BHP Billiton shares drop as South32 spin-off gets mixed reception on trading debut

Shares in miner BHP Billiton fell 5% on Monday as the company's spin-off South32 started trading on the Australian Stock Exchange with a market value of nearly $9bn, at the lower end of analysts' forecasts.South32, which is also traded in London, opened at A$2.13 a share and rose to A$2.20, giving it a market capitalisation of US$9bn - a lukewarm reception compared with expectations for a range between US$7bn and US$13bn.BHP announced its decision last year to spin off its alumina, aluminium, nickel, silver and lead assets to South32 in order to focus on its core divisions such as iron ore and copper, as well as coal, oil and gas, and cut costs further.The company had been under pressure to streamline its operations due to weaker commodity prices resulting from a slowdown in China.Bank of America Merrill Lynch revisited its estimates for BHP Billiton on Monday to reflect the new streamlined operations. It downgraded its 2015 estimate for earnings before interest, taxes, depreciation and amortisation by 9.5% to US$21.7bn and its estimate for 2016 by 12% to US$15.2bn.It maintained its neutral stance on the stock. "While we are attracted BHP's dividend yield (approaching 6% post S32 carve-out) and cost-cutting programmes, our cautious outlook on iron ore prevents us from being more positive," said the bank.Merrill did recommend buying S32, however, and so have RBC, JPMorgan and Citi.