The ratings of Atlan Holdings Bhd’s (Atlan) RM90 Million Murabahah Underwritten Notes Issuance Facility/Islamic Medium-Term Notes (MUNIF/ IMTN) and RM40 million Al’-Bai Bithaman Ajil Islamic Debt Securities (BaIDS) facilities have been reaffirmed at MARC-2ID/AID and AID respectively. The reaffirmation of the ratings reflects Atlan’s focus and strength in its respective core businesses namely, metal stamping and duty-free operations; good competitive position; and intention to pare down the Group’s debt level which include RM85 million of the proceeds from the disposal of its wholly-owned subsidiary, Courseville Holdings Limited (CVL) (which owns Blakes Hotel in the U.K.) to be utilised for the partial redemption of its MUNIF/IMTN and full redemption and subsequent cancellation of the BaIDS facilities, further strengthened by the full fiscal year contribution from its associate, Naluri Corporation Berhad (Naluri). The ratings are, however, moderated by the loss of future contribution from its main profit contributor, the hospitality division arising from the disposal of CVL.

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 hotel operations. Through its manufacturing division, Atlan caters to a wide range of industries such as electrical and electronics, computer, automotive, medical devices and others. Due to the custom-made nature of its products, the risk of customers switching to other manufacturers can be considered relatively low with the high engineering cost of tool making and design. Atlan, however, is still exposed to the cyclical nature of the global electronics and electrical operating environment. Joint efforts in areas such as marketing and research and development with the United Industries Group, a subsidiary of Naluri will further enhance the operations of this division.

Atlan’s involvement in the retail industry is through its subsidiary Emas Kerajang Sdn Bhd (EKSB) which owns and operates a duty free complex at Pekan Padang Besar, Perlis. Through its stake in DFZ Capital Berhad (DFZ) (formerly known as Sriwani Holdings Berhad) via Naluri, Atlan is the largest licensed duty-free operator at the Malaysian-Thai border of Peninsular Malaysia; monopolising tourist flows through the Padang Besar and Bukit Kayu Hitam entry points. The operating environment of the retail segment is recovering driven by improved cross-border traffic flows. Nevertheless, it is largely exposed to adversities which affect the tourism industry.

Financial year ended February 2006 saw Atlan’s revenue rose 14.9% to RM148.66 million on the back of increased revenue contribution mainly from its hospitality and manufacturing segments. The acquisition of Naluri benefited the Group with respectable share of profit contributed as reflected in the results of FY2006. The Retail and Trading segment remained as the main revenue contributor and is expected to do so, going forward.

Atlan’s debt leverage decreased marginally to 0.63 times in FY2006 and remained well below the covenanted level of 1.5 times. However, with the proposed repayment of the BaIDS, MUNIF/IMTN and bank borrowings amounting to RM140.54 million, the Group’s debt leverage is expected to improve, bringing debt to equity ratio down to 0.2 times on a pro-forma basis. Atlan’s cash flow protection measures improved during the year and afford note holders with sufficient protection at current rating levels.