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  1. 1. September 1, 2011ACTIONSellCompal Electronics (2324.TW)Return Potential: (20%) Equity ResearchSqueezed by NB/TV downside and OPEX risk; downgrade to SellSource of opportunity Investment Profile Low HighWe downgrade Compal to Sell from Neutral on: 1) downside to its 2011 NB Growth Growthshipment target; 2) upside in its R&D expense trend; 3) unfavorable product Returns * Returns *mix due to slowdown in corporate demand (from Dell) in 2H; 4) 2Q OP of Multiple MultipleNT$1.96 bn is 39%/43% below GSe/Reuters consensus; 5) least Volatility Volatilitydiversification among the top three NB ODMs: mainly TVs (around 10% of Percentile 20th 40th 60th 80th 100th Compal Electronics (2324.TW)sales) but with downward revision and the least exposure to high-margin Asia Pacific Technology Peer Group Averageservers. We think there is downside risk to Compal’s 2012 bullish NB growth * Returns = Return on Capital For a complete description of theguidance to low visibility. Lastly, we think Compal’s share price rally of 19% investment profile measures please refer to the disclosure section of this document.from its recent trough (Aug 19) is not warranted by its fundamentals. Key data CurrentCatalyst Price (NT$) 31.10Compal’s 42mn NB unit target (-13% yoy, vs previous GSe of 48.3mn) was 12 month price target (NT$) 25.00 Market cap (NT$ mn / US$ mn) 136,666.2 / 4,708.0lowered from 48 mn in Apr and 55 mn in Jan. The shortfall stems mainly Foreign ownership (%) 55.1from: 1) slowdown in corporate demand in 2H vs 1H; 2) netbook orderslost to Quanta; and 3) Acer’s order downside. Compal expects 3Q GM to 12/10 12/11E 12/12E 12/13E EPS (NT$) New 5.38 3.19 3.71 4.40improve slightly, but guided OPM to be flat on rising R&D cost. Compal EPS revision (%) 0.0 (17.4) (17.2) 9.8expects its 2012 NB shipment to grow 20% vs industry growth of 0%-5%. EPS growth (%) 10.9 (40.8) 16.3 18.6 EPS (dil) (NT$) New 5.38 3.19 3.71 4.40In our view, however, this will be a challenge as its share gains at Dell and P/E (X) 5.8 9.7 8.4 7.1 P/B (X) 1.2 1.2 1.1 1.1ASUSTeK may be offset by the potential order loss from Toshiba. EV/EBITDA (X) 7.3 9.7 7.8 5.9Compal’s 3Q/4Q NB shipments (both flat qoq) are also below previous GSe Dividend yield (%) 7.6 8.5 5.1 6.0 ROE (%) 22.1 12.6 13.9 15.2of 1%/4%. We lower our 2011E/12E/13E sales by 13%/16%/12% and PAT by CROCI (%) 113.4 96.5 255.7 125.818%/18%/9% on lower NB/TV TV growth and slower margin recovery. Weexpect the market to negatively react to Compal’s weak 2Q result and 2H Price performance chart 42 11,000guidance, as well as its overly optimistic guidance for 2012. 40 10,500 38 10,000Valuation 36 9,500We downgrade Compal to Sell from Neutral and cut our 12-m target price 34 9,000 32 8,500to NT$25 from NT$32 (still on 7X NTM EPS) as we roll over to 4Q11-3Q12 30 8,000 28 7,500Key risks 26 7,000 Aug-10 Dec-10 Mar-11 Jun-11Higher Acer NB shipments and higher efficiency in inland production. Compal Electronics (L) Taiwan SE Weighted Index (R)INVESTMENT LIST MEMBERSHIPAsia Pacific Sell List Share price performance (%) 3 month 6 month 12 month Absolute (10.5) (10.5) (13.4) Rel. to Taiwan SE Weighted Index 3.9 (0.6) (14.8)Coverage View: Neutral Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 8/31/2011 close.Henry King Goldman Sachs does and seeks to do business with companies+852-2978-0748 henry.king@gs.com Goldman Sachs (Asia) L.L.C.Angel Wei covered in its research reports. As a result, investors should be+886(2)2730-4187 angel.wei@gs.com Goldman Sachs (Asia) L.L.C. aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC see the end of the text. For other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non- US affiliates are not registered/qualified as research analysts with FINRA in the U.S.The Goldman Sachs Group, Inc. Global Investment Research
  2. 2. September 1, 2011 Compal Electronics (2324.TW) Compal Electronics: Summary FinancialsProfit model (NT$ mn) 12/10 12/11E 12/12E 12/13E Balance sheet (NT$ mn) 12/10 12/11E 12/12E 12/13ETotal revenue 844,508.3 700,177.9 787,661.7 894,860.6 Cash & equivalents 34,831.7 45,287.5 43,945.1 47,238.6Cost of goods sold (812,471.1) (677,764.5) (760,935.6) (864,303.1) Accounts receivable 168,415.0 149,754.9 195,765.9 199,120.4SG&A (7,336.6) (6,226.1) (6,450.3) (7,105.9) Inventory 26,380.4 30,160.8 37,367.8 42,154.3R&D (6,416.6) (7,252.3) (8,805.5) (8,770.1) Other current assets 1,363.3 934.3 1,115.3 1,170.8Other operating profit/(expense) 0.0 0.0 0.0 0.0 Total current assets 230,990.4 226,137.5 278,194.2 289,684.0ESO expense (4,012.7) 0.0 0.0 0.0 Net PP&E 2,176.6 1,974.8 1,811.4 1,704.8EBITDA 18,919.7 9,456.9 11,869.9 15,056.5 Net intangibles 894.9 845.2 845.2 845.2Depreciation & amortization (635.8) (521.9) (399.7) (375.0) Total investments 0.0 0.0 0.0 0.0EBIT 18,283.9 8,935.0 11,470.3 14,681.5 Other long-term assets 66,077.8 68,328.4 71,479.1 75,058.5Interest income 323.6 187.5 563.4 362.3 Total assets 300,139.7 297,285.9 352,329.9 367,292.6Interest expense (120.9) (120.9) (120.9) (120.9)Income/(loss) from uncons. subs. 3,983.9 7,090.6 7,206.1 7,830.4 Accounts payable 149,451.4 152,814.8 189,330.0 200,232.7Others 4,092.4 450.0 200.0 200.0 Short-term debt 0.0 0.0 0.0 0.0Pretax profits 26,562.8 16,542.2 19,318.8 22,953.2 Other current liabilities 37,511.9 34,918.8 37,373.9 38,107.0Income tax (3,291.0) (2,523.4) (3,009.5) (3,617.8) Total current liabilities 186,963.3 187,733.6 226,703.9 238,339.7Minorities 0.0 0.0 0.0 0.0 Long-term debt 0.0 0.0 0.0 0.0Net income pre-preferred dividends 23,271.8 14,018.8 16,309.3 19,335.4 Other long-term liabilities 20.3 20.3 20.3 20.3Preferred dividends 0.0 0.0 0.0 0.0 Total long-term liabilities 20.3 20.3 20.3 20.3Net income (pre-exceptionals) 23,271.8 14,018.8 16,309.3 19,335.4 Total liabilities 186,983.7 187,754.0 226,724.2 238,360.0Post-tax exceptionals 0.0 0.0 0.0 0.0Net income 23,271.8 14,018.8 16,309.3 19,335.4 Preferred shares 0.0 0.0 0.0 0.0 Total common equity 113,156.0 109,532.3 125,605.9 128,932.8EPS (basic, pre-except) (NT$) 5.38 3.19 3.71 4.40 Minority interest 0.0 0.0 0.0 0.0EPS (basic, post-except) (NT$) 5.38 3.19 3.71 4.40EPS (diluted, post-except) (NT$) 5.38 3.19 3.71 4.40 Total liabilities & equity 300,139.7 297,286.2 352,330.2 367,292.9EPS excl. ESO expense (basic) (NT$) 7.30 4.09 3.71 4.40EPS excl. ESO expense (dil.) (NT$) 7.30 4.09 3.71 4.40 BVPS (NT$) 26.18 24.93 28.58 29.34DPS (NT$) 2.37 2.66 1.60 1.86Dividend payout ratio (%) 44.1 83.2 43.1 42.3Free cash flow yield (%) 9.5 17.1 (3.8) 11.0 Ratios 12/10 12/11E 12/12E 12/13EGrowth & margins (%) 12/10 12/11E 12/12E 12/13E CROCI (%) 113.4 96.5 255.7 125.8Sales growth 34.9 (17.1) 12.5 13.6 ROE (%) 22.1 12.6 13.9 15.2EBITDA growth 1.4 (50.0) 25.5 26.8 ROA (%) 7.9 4.7 5.0 5.4EBIT growth 3.2 (51.1) 28.4 28.0 ROACE (%) 29.6 19.6 21.8 23.4Net income growth 21.2 (39.8) 16.3 18.6 Inventory days 16.7 15.2 16.2 16.8EPS growth 10.9 (40.8) 16.3 18.6 Receivables days 69.9 82.9 80.1 80.5Gross margin 3.8 3.2 3.4 3.4 Payable days 69.4 81.4 82.1 82.3EBITDA margin 2.2 1.4 1.5 1.7 Net debt/equity (%) (30.8) (41.3) (35.0) (36.6)EBIT margin 2.2 1.3 1.5 1.6 Interest cover - EBIT (X) NM NM NM NMCash flow statement (NT$ mn) 12/10 12/11E 12/12E 12/13E Valuation 12/10 12/11E 12/12E 12/13ENet income pre-preferred dividends 23,271.8 14,018.8 16,309.3 19,335.4D&A add-back 635.8 521.9 399.7 375.0 P/E (analyst) (X) 5.8 9.7 8.4 7.1Minorities interests add-back 0.0 0.0 0.0 0.0 P/B (X) 1.2 1.2 1.1 1.1Net (inc)/dec working capital (1,925.5) 18,243.1 (16,702.9) 2,761.8 EV/EBITDA (X) 7.3 9.7 7.8 5.9Other operating cash flow (5,439.7) (9,182.8) (4,931.9) (7,152.7) EV/GCI (X) 10.1 NM 8.0 11.1Cash flow from operations 16,542.3 23,601.0 (4,925.8) 15,319.5 Dividend yield (%) 7.6 8.5 5.1 6.0Capital expenditures (152.6) (210.1) (236.3) (268.5)Acquisitions (2,577.6) (2,800.7) (3,150.6) (3,579.4)Divestitures 0.0 0.0 0.0 0.0Others (116.0) 207.9 0.0 0.0Cash flow from investments (2,846.2) (2,802.9) (3,386.9) (3,847.9)Dividends paid (common & pref) (10,264.5) (11,669.4) (7,029.6) (8,178.1)Inc/(dec) in debt 12,338.1 13,000.0 14,000.0 0.0Common stock issuance (repurchase) 0.0 0.0 0.0 0.0Other financing cash flows (1,101.3) (11,759.9) 0.0 0.0Cash flow from financing 972.3 (10,429.3) 6,970.4 (8,178.1) Note: Last actual year may include reported and estimated data.Total cash flow 14,668.5 10,368.8 (1,342.3) 3,293.5 Source: Company data, Goldman Sachs Research estimates. Analyst Contributors Henry King henry.king@gs.com Angel Wei angel.wei@gs.com Goldman Sachs Global Investment Research 2
  3. 3. September 1, 2011 Compal Electronics (2324.TW) Compal’s 2Q11 net earnings came in at NT$3.3bn (-6% qoq; -49 yoy), 2% above GSe but by 8% below Reuters consensus. Its 2Q OPM of 1.2% is far below GSe/Reuters consensus of 1.8%/2.0% mainly due to fewer scale improvements from OEMs’ order cuts (e.g. Acer) and rising R&D expenses. The 39% shortfall to GSe in OP is offset by a lower investment loss and forex gains. Compal also lowered its 2011shipments guidance: with NB from 48mn to 42mn units; TV from 8mn to 6.5mn units; and tablets from 3.8mn to 3mn. It also expects flattish NB growth in both 3Q/4Q on muted 2H seasonality and a weak NB demand before Windows 8 launch by 4Q12. Exhibit 1: 2Q11 parent financial numbers Parent-only financials 2Q2011 2Q2011 1Q2011 2Q2010 QoQ YoY Reuters (NT$ mn) Actual GS est. Difference Actual Actual (%) (%) Consensus Difference Revenue 168,660 178,633 -5.6% 162,861 217,055 3.6% -22.3% 176,552 -4.5% Gross profits 5,214 6,140 -15.1% 5,084 8,709 2.6% -40.1% Operating profits 1,955 3,194 -38.8% 1,930 5,422 1.3% -63.9% 3,447 -43.3% Pretax earnings 4,100 3,903 5.0% 3,833 7,800 7.0% -47.4% 4,331 -5.3% Net earnings (NT$) 3,280 3,209 2.2% 3,497 6,437 -6.2% -49.0% 3,549 -7.6% Gross margin 3.1% 3.4% 3.1% 4.0% Operating margin 1.2% 1.8% 1.2% 2.5% 2.0% Net margin 1.9% 1.8% 2.1% 3.0% 2.0% Source: Company data, Goldman Sachs Research estimates. Exhibit 2: Goldman Sachs revisions Parent-only financials Revised Original Revised Original Revised Original (NT$ mn) 2011E 2011E Diff 2012E 2012E Diff 2013E 2013E Diff Revenue 700,178 806,023 -13.1% 787,662 941,493 -16.3% 894,861 1,012,819 -11.6% Gross profits 22,413 28,926 -22.5% 26,726 34,040 -21.5% 30,557 35,938 -15.0% Operating profits 8,935 15,354 -41.8% 11,470 19,437 -41.0% 14,681 20,645 -28.9% Pretax earnings 16,542 20,111 -17.7% 19,319 23,319 -17.2% 22,953 20,884 9.9% Net earnings 14,019 17,133 -18.2% 16,309 19,881 -18.0% 19,335 17,775 8.8% Gross margin 3.2% 3.6% 3.4% 3.6% 3.4% 3.5% Operating margin 1.3% 1.9% 1.5% 2.1% 1.6% 2.0% Net margin 2.0% 2.1% 2.1% 2.1% 2.2% 1.8% Source: Goldman Sachs Research estimates. Exhibit 3: Key assumption changes Revised Original Revised Original Revised Original 2011E 2011E Diff 2012E 2012E Diff 2013E 2013E Diff NB shipment 41,300 48,300 -14.5% 45,718 55,415 -17.5% 53,338 60,909 -12% NB gross margin 3.14% 3.54% -11.4% 3.33% 3.60% -7.6% 3.33% 3.55% -6% TV shipments 6,584 7,911 -16.8% 6,311 9,596 -34.2% 7,469 11,244 -34% Tablet shipments 2,766 2,581 7.1% 4,548 3,939 15.5% 5,421 4,413 23% Source: Goldman Sachs Research estimates.Goldman Sachs Global Investment Research 3
  4. 4. September 1, 2011 Compal Electronics (2324.TW)Exhibit 4: Compal’s quarterly parent P&L summary 1Q11 2Q11 3Q11E 4Q11E 1Q12E 2Q12E 3Q12E 4Q12E 1Q13E 2Q13E 3Q13E 4Q13E 2,010 2011E 2012E 2013ENet sales 162,861 168,148 179,376 189,794 168,440 176,546 207,628 235,048 206,158 209,590 230,212 248,900 844,508 700,178 787,662 894,861Gross profits 5,084 5,214 5,800 6,315 5,682 6,170 7,146 7,727 6,756 7,126 8,186 8,490 32,037 22,413 26,726 30,557Operating profits (loss) 1,930 1,955 2,284 2,766 2,347 2,764 3,097 3,262 2,921 3,460 4,043 4,258 18,284 8,935 11,470 14,681Pretax profits 3,833 4,100 3,998 4,699 3,750 4,516 5,263 5,790 4,488 5,325 6,298 6,842 26,563 16,542 19,319 22,953Net profits 3,497 3,280 3,358 3,971 3,414 3,604 4,410 4,881 4,077 4,239 5,265 5,754 23,272 14,019 16,309 19,335Ratio analysis% of salesGross margins 3.1% 3.1% 3.2% 3.3% 3.4% 3.5% 3.4% 3.3% 3.3% 3.4% 3.6% 3.4% 3.8% 3.2% 3.4% 3.4%Operating margins 1.2% 1.2% 1.3% 1.5% 1.4% 1.6% 1.5% 1.4% 1.4% 1.7% 1.8% 1.7% 2.2% 1.3% 1.5% 1.6%Tax rate (fully tax at 25%) 8.8% 20.0% 16.0% 15.5% 9.0% 20.2% 16.2% 15.7% 9.2% 20.4% 16.4% 15.9% 12.4% 15.3% 15.6% 15.8%Net margins 2.1% 2.0% 1.9% 2.1% 2.0% 2.0% 2.1% 2.1% 2.0% 2.0% 2.3% 2.3% 2.8% 2.0% 2.1% 2.2%Qoq growth (%)Sales -26.7% 3.2% 6.7% 5.8% -11.3% 4.8% 17.6% 13.2% -12.3% 1.7% 9.8% 8.1%Gross profits -47.4% 2.5% 11.2% 8.9% -10.0% 8.6% 15.8% 8.1% -12.6% 5.5% 14.9% 3.7%Operating profits -67.3% 1.3% 16.8% 21.1% -15.1% 17.8% 12.1% 5.3% -10.4% 18.4% 16.9% 5.3%Net profits -56.4% -6.2% 2.4% 18.2% -14.0% 5.5% 22.4% 10.7% -16.5% 4.0% 24.2% 9.3%Yoy growth (%)Sales 49.2% 37.9% 3.7% -14.6% 3.4% 5.0% 15.8% 23.8% 22.4% 18.7% 10.9% 5.9% 34.9% -17.1% 12.5% 13.6%Gross profits -5.8% -8.3% -28.3% -34.7% 11.8% 18.3% 23.2% 22.4% 18.9% 15.5% 14.6% 9.9% 11.1% -30.0% 19.2% 14.3%Operating profits -42.2% -42.9% -54.8% -53.1% 21.6% 41.4% 35.6% 17.9% 24.4% 25.2% 30.5% 30.6% 3.2% -51.1% 28.4% 28.0%Net profits 24.9% 1.3% -34.7% -50.5% -2.4% 9.9% 31.3% 22.9% 19.4% 17.6% 19.4% 17.9% 21.2% -39.8% 16.3% 18.6%Source: Company data, Goldman Sachs Research estimates.Goldman Sachs Global Investment Research 4
  5. 5. September 1, 2011 Compal Electronics (2324.TW)Reg ACI, Henry King, 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).Disclosure AppendixCoverage group(s) of stocks by primary analyst(s)Henry King: Asia Pacific Technology.Asia Pacific Technology: AAC Technologies, Acer, Advanced Semiconductor, Advanced Semiconductor (ADR), ASUSTeK Computer, AU Optronics,BYD Electronic, Catcher Technology, Cheng Uei Precision (Foxlink), Chimei Innolux, China Wireless Technologies, Chipbond Technology Corp.,Compal Communications, Compal Electronics, Coretronic, Delta Electronics, E Ink Holdings Inc, Epistar, Everlight Electronics, Foxconn Intl Holdings,Foxconn Technology, Hon Hai Precision, HTC Corp., Kinsus Interconnect Technology, Largan Precision, Lenovo Group, Lite-On Technology, Nan YaPCB, Novatek Microelectronics, Pegatron, Powertech Technology, Quanta Computer, Radiant Opto-Electronics, Siliconware Precision, SiliconwarePrecision (ADR), Silitech Technology, SK C&C, TCL Communication, TPK Holding, TPV Technology, Tripod Technology, Unimicron, 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.Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Compal Electronics(NT$31.10)Distribution of ratings/investment banking relationshipsGoldman Sachs Investment Research global coverage universe Rating Distribution Investment Banking Relationships Buy Hold Sell Buy Hold Sell Global 32% 54% 14% 52% 41% 37%As of July 1, 2011, Goldman Sachs Global Investment Research had investment ratings on 3,167 equity securities. Goldman Sachs assigns stocks asBuys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell forthe purposes of the above disclosure required by NASD/NYSE rules. See Ratings, Coverage groups and views and related definitions below.Goldman Sachs Global Investment Research 5
  6. 6. September 1, 2011 Compal Electronics (2324.TW)Price target and rating history chart(s) Com pal Ele ctronics (2324.TW) Stock Price Currency : Taiw an Dollar Goldman Sachs rating and stock price target history 60 10,000 46.09 44 30 25.37 24.39 44.13 44.13 48.05 9,000 50 31.23 18.54 33.18 43 52.96 40.01 26.35 8,000 32 40 7,000 30 49.03 47 6,000 47.07 42 20 5,000 49.03 10 4,000 Aug 31 Sep 6 Mar 30 Stock Price Index Price N B N A S O N D J F MA M J J A S O N D J F MA M J J A S O N D J F MA M J 2008 2009 2010 2011 Source: Goldman Sachs Investment Research for ratings and price targets; FactSet closing prices as of 6/30/2011. Rating Covered by Henry King Jul 1, 2008 B Price target 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 at http://www.gs.com/worldwide/brazil/gir/index.html.Where applicable, the Brazil-registered analyst primarily responsible for the content of this research report, as defined in Article 16 of CVMInstruction 483, is the first author named at the beginning of this report, unless indicated otherwise at 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 the extent it relates to equity securities of Canadianissuers. Analysts may conduct site visits but are prohibited from accepting payment or reimbursement by the company of travel expenses for suchvisits. Hong Kong: Further information on the securities of covered companies referred to in this research may be obtained on request fromGoldman Sachs (Asia) L.L.C. India: Further information on the subject company or companies referred to in this research may be obtained fromGoldman Sachs (India) Securities Private Limited; Japan: See below. Korea: Further information on the subject company or companies referred toin this research may be obtained from Goldman Sachs (Asia) L.L.C., Seoul Branch. Russia: Research reports distributed in the Russian Federationare not advertising as defined in the Russian legislation, but are information and analysis not having product promotion as their main purpose anddo not provide appraisal within the meaning of the Russian legislation on appraisal activity. Singapore: Further information on the coveredcompanies referred to in this research may be obtained from Goldman Sachs (Singapore) Pte. (Company Number: 198602165W). Taiwan: Thismaterial is for reference only and must not be reprinted without permission. Investors should carefully consider their own investment risk.Investment results are the responsibility of the individual investor. United Kingdom: Persons who would be categorized as retail clients in theUnited Kingdom, as such term is defined in the rules of the Financial Services Authority, should read this research in conjunction with priorGoldman Sachs research on the covered companies referred to herein and should refer to the risk warnings that have been sent to them byGoldman Sachs International. A copy of these risks warnings, and a glossary of certain financial terms used in this report, are available fromGoldman 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/client_services/global_investment_research/europeanpolicy.html which states the European Policy for ManagingConflicts of Interest in Connection with 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.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 particularGoldman Sachs Global Investment Research 6
  7. 7. September 1, 2011 Compal Electronics (2324.TW)coverage 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. 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