New | BHP spin-off South32 makes cautious market debut amid mining sector doubts
South32, home to assets hived off from the resources giant, begins trading with value of almost US$9b, well shy of top end of forecasts
BHP Billiton's South32 spin-off started trading with a market value of nearly US$9 billion yesterday, a third below the top end of forecasts and underlining investor nerves about the outlook for the battered mining sector.
The cautious response to mining's biggest listing since Glencore in 2011 suggests the newly independent firm will need to do more to convince the market it can grow assets that were long neglected within BHP.
"Investors feel that they can be patient as they wait to learn a little more about the strategy, the assets and the potential for growth," CLSA analyst Andrew Driscoll said ahead of the market debut.
Australia's largest listing since 1998 includes BHP Billiton's former alumina, aluminium, manganese, nickel and silver assets and some coal assets.
Some analysts had valued South32 at nearly US$13 billion, but most were expecting early trading to value it at about US$10 billion.
Investors feel that they can be patient as they wait to learn a little more about the strategy, the assets and the potential for growth
While some investors see the company as a potential takeover target, some analysts and fund managers say that is unlikely, given its size.
