The long term rating of AID (A flat, islamic debt) and short term rating of MARC-2ID assigned to Atlan Holdings Berhad’s (Atlan) facilities reflect the strength of its diversified business; its competitive position within the industries it operates in; and its strong post acquisition financial profile. Moderating factor to the rating include the competitiveness of the manufacturing industry and vulnerability of the said industry to adverse external developments.

Atlan is an investment holding company, with subsidiaries involved in manufacturing and trading of precision mechanical products, tools and dies, duty free retail shops and hospitality.

Atlan’s manufacturing division serves the needs of a wide range of industries such as electrical and electronics, computer, automotive, medical devices and others. As Atlan’s products are customized to client’s specifications the risk of clients switching to other manufacturers is considered low. Atlan, however, is still exposed to the global electronics and electrical environment.

Atlan’s involvement in the retail industry is through its recently acquired subsidiary Emas Kerajang Sdn Bhd (EKSB), that owns and operates a duty free complex at Pekan Padang Besar, Perlis. As the only licensed duty-free operator in Perlis, EKSB is able to monopolise the tourist flow between Malaysia and Thailand at the Padang Besar entry point. The operating environment, nevertheless, is exposed to the presently weak state of the tourism industry.

In addition to EKSB, Atlan also acquired Courseville Holdings Ltd (CVL), which is the ultimate parent of the Blakes Hotel in London. Atlan receives an annual rental income from the lease of the building occupied by Blakes Hotel and license fees for the use of the ‘Blakes’ trademark.

After several years of suffering losses, Atlan registered a consolidated profit before tax of RM2.24 million on the back of RM36.58 million in revenue at the end of February 2003 (FYE2/02: RM35.48 million). The impact of the acquisitions of EKSB and CVL on the group’s consolidated financial position will only be fully reflected in fiscal year 2004. Nevertheless, the six months interim results revealed revenue and profit after tax and minority interest of RM48.40 million and RM4.11 million, respectively. Going forward, EKSB and CVL are expected to contribute around 50% and 6-10% of the group’s revenue respectively.

Atlan’s debt servicing measures appear resilient, after being stressed tested under different scenarios. MARC believes that Atlan’s cash flow position is set to improve in the medium term, benefiting from its planned expansion programmes, after the acquisition of Naluri is completed.

Atlan’s debt leverage has hovered around 0.60x and is expected to reduce to below 0.30x upon the consolidation of EKSB and CV. The debt to equity position upon the issuance of the RM130 million facilities is estimated at 0.60 times and is expected to improve over the tenure of the facilities.