ECM Libra Investment Research has maintained its buy recommendation on UMW Holdings Bhd at RM5.90 with an unchanged target price of RM7.25, after the company secured a US$170 million (RM565.5 million) contract by PCPP Operating Company Sdn Bhd for the provision of its Naga 2 jack-up drilling rig.

The three year contract, which is expected to commence on Dec 1 this year, could be extended a further three years on an annual renewal basis.

ECM Libra Research said it had expected UMW to secure the charter rates at the higher end of US$150,000 to US$200,000 range based on record crude oil prices in 1H08 while oil and gas frabrication specialists saw order backlogs due to shortage in drilling rigs.

"Nevertheless, UMW still secured a decent charter rates for Naga 2 at US$171,717 (RM571,222) a day, assuming 330 operational days per year. We had previously assumed UMW would be able to charter out Naga 2 at US$180,000 per day at foreign exchange (forex) rates of RM3.10 to the dollar for FY09," it said.

The research house said ringgit prospects were also a part of their consideration in reiterating its buy call.

"Our forex expectation of the ringgit remains unchanged, based on our expectations that the ringgit has immense upside potential and will further strengthen against the dollar in FY09 and FY10," the research house said.