ECM Libra Investment Research has maintained a buy call on Boustead Heavy Industries Corp Bhd at RM4.30 with a target price of RM6.30, following the announcement of its second quarter ended June 30, 2008 (2QFY08), results on Tuesday.

Commenting on BHIC's net profit that rose 10.3% quarter-on-quarter (q-o-q) to RM34.4 million on the back of a 11.4% q-o-q rise in revenue to RM111.4 million, ECM Libra Research said BHIC's results came in slightly above its expectations and slightly below the market's, while the company's first half ended June 30, 2008 (1HFY08), earnings already accounted for 52% of the research house's full year estimate.

"Heavy engineering division contributed to 90% of group revenue, while the bulk of associate contribution is from Boustead Naval Shipyard (BNS). Included in the share of results of associates is the group's share of utilisation of previously unrecognised tax losses by BNS amounting to RM8.8 million," it said.

Going forward, the much-talked about 21 patrol vessels from the Ministry of Defence that is still pending announcement from the government could be a major catalyst for the company, said the research house.

However, it said rising direct costs and operating expenses were the main challenges the group faced, particularly due to the rise in raw material and fuel prices, although BHIC was expected to sustain growth given new activities in the maritime and oil and gas sectors. "The renewal of BHIC's license from Petronas would allow it to actively participate in the O&G sector and related activities," ECM Libra said.

The research house note that BHIC had not recorded any change in the group's order book of RM746.4 million since it last secured a job from Swire Pacific Offshore Operations to build two 111m-long accomodation work barges for RM205 million, expected for delivery by 1HFY2010.

"With this contract, total direct order book now stands for RM746.6 million, which is getting close to its targeted order book of RM1 billion for FY08," it said.

It said the contract was the second batch secured year-to-date, after it had received RM204 million worth of jobs from various parties in February, adding BHIC was able to accept more jobs due to expected excess capacity following its completion of a chemical tanker, and a well-testing and servicing vessel this year.