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For the most hideously overvalued company on AIM, Zoltav Resources (LSE:ZOL) the end is nigh. Today saw news that it has drawn down the second and final £250,000 tranche of a £500,000 loan facility made available by its largest shareholder. That suggests that net cash was down to pretty much sod all. And that makes for grim reading. Yet at 5.85p the company is valued at a quite unbelievable £22 million. This is a joke valuation.
I have pointed this out before ( and the shares have risen). That does not make me wrong it is merely a matter of when this stock collapses. To read the previous joke valuation article click here
Zoltav has a rag bag of penny shares on its balance sheet. These would be hard to realise cash from in an orderly fashion. If I was a shareholder in Aurum Mining, Paternoster Resources or Evergreen Energy I’d watch out as there could be a big line of stock hitting the market soon). Other than that it now has £250,000 cash (tranche b of its loan) and perhaps a bit of tranche a left. However the most recent accounts show that – amazingly for a company that does sweet FA – PLC cashburn runs at £70,000 a month. And remember that it now owes its largest shareholder ( a company run by the son of Roman Abramovich) £500,000. My guess is that net realisable assets are now not a lot different from zippo.
The best case scenario is that this is used as a cash shell for a Reverse Take Over (RTO) in which case it might just attract a value of two times net cash. That works out at more or less nothing. If Baby A or Daddy A wish to reverse a big Russian oil play onto AIM – as some speculate – they could easily find a shell with net cash of £500,000 plus valued at sub £2 million. Why on earth would they give away equity in a Russian oil play they own merely to justify the current Zoltav share price?
The reality is that this stock is very hard to short. And thus it does not take much in the way of buying stimulus or folks jumping on a momentum bandwagon to push it higher but at some stage reality must sink in. And that reality is that in four months time cash will be nil. There may be a few penny shares to flog but that will buy just another month or so. And there will be a debt of £500,000. Even if that is converted into shares ( at 2.3p) that still leaves no assets and an ongoing cashburn.
This valuation is just utterly ludicrous. Sell.
Tom Winnifrith writes for 10 and UK websites. You can receive a free bi-weekly newsletter from Tom with links to all his articles plus a couple of exclusive pieces by signing up here
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