Time DotCom Initial Sale Gets Poor Investor Response (Update4)
By David Yong
Kuala Lumpur, Feb. 13 (Bloomberg) -- Time DotCom Bhd.'s $497 million initial share sale, Malaysia's biggest in five years, flopped as it got applications for only a quarter of the shares offered on concern a slowing economy will weaken demand for its phone services.
Reflecting dwindling interest in cell phone and Internet stocks worldwide, Time DotCom, which manages the longest fiber optics network in Malaysia, said it got applications from the public, its employees and others for 143 million shares out of the 572 million it was looking to sell at 3.30 ringgit a share.
``I'm quite sure this is the worst'' response to an IPO in Malaysia, said Michael Greenall, head of research sales at BNP Paribas Peregrine. ``It's a sign that retail investors are learning by not jumping on the bandwagon.''
The Time DotCom flop shows waning interest in new issues in Malaysia as the economy cools, hurting demand for goods and services, and may prompt a delay in some other large Malaysian share sales. At 7.7 percent, Malaysia's economy grew at its slowest pace in five quarters in the third quarter.
Investors applied for less than 9 percent of 323 million shares offered to the public by the company and its parent Time Engineering Bhd., said Malaysian Issuing House, which handles applications for new issues. The shares were priced at 55 times Time DotCom's expected 2001 profit of 6 sen a share, about 1.5 times more expensive than Telekom Malaysia Bhd., the nation's biggest phone company.
``It's overpriced by most yardsticks,'' said Lynn Cheah, who helps manage $15 million at Apex Unit Trusts Bhd. ``Nobody should be surprised at all (by the poor demand).''
Underwriters' Woes
Time dotCom said it received applications for 9 percent of shares it allotted to the public, employees and business partners in its share sale. Separately, its parent Time Engineering Bhd. sold only one-fifth of shares it offered to its own shareholders.
In total, the share sale raised only a quarter of 1.89 billion ringgit it targeted to achieve, according to results released by Malaysian Issuing House.
``The remaining shares not subscribed will be subscribed by the underwriters,'' it said after the market closed.
The poor takeup leaves the sale's main managers, Commerce Asset-Holding Bhd. and Affin Holdings Bhd., which together underwrote 92 percent of the shares, sitting on piles of unsold stock worth 1.14 billion ringgit. The two underwriters were unavailable for comment.
The poor showing had been expected after ``many analysts' reports said it was overpriced,'' said Soon Dee Hwee, director of corporate finance at Alliance Merchant Bank Bhd., one of the underwriters of the sale.
Time DotCom, owner of the country's largest fiber-optics phone network, and its parent Time Engineering offered 572 million shares to raise 1.89 billion ringgit ($497 million) to fund expansion and repay debt.
About 323 million shares were offered to the public, while the rest were allotted to employees, creditors, dealers and other unidentified investors. The shares were offered between Jan. 22 and Feb. 8.
The underwriters, who agreed to pick up as many as 487 million shares worth 1.6 billion ringgit if the sale flopped, may further be faced with losses if the shares trade below the offer price next month.
``We already have a weak market and if Time dotCom shares are under-subscribed, this could lead to weak investor response on its debut,'' said Leong Hon Sze, general manager at O.S.K. Research Sdn. in Kuala Lumpur.
Other underwriters include K&N Kenanga Bhd., Arab Malaysian Merchant Bank Bhd., HLG Securities Sdn., RHB Sakura Merchant Bankers Bhd. and Utama Merchant Bank Bhd.
Time DotCom
The Time DotCom sale, the largest since the government sold shares in Petronas Gas Bhd. in September 1995, came at a time when the economy is facing a further slowdown.
The Malaysian Institute of Economic Research, a private think- tank, expects economic growth to fall to 5 percent this year, as exports to the U.S. dry up. Malaysia expects its economy expanded by 7.5 percent in 2000.
Time DotCom also faces increased competition in its home market. Time, one of the country's smallest mobile phone companies, competes with half a dozen others in Malaysia, a nation of 23 million.
It has lost money in the past three years, with its loss narrowing to 124.8 million ringgit in 1999, from 2.3 billion ringgit a year earlier. It estimates 2000 losses at about 2.6 million ringgit in 2000.
Time DotCom manages a 2,200-mile fiber optic network across peninsular Malaysia.
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