A broker relies heavily on mineral valuations and
independent experts' reports to provide the fundamental
information, both technical and commercial, which
provides the basis of estimating the sharemarket value
of securities and underlying assets. It is important to
appreciate the significant variance that can occur
between the market value and other types of valuation
at a particular point in time. In general, most experts' reports and valuations seek
to provide estimates of technical/fundamental or ""fair""
value which correspond to the Corporations Law and
accounting standards requirements. They do not usually
attempt to estimate (stock) market values and it is
usually and quite correctly the broker's task to estimate
market values on the basis of a technical appraisal and
consideration of all other commercial, market and
financial influences. Therefore ideally, an independent
experts' report or information memorandum will include material relating to commercial and
management aspects of a company as well as detailed
technical reviews and fundamental valuations. Wherever sensible cash flow projections can be made,
cash flow-derived valuations, usually based on
discounted cash flow (DCF) calculations, remain the
preferred valuation methodology. Brokers in general
would not argue with this preference. However, there
is a paucity of examples of valuations where alternative
methods are applied as a check on the reasonableness
of a DCF-based estimate.