December 6, 2011COMPANY UPDATERadiant Opto-Electronics (6176.TW)Buy                                                       ...
December 6, 2011                                                                                                          ...
December 6, 2011                                                                                                          ...
December 6, 2011                                                                                                          ...
December 6, 2011                                                                                                          ...
December 6, 2011                                                                                                          ...
December 6, 2011                                                                                                        Ra...
December 6, 2011                                                                                              Radiant Opto...
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  1. 1. December 6, 2011COMPANY UPDATERadiant Opto-Electronics (6176.TW)Buy Equity ResearchExpect weaker December sales, but 2012 growth remains intact; BuyWhats changed Investment Profile Low HighWe lower our 4Q11 sales estimate to -3% qoq from +2% qoq as the Growth Growthcompany is now indicating softer Dec sales than previously guided due to Returns * Returns *order delays from tablets and weaker regular NB shipments. We think the Multiple Multipleimpact from regular NBs may last to 1Q12. Thus, we lower our Volatility Volatility2011E/2012E EPS by 1%/1% to NT$9.42/NT$10.51 and keep our 2013E EPS Percentile 20th 40th 60th 80th 100th Radiant Opto-Electronics (6176.TW)unchanged. Due to our earning revisions, our 12-month target price comes Asia Pacific Technology Peer Group Averagedown slightly to NT$115. We maintain our Buy rating on Radiant. * Returns = Return on Capital For a complete description of the investment profile measures please refer to the disclosure section of this document.ImplicationsWe now expect Dec sales to be down 7% mom (from +10% mom) due to Key data Current Price (NT$) 86.80delays in iPad 3 shipments and weaker regular NB shipments, which, in 12 month price target (NT$) 115.00our view, may be due to the potential impact from HDD shortage. Based Market cap (NT$ mn / US$ mn) 38,077.7 / 1,262.0 Foreign ownership (%) 52.0on our supply-chain checks, the bottleneck delay on iPad 3 shipments maybe due to the low production yield of high resolution panels at the early 12/10 12/11E 12/12E 12/13Eproduction stage. We believe iPad shipments should gradually trend up in EPS (NT$) New 6.14 9.42 10.51 11.47 EPS revision (%) 0.0 (1.1) (1.1) 0.01Q12, ahead of the new product launch and the NB production issue on EPS growth (%) 86.3 53.3 11.6 9.2HDD shortage should be a short-term effect that could be solved by end- EPS (dil) (NT$) New 6.14 9.42 10.51 11.47 P/E (X) 14.1 9.2 8.3 7.61Q12 (see “ST headwinds may not end until 2Q12; wait for better entry P/B (X) 2.5 2.0 1.8 1.7 EV/EBITDA (X) 3.1 5.7 4.4 4.1point,” Nov 24, 2011, written by our technology hardware analyst, Henry Dividend yield (%) 2.6 4.4 7.1 7.9King). Thus, we believe Radiant will resume it sales growth momentum ROE (%) 18.3 24.8 23.4 23.2 CROCI (%) 28.8 117.0 33.8 31.9from 2Q12. Despite the short-term order pushback, we maintain ourbullish view on Radiant. We still like its advanced BLU design ability and Price performance chartstable revenue and earning contribution. 120 10,000 110 9,500Valuation 100 9,000 90 8,500Our new 12-month target price of NT$115 (from NT116), implying 11X 80 8,0002012E P/E, based on Director’s Cut with a ValRatio of 0.62X (unchanged). 70 7,500The stock is trading at 8X 12-m forward P/E vs its historical range of 4X- 60 7,00014X. 50 6,500 Dec-10 Mar-11 Jun-11 Sep-11Key risks Radiant Opto-Electronics (L) Taiwan SE Weighted Index (R)Demand slowdown for the iPad or any delay in new product launches.INVESTMENT LIST MEMBERSHIP Share price performance (%) 3 month 6 month 12 month Absolute (5.7) (20.9) 70.9Asia Pacific Buy List Rel. to Taiwan SE Weighted Index (0.1) 2.9 113.8 Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 12/06/2011 close.Coverage View: NeutralLiang-chun Lin Goldman Sachs does and seeks to do business with companies+886(2)2730-4185 liang.lin@gs.com Goldman Sachs (Asia) L.L.C., Taipei BranchMaggie Lu covered in its research reports. As a result, investors should be+886(2)2730-4188 maggie.y.lu@gs.com Goldman Sachs (Asia) L.L.C., Taipei Branch aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non- US affiliates are not registered/qualified as research analysts with FINRA in the U.S.The Goldman Sachs Group, Inc. Global Investment Research
  2. 2. December 6, 2011 Radiant Opto-Electronics (6176.TW) Radiant Opto-Electronics: Summary FinancialsProfit model (NT$ mn) 12/10 12/11E 12/12E 12/13E Balance sheet (NT$ mn) 12/10 12/11E 12/12E 12/13ETotal revenue 48,311.5 63,625.6 77,539.5 83,768.0 Cash & equivalents 11,391.8 25,277.0 33,349.7 32,084.4Cost of goods sold (43,676.2) (57,030.9) (69,392.6) (74,848.8) Accounts receivable 9,374.2 12,680.1 15,886.0 18,338.1SG&A (935.4) (1,110.9) (1,266.3) (1,420.6) Inventory 2,007.4 2,260.5 3,217.6 3,228.4R&D (674.9) (908.3) (1,111.5) (1,196.0) Other current assets 1,354.4 2,540.3 3,663.9 3,672.5Other operating profit/(expense) 0.0 0.0 0.0 0.0 Total current assets 24,127.9 42,757.9 56,117.1 57,323.4ESO expense -- -- -- -- Net PP&E 6,373.4 8,210.0 9,299.1 10,233.3EBITDA 3,827.9 5,437.6 6,717.4 7,405.8 Net intangibles 132.2 132.2 132.2 132.2Depreciation & amortization (803.0) (862.2) (948.3) (1,103.2) Total investments 0.0 0.0 0.0 0.0EBIT 3,024.9 4,575.4 5,769.1 6,302.5 Other long-term assets 488.7 547.2 547.2 547.2Interest income 227.9 389.0 570.2 626.4 Total assets 31,122.2 51,647.3 66,095.6 68,236.1Interest expense (109.9) (238.6) (467.3) (519.6)Income/(loss) from uncons. subs. 0.0 0.0 0.0 0.0 Accounts payable 9,961.5 12,303.9 17,616.1 17,662.5Others 184.5 497.3 0.0 0.0 Short-term debt 3,038.4 14,113.4 20,355.8 20,403.7Pretax profits 3,327.4 5,223.1 5,872.0 6,409.3 Other current liabilities 1,615.9 2,177.4 3,140.5 3,147.9Income tax (738.8) (1,092.4) (1,262.5) (1,378.0) Total current liabilities 14,615.8 28,594.7 41,112.4 41,214.0Minorities 0.0 0.0 0.0 0.0 Long-term debt 1,811.1 4,281.4 4,281.4 4,281.4Net income pre-preferred dividends 2,588.6 4,130.7 4,609.5 5,031.3 Other long-term liabilities 47.1 59.7 65.8 69.5Preferred dividends 0.0 0.0 0.0 0.0 Total long-term liabilities 1,858.2 4,341.1 4,347.2 4,350.9Net income (pre-exceptionals) 2,588.6 4,130.7 4,609.5 5,031.3 Total liabilities 16,473.9 32,935.8 45,459.6 45,565.0Post-tax exceptionals 11.6 0.0 0.0 0.0Net income 2,600.2 4,130.7 4,609.5 5,031.3 Preferred shares 0.0 0.0 0.0 0.0 Total common equity 14,648.3 18,711.5 20,636.0 22,671.1EPS (basic, pre-except) (NT$) 6.12 9.42 10.51 11.47 Minority interest 0.0 0.0 0.0 0.0EPS (basic, post-except) (NT$) 6.14 9.42 10.51 11.47EPS (diluted, post-except) (NT$) 6.14 9.42 10.51 11.47 Total liabilities & equity 31,122.2 51,647.3 66,095.6 68,236.1EPS excl. ESO expense (basic) (NT$) 6.14 9.42 10.51 11.47EPS excl. ESO expense (dil.) (NT$) 6.11 9.42 10.51 11.47 BVPS (NT$) 34.39 42.65 47.04 51.68DPS (NT$) 2.25 3.85 6.12 6.83Dividend payout ratio (%) 36.5 40.9 58.2 59.6Free cash flow yield (%) 19.1 31.2 11.9 4.5 Ratios 12/10 12/11E 12/12E 12/13EGrowth & margins (%) 12/10 12/11E 12/12E 12/13E CROCI (%) 28.8 117.0 33.8 31.9Sales growth 31.6 31.7 21.9 8.0 ROE (%) 18.3 24.8 23.4 23.2EBITDA growth 31.7 42.1 23.5 10.2 ROA (%) 8.9 10.0 7.8 7.5EBIT growth 66.7 51.3 26.1 9.2 ROACE (%) 28.6 40.2 38.1 36.4Net income growth 90.9 58.9 11.6 9.2 Inventory days 14.1 13.7 14.4 15.7EPS growth 86.3 53.3 11.6 9.2 Receivables days 69.5 63.3 67.2 74.6Gross margin 9.6 10.4 10.5 10.6 Payable days 72.4 71.2 78.7 86.0EBITDA margin 7.9 8.5 8.7 8.8 Net debt/equity (%) (44.7) (36.8) (42.2) (32.6)EBIT margin 6.3 7.2 7.4 7.5 Interest cover - EBIT (X) NM NM NM NMCash flow statement (NT$ mn) 12/10 12/11E 12/12E 12/13E Valuation 12/10 12/11E 12/12E 12/13ENet income pre-preferred dividends 2,588.6 4,130.7 4,609.5 5,031.3D&A add-back 803.0 862.2 948.3 1,103.2 P/E (analyst) (X) 14.1 9.2 8.3 7.6Minorities interests add-back 0.0 0.0 0.0 0.0 P/B (X) 2.5 2.0 1.8 1.7Net (inc)/dec working capital 1,348.1 (1,840.8) 988.8 (2,417.9) EV/EBITDA (X) 3.1 5.7 4.4 4.1Other operating cash flow 37.9 10,842.4 0.0 0.0 EV/GCI (X) 1.1 2.0 1.8 1.4Cash flow from operations 4,777.6 13,994.6 6,546.6 3,716.6 Dividend yield (%) 2.6 4.4 7.1 7.9Capital expenditures (1,271.4) (2,125.1) (2,000.0) (2,000.0)Acquisitions 0.0 (104.6) (37.4) (37.4)Divestitures 0.0 11.2 0.0 0.0Others (868.7) (9,146.4) 0.0 0.0Cash flow from investments (2,140.1) (11,364.8) (2,037.4) (2,037.4)Dividends paid (common & pref) (950.3) (1,617.2) (2,685.0) (2,996.2)Inc/(dec) in debt 240.4 13,545.2 6,242.4 47.9Common stock issuance (repurchase) 0.0 1,549.6 0.0 0.0Other financing cash flows 285.2 (2,222.3) 6.1 3.8Cash flow from financing (424.8) 11,255.4 3,563.5 (2,944.6) Note: Last actual year may include reported and estimated data.Total cash flow 2,212.8 13,885.1 8,072.7 (1,265.3) Source: Company data, Goldman Sachs Research estimates. Analyst Contributors Liang-chun Lin liang.lin@gs.com Maggie Lu maggie.y.lu@gs.com Goldman Sachs Global Investment Research 2
  3. 3. December 6, 2011 Radiant Opto-Electronics (6176.TW)ExhibitsExhibit 1: Radiant’s earning revision tableRadiant (6176.TW)P&L (GAAP, NT$mn) 4Q11 New 4Q11 Old Diff. 1Q12 New 1Q12 Old Diff. 2011E New 2011E Old Diff. 2012E New 2012E Old Diff. 2013E New 2013E Old Diff.Revenues 15,242 16,083 -5% 16,146 16,989 -5% 63,626 64,466 -1% 77,539 78,382 -1% 83,768 83,768 0%Gross profits 1,490 1,577 -5% 1,591 1,682 -5% 6,595 6,681 -1% 8,147 8,239 -1% 8,919 8,919 0% Operating profits 997 1,056 -6% 1,068 1,132 -6% 4,575 4,635 -1% 5,769 5,834 -1% 6,303 6,303 0% Pretax earnings 1,001 1,060 -6% 1,096 1,159 -5% 5,223 5,282 -1% 5,872 5,937 -1% 6,409 6,410 0% Net earnings 776 821 -6% 860 910 -5% 4,131 4,176 -1% 4,610 4,660 -1% 5,031 5,032 0% EPS (fully diluted, NT$) 1.77 1.87 -6% 1.96 2.07 -5% 9.42 9.52 -1% 10.51 10.62 -1% 11.47 11.47 0%Ratio analysis Gross margin (%) 9.8% 9.8% 9.9% 9.9% 10.4% 10.4% 10.5% 10.5% 10.6% 10.6% EBIT margin (%) 6.5% 6.6% 6.6% 6.7% 7.2% 7.2% 7.4% 7.4% 7.5% 7.5% Net margin (%) 5.1% 5.1% 5.3% 5.4% 6.5% 6.5% 5.9% 5.9% 6.0% 6.0%Source: Goldman Sachs Research estimates.Exhibit 2: Radiant’s financial summary(NT$mn, unless otherwise noted)Summary P&L (GAAP) 1Q2011 2Q2011 3Q2011 4Q2011E 1Q2012E 2Q2012E 3Q2012E 4Q2012E 2011E 2012E 2013ENet sales 15,193 17,425 15,765 15,242 16,146 18,264 21,146 21,983 63,626 77,539 83,768 TV BLU 18% 18% 20% 30% 29% 27% 26% 26% 21% 27% 25% MNT BLU 28% 26% 21% 24% 24% 22% 19% 17% 25% 20% 17% NB BLU (including tablets) 53% 55% 58% 45% 47% 51% 55% 57% 53% 52% 57%Gross profits 1,541 2,032 1,531 1,490 1,591 1,848 2,299 2,410 6,595 8,147 8,919Operating profits 1,065 1,509 1,004 997 1,068 1,257 1,678 1,766 4,575 5,769 6,303Pre-tax earning 1,239 1,720 1,263 1,001 1,096 1,286 1,701 1,790 5,223 5,872 6,409Net income 991 1,352 1,012 776 860 1,009 1,335 1,405 4,131 4,610 5,031EPS (NT$) 2.33 3.08 2.31 1.77 1.96 2.30 3.04 3.20 9.42 10.51 11.47Key assumptionShipments (mn units) TV BLU 2.3 2.1 2.1 2.9 3.0 3.1 3.4 3.5 9.4 13.0 13.8 MNT BLU 8.7 9.1 7.0 7.6 7.5 7.7 8.1 7.9 32.3 31.2 30.1 NB BLU (including tablets) 19.6 24.2 23.4 17.6 19.7 24.5 30.7 32.2 84.8 107.1 132.0ASP (US$) TV BLU 41 53 52 53 54 54 55 57 50 55 54 MNT BLU 17 17 16 17 17 18 17 17 17 17 17 NB BLU (including tablets) 14 14 13 13 13 13 13 13 14 13 13Ratio analysisMargin Gross margin 10.1% 11.7% 9.7% 9.8% 9.9% 10.1% 10.9% 11.0% 10.4% 10.5% 10.6% Operating margin 7.0% 8.7% 6.4% 6.5% 6.6% 6.9% 7.9% 8.0% 7.2% 7.4% 7.5% EBITDA margin 8.3% 9.9% 7.8% 8.0% 8.0% 8.2% 9.1% 9.2% 8.5% 8.7% 8.8% Net margin 6.5% 7.8% 6.4% 5.1% 5.3% 5.5% 6.3% 6.4% 6.5% 5.9% 6.0%Qoq (%) Net sales 11.0% 14.7% -9.5% -3.3% 5.9% 13.1% 15.8% 4.0% Gross profit 5.1% 31.9% -24.6% -2.7% 6.7% 16.2% 24.4% 4.8% Operating profit 4.0% 41.6% -33.5% -0.7% 7.1% 17.7% 33.5% 5.2% Net profits 16.7% 36.3% -25.2% -23.3% 10.9% 17.3% 32.3% 5.2% EPS 16.7% 32.4% -25.2% -23.3% 10.9% 17.3% 32.3% 5.2%Yoy (%) Net sales 56.3% 39.0% 27.6% 11.3% 6.3% 4.8% 34.1% 44.2% 31.7% 21.9% 8.0% Gross profit 77.3% 69.6% 38.9% 1.7% 3.2% -9.1% 50.1% 61.7% 42.3% 23.5% 9.5% Operating profit 103.8% 95.0% 42.6% -2.7% 0.2% -16.7% 67.2% 77.1% 51.3% 26.1% 9.2% Net profits 126.1% 109.8% 51.4% -8.6% -13.3% -25.3% 32.0% 81.1% 58.9% 11.6% 9.2% EPS 119.5% 97.8% 47.0% -11.3% -15.8% -25.3% 32.0% 81.1% 53.3% 11.6% 9.2%Source: Company data, Goldman Sachs Research estimates.Goldman Sachs Global Investment Research 3
  4. 4. December 6, 2011 Radiant Opto-Electronics (6176.TW)Exhibit 3: Radiant’s P/B vs. ROE Exhibit 4: Radiant’s 12-m forward P/E Radiant (6176.TW) P/B vs. ROE Radiant (6176.TW) 12-m forward P/EP/B (X) Fwd P/B (L) Avg P/B (L) ROE (R) Avg ROE (R) P/E (X) Fwd P/E Avg P/E +1 Std Dev -1 Std Dev 3.0 45% 16.0 40% 14.0 2.5 35% 12.0 + 1 Std Dev: 11.2X 2.0 30% 10.0 Current: 1.8X Avg: 8.4X 1.5 25% 8.0 Current: 8.2X Avg: 1.4X Avg: 19% 20% 6.0 1.0 - 1 Std Dev: 5.6X 15% 4.0 0.5 10% 2.0 0.0 5% 0.0 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11Source: Datastream, company data, Goldman Sachs Research estimates. Source: Datastream, company data, Goldman Sachs Research estimates.Goldman Sachs Global Investment Research 4
  5. 5. December 6, 2011 Radiant Opto-Electronics (6176.TW)Disclosure AppendixReg ACI, Liang-chun Lin, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company orcompanies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specificrecommendations or views expressed in this report.Investment ProfileThe Goldman Sachs Investment Profile provides investment context for a security by comparing key attributes of that security to its peer group andmarket. The four key attributes depicted are: growth, returns, multiple and volatility. Growth, returns and multiple are indexed based on compositesof several methodologies to determine the stocks percentile ranking within the regions coverage universe.The precise calculation of each metric may vary depending on the fiscal year, industry and region but the standard approach is as follows:Growth is a composite of next years estimate over current years estimate, e.g. EPS, EBITDA, Revenue. Return is a year one prospective aggregateof various return on capital measures, e.g. CROCI, ROACE, and ROE. Multiple is a composite of one-year forward valuation ratios, e.g. P/E, dividendyield, EV/FCF, EV/EBITDA, EV/DACF, Price/Book. Volatility is measured as trailing twelve-month volatility adjusted for dividends.QuantumQuantum is Goldman Sachs proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used forin-depth analysis of a single company, or to make comparisons between companies in different sectors and markets.GS SUSTAINGS SUSTAIN is a global investment strategy aimed at long-term, long-only performance with a low turnover of ideas. The GS SUSTAIN focus listincludes leaders our analysis shows to be well positioned to deliver long term outperformance through sustained competitive advantage andsuperior returns on capital relative to their global industry peers. Leaders are identified based on quantifiable analysis of three aspects of corporateperformance: cash return on cash invested, industry positioning and management quality (the effectiveness of companies management of theenvironmental, social and governance issues facing their industry).DisclosuresCoverage group(s) of stocks by primary analyst(s)Liang-chun Lin: Asia Pacific Technology.Asia Pacific Technology: AAC Technologies, Acer, ASUSTeK Computer, AU Optronics, BYD Electronic, Catcher Technology, Cheng Uei Precision(Foxlink), Chimei Innolux, China Wireless Technologies, Compal Communications, Compal Electronics, Coretronic, Delta Electronics, E Ink HoldingsInc, Epistar, Everlight Electronics, Foxconn Intl Holdings, Foxconn Technology, Hon Hai Precision, HTC Corp., Largan Precision, Lenovo Group, Lite-On Technology, Novatek Microelectronics, Pegatron, Quanta Computer, Radiant Opto-Electronics, Silitech Technology, SK C&C, SynnexTechnology International, TCL Communication, TPK Holding, TPV Technology, Wintek, Wistron, Young Fast Optoelectronics.Company-specific regulatory disclosuresThe following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, "Goldman Sachs") and companiescovered by the Global Investment Research Division of Goldman Sachs and referred to in this research.There are no company-specific disclosures for: Radiant Opto-Electronics (NT$86.80)Distribution of ratings/investment banking relationshipsGoldman Sachs Investment Research global coverage universe Rating Distribution Investment Banking Relationships Buy Hold Sell Buy Hold Sell Global 31% 55% 14% 50% 43% 36%Goldman Sachs Global Investment Research 5
  6. 6. December 6, 2011 Radiant Opto-Electronics (6176.TW)As of October 1, 2011, Goldman Sachs Global Investment Research had investment ratings on 3,198 equity securities. Goldman Sachs assignsstocks as Buys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Holdand Sell for the purposes of the above disclosure required by NASD/NYSE rules. See Ratings, Coverage groups and views and related definitionsbelow.Price target and rating history chart(s) Radiant Opto-Electronics (6176.TW) Stock Price Currency : Taiw an Dollar Goldman Sachs rating and stock price target history 10,000 140 126 120 9,000 100 8,000 80 7,000 60 130 120 6,000 40 20 5,000 0 4,000 Jul 4 Stock Price Index Price NA B N D J F MA M J J A S O N D J F MA MJ J A S O N D J F MA M J J A S 2008 2009 2010 2011 Source: Goldman Sachs Investment Research for ratings and price targets; FactSet closing prices as of 9/30/2011. Rating Covered by Liang-chun Lin, Price target as of Jul 4, 2011 Price target at removal Not covered by current analyst Taiw an SE Weighted Index The price targets show n should be considered in the context of all prior published Goldman Sachs research, w hich may or may not have included price targets, as w ell as developments relating to the company, its industry and f inancial markets.Regulatory disclosuresDisclosures required by United States laws and regulationsSee company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report: manageror co-manager in a pending transaction; 1% or other ownership; compensation for certain services; types of client relationships; managed/co-managed public offerings in prior periods; directorships; for equity securities, market making and/or specialist role. Goldman Sachs usually makes amarket in fixed income securities of issuers discussed in this report and usually deals as a principal in these securities.The following are additional required disclosures: Ownership and material conflicts of interest: Goldman Sachs policy prohibits its analysts,professionals reporting to analysts and members of their households from owning securities of any company in the analysts area of coverage.Analyst compensation: Analysts are paid in part based on the profitability of Goldman Sachs, which includes investment banking revenues.Analyst as officer or director: Goldman Sachs policy prohibits its analysts, persons reporting to analysts or members of their households fromserving as an officer, director, advisory board member or employee of any company in the analysts area of coverage. Non-U.S. Analysts: Non-U.S.analysts may not be associated persons of Goldman, Sachs & Co. and therefore may not be subject to NASD Rule 2711/NYSE Rules 472 restrictionson communications with subject company, public appearances and trading securities held by the analysts.Distribution of ratings: See the distribution of ratings disclosure above. Price chart: See the price chart, with changes of ratings and price targetsin prior periods, above, or, if electronic format or if with respect to multiple companies which are the subject of this report, on the Goldman Sachswebsite at http://www.gs.com/research/hedge.html.Additional disclosures required under the laws and regulations of jurisdictions other than the UnitedStatesThe following disclosures are those required by the jurisdiction indicated, except to the extent already made above pursuant to United States lawsand regulations. Australia: This research, and any access to it, is intended only for "wholesale clients" within the meaning of the AustralianCorporations Act. Brazil: Disclosure information in relation to CVM Instruction 483 is available athttp://www.gs.com/worldwide/brazil/area/gir/index.html. Where applicable, the Brazil-registered analyst primarily responsible for the content of thisresearch report, as defined in Article 16 of CVM Instruction 483, is the first author named at the beginning of this report, unless indicated otherwiseat the end of the text. Canada: Goldman, Sachs & Co. has approved of, and agreed to take responsibility for, this research in Canada if and to theextent it relates to equity securities of Canadian issuers. Analysts may conduct site visits but are prohibited from accepting payment orreimbursement by the company of travel expenses for such visits. Hong Kong: Further information on the securities of covered companies referredto in this research may be obtained on request from Goldman Sachs (Asia) L.L.C. India: Further information on the subject company or companiesreferred to in this research may be obtained from Goldman Sachs (India) Securities Private Limited; Japan: See below. Korea: Further informationon the subject company or companies referred to in this research may be obtained from Goldman Sachs (Asia) L.L.C., Seoul Branch. Russia:Research reports distributed in the Russian Federation are not advertising as defined in the Russian legislation, but are information and analysis nothaving product promotion as their main purpose and do not provide appraisal within the meaning of the Russian legislation on appraisal activity.Singapore: Further information on the covered companies referred to in this research may be obtained from Goldman Sachs (Singapore) Pte.(Company Number: 198602165W). Taiwan: This material is for reference only and must not be reprinted without permission. Investors shouldcarefully consider their own investment risk. Investment results are the responsibility of the individual investor. United Kingdom: Persons whowould be categorized as retail clients in the United Kingdom, as such term is defined in the rules of the Financial Services Authority, should readthis research in conjunction with prior Goldman Sachs research on the covered companies referred to herein and should refer to the risk warningsthat have been sent to them by Goldman Sachs International. A copy of these risks warnings, and a glossary of certain financial terms used in thisreport, are available from Goldman Sachs International on request.European Union: Disclosure information in relation to Article 4 (1) (d) and Article 6 (2) of the European Commission Directive 2003/126/EC isavailable at http://www.gs.com/disclosures/europeanpolicy.html which states the European Policy for Managing Conflicts of Interest in Connectionwith Investment Research.Japan: Goldman Sachs Japan Co., Ltd. is a Financial Instrument Dealer under the Financial Instrument and Exchange Law, registered with theKanto Financial Bureau (Registration No. 69), and is a member of Japan Securities Dealers Association (JSDA) and Financial Futures Association ofJapan (FFAJ). Sales and purchase of equities are subject to commission pre-determined with clients plus consumption tax. See company-specificdisclosures as to any applicable disclosures required by Japanese stock exchanges, the Japanese Securities Dealers Association or the JapaneseSecurities Finance Company.Goldman Sachs Global Investment Research 6
  7. 7. December 6, 2011 Radiant Opto-Electronics (6176.TW)Ratings, coverage groups and views and related definitionsBuy (B), Neutral (N), Sell (S) -Analysts recommend stocks as Buys or Sells for inclusion on various regional Investment Lists. Being assigned a Buyor Sell on an Investment List is determined by a stocks return potential relative to its coverage group as described below. Any stock not assignedas a Buy or a Sell on an Investment List is deemed Neutral. Each regional Investment Review Committee manages various regional InvestmentLists to a global guideline of 25%-35% of stocks as Buy and 10%-15% of stocks as Sell; however, the distribution of Buys and Sells in any particularcoverage group may vary as determined by the regional Investment Review Committee. Regional Conviction Buy and Sell lists representinvestment recommendations focused on either the size of the potential return or the likelihood of the realization of the return.Return potential represents the price differential between the current share price and the price target expected during the time horizon associatedwith the price target. Price targets are required for all covered stocks. The return potential, price target and associated time horizon are stated ineach report adding or reiterating an Investment List membership.Coverage groups and views: A list of all stocks in each coverage group is available by primary analyst, stock and coverage group athttp://www.gs.com/research/hedge.html. The analyst assigns one of the following coverage views which represents the analysts investmentoutlook on the coverage group relative to the groups historical fundamentals and/or valuation. Attractive (A). The investment outlook over thefollowing 12 months is favorable relative to the coverage groups historical fundamentals and/or valuation. Neutral (N). The investment outlookover the following 12 months is neutral relative to the coverage groups historical fundamentals and/or valuation. Cautious (C). The investmentoutlook over the following 12 months is unfavorable relative to the coverage groups historical fundamentals and/or valuation.Not Rated (NR). The investment rating and target price have been removed pursuant to Goldman Sachs policy when Goldman Sachs is acting inan advisory capacity in a merger or strategic transaction involving this company and in certain other circumstances. Rating Suspended (RS).Goldman Sachs Research has suspended the investment rating and price target for this stock, because there is not a sufficient fundamental basisfor determining, or there are legal, regulatory or policy constraints around publishing, an investment rating or target. The previous investmentrating and price target, if any, are no longer in effect for this stock and should not be relied upon. Coverage Suspended (CS). Goldman Sachs hassuspended coverage of this company. Not Covered (NC). Goldman Sachs does not cover this company. Not Available or Not Applicable (NA).The information is not available for display or is not applicable. Not Meaningful (NM). The information is not meaningful and is therefore excluded.Global product; distributing entitiesThe Global Investment Research Division of Goldman Sachs produces and distributes research products for clients of Goldman Sachs, andpursuant to certain contractual arrangements, on a global basis. Analysts based in Goldman Sachs offices around the world produce equityresearch on industries and companies, and research on macroeconomics, currencies, commodities and portfolio strategy. This research isdisseminated in Australia by Goldman Sachs Australia Pty Ltd (ABN 21 006 797 897); in Brazil by Goldman Sachs do Brasil Banco Múltiplo S.A.; inCanada by Goldman, Sachs & Co. regarding Canadian equities and by Goldman, Sachs & Co. (all other research); in Hong Kong by Goldman Sachs(Asia) L.L.C.; in India by Goldman Sachs (India) Securities Private Ltd.; in Japan by Goldman Sachs Japan Co., Ltd.; in the Republic of Korea byGoldman Sachs (Asia) L.L.C., Seoul Branch; in New Zealand by Goldman Sachs New Zealand Limited; in Russia by OOO Goldman Sachs; inSingapore by Goldman Sachs (Singapore) Pte. (Company Number: 198602165W); and in the United States of America by Goldman, Sachs & Co.Goldman Sachs International has approved this research in connection with its distribution in the United Kingdom and European Union.European Union: Goldman Sachs International, authorized and regulated by the Financial Services Authority, has approved this research inconnection with its distribution in the European Union and United Kingdom; Goldman Sachs AG, regulated by the Bundesanstalt fürFinanzdienstleistungsaufsicht, may also distribute research in Germany.General disclosuresThis research is for our clients only. Other than disclosures relating to Goldman Sachs, this research is based on current public information that weconsider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. We seek to update our research asappropriate, but various regulations may prevent us from doing so. Other than certain industry reports published on a periodic basis, the largemajority of reports are published at irregular intervals as appropriate in the analysts judgment.Goldman Sachs conducts a global full-service, integrated investment banking, investment management, and brokerage business. We haveinvestment banking and other business relationships with a substantial percentage of the companies covered by our Global Investment ResearchDivision. Goldman, Sachs & Co., the United States broker dealer, is a member of SIPC (http://www.sipc.org).Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients and ourproprietary trading desks that reflect opinions that are contrary to the opinions expressed in this research. Our asset management area, ourproprietary trading desks and investing businesses may make investment decisions that are inconsistent with the recommendations or viewsexpressed in this research.The analysts named in this report may have from time to time discussed with our clients, including Goldman Sachs salespersons and traders, ormay discuss in this report, trading strategies that reference catalysts or events that may have a near-term impact on the market price of the equitysecurities discussed in this report, which impact may be directionally counter to the analysts published price target expectations for such stocks.Any such trading strategies are distinct from and do not affect the analysts fundamental equity rating for such stocks, which rating reflects a stocksreturn potential relative to its coverage group as described herein.We and our affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or short positions in,act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this research.This research is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would beillegal. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs ofindividual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and,if appropriate, seek professional advice, including tax advice. The price and value of investments referred to in this research and the income fromthem may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital mayoccur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments.Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for allinvestors. Investors should review current options disclosure documents which are available from Goldman Sachs sales representatives or athttp://www.theocc.com/about/publications/character-risks.jsp. Transactions cost may be significant in option strategies calling for multiple purchaseand sales of options such as spreads. Supporting documentation will be supplied upon request.All research reports are disseminated and available to all clients simultaneously through electronic publication to our internal client websites. Notall research content is redistributed to our clients or available to third-party aggregators, nor is Goldman Sachs responsible for the redistribution ofour research by third party aggregators. For all research available on a particular stock, please contact your sales representative or go tohttp://360.gs.com.Goldman Sachs Global Investment Research 7
  8. 8. December 6, 2011 Radiant Opto-Electronics (6176.TW)Disclosure information is also available at http://www.gs.com/research/hedge.html or from Research Compliance, 200 West Street, New York, NY10282.Copyright 2011 Goldman Sachs.No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without theprior written consent of The Goldman Sachs Group, Inc.Goldman Sachs Global Investment Research 8

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