I'd say Hoots is a subscriber to "The Efficient Market...

I'd say Hoots is a subscriber to "The Efficient Market Hypothesis", but I'm not altogether certain he's heard of it. It is certainly a contentious issue amongst academics. So, pay attention Hoots, this is NOT a clear and settled issue. Warren Buffett is one notable person who does not believe in the EMH and has done very well on the market.

As for the valuation, I've been pretty busy at work this week and am sorry to say that I haven't looked at it thoroughly yet. My general feeling so far though is that it is very conservative. The valuation methods that they use are basically saying, if we had to break PLV up and sell off the assets, what would we hope to recoup? They have answered this with something between (roughly) 30c and 50c per share. Unless you're buying into PLV in the hope that they do a fire sale and pay us the cash, these aren't the numbers to get excited about. Put simply, the report doesn't value potential for growth and further development of the assets. This is clearly where the value to long-term investors lies - why else do you invest in a small cap stock?

It's a bit like buying a cheap house or apartment for $300K. The bank values it and says, ok, it's worth $300K. But you know you can do some renovations, spend $30K and rent it out to some students who pay $420/week in rent. So what's the current value based on future earning potential? Is the market really all knowing and efficient hoots?

My opinion is that long-term investors should be basing their valuations on conditional probabilities. To do this:
1. Sit down and write down all of the conceivable future scenarios that might eventuate for PLV (including PLV going bust).
2. For each scenario, write down PLVs earnings (p.a.) and put probabilities on these scenarios eventuating (preferably based on past data from similar types of businesses).
3. From here you can work out the expected earnings p.a. of the company by multiplying the probabilities by the earning potentials and adding them up.
4. Throw a reasonable PE multiplier at the expected earnings and you've got yourself a valuation that incorporates both risk and reward.

You won't see BDO (or any other valuer) using this sort of approach though, because it relies on some modelling and some subjectivity on the part of the analyst. They're accountants not modellers, so we're not going to see them thinking outside the box.