Few analysts had expected the Time dotCom IPO to fare well. The 3.30-ringgit offer price was first calculated a year ago, when telecom stocks were hot and the Malaysian market was in an upbeat mode. Independent analysts value Time dotCom at 1.50 ringgit to 2.30 ringgit a share. The company owns an extensive fiber-optic network that it says will serve as a platform for an array of existing and proposed Internet and telecom services.

Time dotCom officials say bullish earnings projections for this year and next warrant the offer price, but many analysts say those projections are overblown. Critics contend that Time Engineering had to stick to its initial offer price in order to raise enough money to pay down its debt. Proceeds from the IPO, which raised 1.89 billion ringgit, will be used to finance Time dotCom's operations and pay off most of Time Engineering's debt.

Time dotCom shares will begin trading on Kuala Lumpur's stock exchange in March. On Wednesday, Time Engineering's stock price fell 3.3%, or seven sen, to 2.05 ringgit. Renong's stock declined 4.7%, or five sen, to 1.02 ringgit.

"We had always expected weak public response, but thought government funds would step in," said Chehan Perera, deputy head of research at ABN Amro Asia Equity Research. "Instead, now it seems that the key underwriters may have to take a severe hit."

There are 10 lead underwriters for the Time dotCom IPO, but analysts say it's hard to assess the impact of the undersubscription on those banks. Some of the Time dotCom stock has been sub-underwritten by other banks, buffering the hit for any one institution. Indeed, some analysts suggest that the IPO's poor showing could be mitigated by Time Engineering's ability to now repay its debts with the proceeds. "As far as Renong is concerned, the money they wanted to raise is raised," said an analyst at a European brokerage firm. "That's money that can now go back into the banking system."

Still, investors' snub of the Time dotCom IPO could cause another Renong subsidiary -- United Engineers Malaysia Bhd., or UEM -- to rethink or delay plans to list PLUS. UEM had hoped to raise about three billion ringgit with the PLUS IPO, analysts say. "It's going to be very difficult unless the underwriter is forced into the deal," said an analyst at a foreign securities firm.

In November, UEM granted Halim Saad, Renong's executive chairman and controlling shareholder, a 15-month extension to honor a pledge to buy back a large block of Renong shares from UEM. Tan Sri Halim made the first payment of 100 million ringgit Tuesday, but requested that the second payment, due July 14, be pushed back to October.

Tan Sri Halim owes about 3.2 billion ringgit for Renong shares he agreed to purchase under an option he entered into three years ago to mollify investors, after he had announced that UEM would take on debt to buy a 33% stake in Renong. That move was widely seen as a bailout of the ailing parent company at the expense of UEM.

Write to Cris Prystay at cris.prystay@awsj.com

http://interactive.wsj.com/

From The Star
14th February 2001

Poor response to Time dotCom IPO

By KATHY FONG

Time dotCom Bhd's initial public offering (IPO), the largest ever in Malaysia's history, has received poor response from the investing public. Applications were received for only 142.86 million shares, or 25% of the total made available for public subscription.

Malaysian Issuing House Sdn Bhd (MIH), which is handling the applications for the share issue, said in a statementthat the remaining shares (428.83 million) not subscribed to would be taken up by the joint lead underwriters and underwriters, who would have to pay RM1.415bil cash for the unsubscribed portion.

The joint lead underwriters are Commerce International Merchant Bankers Bhd, Perwira Affin Merchant Bank Bhd and Affin-UOB Securities Sdn Bhd. The sub-underwriters are Amanah Merchant Bank Bhd, CIMB Securities Sdn Bhd, K&N Kenanga Bhd, Arab-Malaysian Merchant Bank Bhd, HLG Securities Sdn Bhd, RHB Sakura Merchant Bankers Bhd and Utama Merchant Bank Bhd.

A total of 572 million Time dotCom shares were issued at RM3.30 apiece for the IPO, which is part of the restructuring exercise of the Time Engineering group.

Of the total, 343 million shares were allocated for the public, eligible employees of the Time Group and eligible dealers of Time Wireless Sdn Bhd, and 144.54 million for entitled shareholders of Time Engineering.

According to MIH, 14,558 applications for 29.738 million shares were received in respect of the category of shares made available to the Malaysian public, eligible employees and dealers. This represented a subscription rate of 8.6%.

MIH said the share registrars had reported that application for 28.96 million shares had been received in respect of the restricted offer for sale, for which 144.539 million shares had been allotted. The take-up rate in this category was 20%.

"The placement of 84.15 million new ordinary shares and ordinary shares to specific investors and a turnkey contractor of Time Wireless have been successfully concluded,'' the statement said.

However, if this placement is excluded from the subscriptions received, the take-up for Time dotCom's IPO would be only about 12%.

The subscription rate was very much below analysts' expectations.

"We had expected the IPO to be undersubscribed given the weak sentiment, but we did not expect it to be that low.'' an analyst said. "The news will be a dampener on market sentiment.''

http://thestar.com.my/

http://news.catcha.com/my/content.phtml?1&010&&afpnews.cgi&cat=malaysia&story=010214093914.7pncb3uh.txt

IPO flop clouds Malaysia corporate restructuring drive: analysts

KUALA LUMPUR, Feb 14 (AFP) - The embarrassing failure of Malaysia's largest initial public offering since 1995 will be a setback for future efforts to restructure debt-laden companies, analysts said Wednesday.

The IPO by telecoms firm Time dotCom received applications for only a quarter of the 572 million shares offered at 3.30 ringgit, leaving underwriters to stump up for most of the 1.87 billion ringgit (492 million dollars) targeted.

The public portion of the offer was less than nine percent subscribed, with 20 percent of the restricted offer taken up. A share placement was fully taken up to give an overall subscription rate of 25 percent.

Time dotCom, a unit of Time Engineering, manages the country's longest fibre-optic network.

Time Engineering, which has debts of close to five billion ringgit, is 47 percent owned by debt-laden but politically well connected conglomerate Renong.

Most analysts said the share pricing was the problem, along with over-optimistic profit forecasts by Time dotCom. Some said investors had a negative perception of the Renong group as a whole.

Mercury Securities senior analyst Victor Wan said the undersubscription had been widely expected but the 75 percent shortfall was an "unpleasant surprise.

"The undersubscription is a big dent to the country's efforts to restructure some of its ailing companies as it shows the lack of faith in some of the proposals to turn around debt-laden companies," he said.

Wan said Time dotCom's earnings forecast was "way, way too optimistic" with an astronomical compounded annual growth rate of almost 130 percent projected for the next five years.

"This is seen as unrealistic despite the group being debt-free after the listing, as the earnings growth will be hampered by the slowing economy and the intense competition in the sector," Wan told AFP.

He pegs the fair valuation of the share at around 2.50 ringgit.

Wan said falling interest in telecommunication and Internet stocks worldwide had also hurt the IPO.

OSK Research also said the low take-up rate surprised the market.

"As a sign of the times, fund-raising exercises via the equity market are becoming undersubscribed, choking off funding which means trouble again for financially distressed companies and the banking system," it said in a daily report.

Sebastian Chang, research chief in Malaysia for Vickers Ballas, said local investors were becoming more mature. "Gone are the days when they blindly apply for any IPO."

Chang said investors doubted the valuation of 3.30 and also doubted the management of the company. He saw a fair valuation at 2.62 ringgit.

An institutional dealer with a local brokerage said the 25 percent take-up rate was the worst for an IPO offering of its size.

"It's an embarrassment to those involved in the issue but it shows that the investing public is now well-informed," the dealer added.

The failure of the IPO would have little impact on the Renong group debt restructuring as the exercise was fully underwritten, analysts said.

"They have got the money. The difference now is that instead of getting it from the public, they are getting it from a handful of underwriters," said Lucy Ng, research chief at KAF Research.

A senior analyst said the underwriters -- mainly Commerce-Asset Holding and Affin Holdings -- would now have to pay out about 1.4-1.5 billion ringgit for the unsubscribed portion.

"The underwriters may farm out the unsubscribed portion, possibly to government-related agencies," he said, adding that some government funds may have to liquidate other shareholdings to take up Time dotCom shares.

"The broader market could suffer as a result of that," he added.

The KLSE composite index fell 4.60 points to finish at 714.54 in reaction to the poor IPO result.

Commerce-Asset closed down 0.35 ringgit at 8.50 while Affin was off 0.01 at 1.35. Time Engineering slipped 0.07 to 2.05 and Renong eased 0.05 to 1.02.