South32 seen listing at A$8.5 bln market value - Morgan Stanley

MELBOURNE, April 29 (Reuters) - BHP Billiton (NYSE: BBL - news) 's proposed spin-off company, South32, is likely to debut on the Australian bourse with a market capitalisation of A$8.5 billion ($6.8 billion), Morgan Stanley (Xetra: 885836 - news) analysts estimate.

Their estimate is well below earlier estimates of what the aluminium, coal, manganese, nickel and silver company, which BHP is set to spin off to shareholders, would be worth.

South32 is due to list on May 18, pending approval from BHP shareholders on May 6.

Morgan Stanley expects demand from passive funds for South32 shares will drive trade worth about A$297 million as the company will be added to the S&P/ASX 100, 200 and 300 indices.

Analysts at Investec (LSE: INVP.L - news) said based on the price-to-earnings multiples other mid-sized miners are trading at, South32 could be worth $7.6 billion, or based on earnings-to-enterprise value multiples for mid-sized miners, it could be worth $11.1 billion. ($1 = 1.2514 Australian dollars) (Reporting by Sonali Paul; Editing by Michael Perry)