MARC has upgraded the rating of Reliance Pacific Berhad’s (RPB or group) RM100 million Redeemable Secured Bonds (2001/2006) to A- (A minus). The upgrade is underpinned by the improvement in the travel and tourism industry and the group’s overall improved financial profile. The group returned to profitability after three consecutive years of losses whilst operating cash flow level returned to the black. The rating, however, is moderated by RPB’s somewhat high debt leverage.

RPB’s subsidiaries are involved in travel, hotel management, resort development and e-commerce. The group’s leading position in the travel industry is supported by a wide distribution network, competitive cost structure and established brand name.

For FY2005, RPB group’s earnings turned around significantly to reach RM9.2 million in tandem with the rise in revenue. The 21.3% growth in revenue arose mainly due to the strong recovery in the tourism industry coupled with the successful implementation of demand stimulation measures to encourage travel after the effects of SARS within the region. Notwithstanding the impact of

the tsunami, industry figures from Tourism Malaysia revealed that tourist arrivals and receipts for 2004 had improved tremendously, supported by strong economic performance of regional countries and greater connectivity in air services.

The travel division remained the key revenue contributor (75.2%) for the group followed by the hotel division (23.0%). Within the hotel division, the overseas hotel contributed 66.4% to the hotel’s revenue, underpinned by healthy average occupancy and room rates. Operating profit margin edged up to 9.5% in line with the improved earnings.

The combination of higher paid up capital, accumulation of retained earnings and the repayment of the first series of bonds during the year had brought the debt leverage level down. The group’s effective debt leverage position, at 1.01 times, was within the covenanted level of 1.25 times.

The second redemption of the bonds facility of RM35.0 million in July 2005 is expected to further pare down the debt leverage level.