The poor response to the politically connected Halim Saad's Time dotCom initial public offering was expected as the demand in the share market is weak, according to two analysts today.

They also said that the Kuala Lumpur Stock Exchange was not strong enough to absorb the huge flotation amounting to RM1.87 billion.

The share issue of Time dotCom, incidentally the biggest offering in recent years, has been undersubscribed by 75 percent, reported Malaysian Issuing House (MIH), late yesterday.

According to economist J Vong, the setback could possibly be due to the lack of management transparency of Time dotCom and related companies.

Time dotCom is a unit of Time Engineering which is part-owned by debt-ridden conglomerate Renong controlled by Halim.

Time dotCom had issued 572 million shares at RM3.30 per share for the IPO, and was part of a restructuring exercise involving Time Engineering, with part of the RM1.87 billion to be raised to reduce debt.

Incentives offered

Time dotCom, which aims to become the country's major fibre-optic carrier of high-speed data and leading bandwidth wholesaler, went on a massive advertisement blitz - full page advertisements in national dailies for weeks - to attract the public to its IPO.

Time dotCom also became the first local company to offer incentives to subscribers of its shares, giving successful applicants a service which offers a flat 80 percent discount on all outstation and international calls made through mobile phones.

Vong, who operates the klsetracker.com website, also said that the undersubscription also reflected the current thinking of majority of shareholders in the country.

"They are not taking everything at face value. They are cautious now in buying shares," he said.

Another analyst, who requested his name not be revealed, said that the lack of public support for the IPO showed the poor public perception of Time dotCom as well as the market sentiment.

Worst performance

The analyst said that the 25 percent subscription of Time dotCom shares was one of the worst-ever performances by an IPO in the country, adding that the poor response could be due to the insistence of Time dotCom in maintaining its high pricing despite the global price meltdown.

MIH said in its statement that "applications for 142,862,563 shares for RM 471.4 million representing 25 percent of all the shares available for subscription have been received."

The public portion of the offer was less than nine percent.

The remaining unsubscribed shares would be taken up by the underwriters of the initial public offering exercise, it added.

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

Underwriters' burden

Vong said that the large amount of unsold shares will put a heavy burden on the underwriters.

"They are stuck with the shares and will eventually sell them at a lower price," he said.

Vong, who expects the shares to be eventually valued at below RM1.50, also said that Time dotCom contractors and subcontractors who are owed several million ringgit will also suffer.

Another analyst at a local brokerage predicted that Time dotCom would list at about RM2.50, describing the huge under-subscription as "an embarrassment" to those involved in the issue.

Contractors owed money

Malaysiakini has earlier reported that contractors claimed that Time dotCom has yet to pay money owed to those who were allocated contracts to sign up subscribers for the "Time Gold" service.

It is a service which offers subscribers up to 50 percent discount on all outstation and international calls by using Internet technology through Time dotCom's fibre optic network. ([#1] Time dotCom yet to pay debts, contractors claim [/#], Feb 9)

Vong said that these contractors will be paid their dues in the form of the shares but "they are not going to receive full payment based on the full value of the shares".

The IPO closed for subscription last Thursday and Time dotCom has planned to be listed in early March.

Singapore Telecommunications Ltd was in the final stages of sealing an equity purchase into Time dotCom last June but it did not take place following an objection from the Malaysian government.

At the KLSE today, the main share index KLCI closed at 714.54 points, a drop of 4.6 from yesterday's close.