 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.