Comparison of RED and SLR - half year results are in, page-18

I'd kind of taken my eye off the ball with this one. Was kind of put into the bottom drawer. I'm originally a DRM holder so I've been here a fair while now.

1st look at this I don't mind the merger, seems an amalgamation of 2 businesses that need each other. Red need cash which SLR have, and SLR want more diversification in ops and somewhere to utilise their cash, they've sat on these cash balances for a long time now.

However the valuation looks out of whack. No matter which way you spin the Income statement and the balance sheet, SLR shareholders appear to be getting a raw deal.

Reported Income statement stat profit and Net assets come in at 70% and 76% SLR vs Red. Reported stat profit isn't the best example as SLR include movement in their valuation of Red in their Income statement, and Red don't show any Income tax as they have written off all their deferred tax assets due to making prior period losses and therefore lower likelihood of utilising them, so EBITDA is probably a better example (as eliminates both of them), which brings EBITDA % to 62% for SLR.

From a production perspective, SLR produces more (53.3% of the consolidated numbers) and maybe that % should be closer to the mark, but surely those mark to market hedge valuations should be taken into account even if Red essentially report them off balance sheet.

The 1 area that Red is significantly better off are with Reserves and thats largely due to the slack nature of the SLR management team in scoping out these areas. Reserves would have SLR at about 36% of the consolidated group, but when resources are taken into account, its more like 50/50.

I'd think with all this rolled up, that the split of the newco, should be more in favour of SLR, maybe in the region of 53-55% rather than the current 48.3%.