September 1, 2011ACTIONRemoved from Asia Pacific Conviction Buy ListCheng Uei Precision (Foxlink) (2392.TW)               ...
September 1, 2011                                                                                                         ...
September 1, 2011                                                                                                         ...
September 1, 2011                                                                                                         ...
September 1, 2011                                                                                                         ...
September 1, 2011                                                                                                    Cheng...
September 1, 2011                                                                                                         ...
September 1, 2011                                                                                                  Cheng U...
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  1. 1. September 1, 2011ACTIONRemoved from Asia Pacific Conviction Buy ListCheng Uei Precision (Foxlink) (2392.TW) Equity ResearchLimited upside to our TP after margin shortfall; down to NeutralWhat happened Investment Profile Low HighWe remove Cheng Uei (Foxlink) from the Conv Buy list and downgrade to Growth GrowthNeutral as we see limited upside to our revised TP. Foxlink posted 2Q PAT of Returns * Returns *NT$624mn, (60% qoq and 181% yoy), 84% higher than GSe but 29% below Multiple MultipleReuters as Foxlink booked around NT$400mn disposal gain from selling Volatility VolatilitySollink to Qualcomm. 2Q recurring earnings excluding Sollink’s disposal gains Percentile 20th 40th 60th 80th 100th Cheng Uei Precision (Foxlink) (2392.TW)came in around NT$224mn (-43%qoq/+1%yoy), 34% below GSe mainly on Asia Pacific Technology Peer Group Averagemargin contraction on product mix changes, PQI loss and rising OPEX on * Returns = Return on Capital For a complete description of thefurther salary increases. Since we upgraded to Buy and added Foxlink to the investment profile measures please refer to the disclosure section of this document.CL on May 5, 2011, it is +29% vs. TAIEX -14% (12m +59%/ TAIEX +2%). Key data CurrentCurrent view Price (NT$) 81.50While Studio A remains the key growth driver with near 63 stores in late 12 month price target (NT$) 85.00 Market cap (NT$ mn / US$ mn) 37,894.9 / 1,305.4Aug, Studio A has lowered its 2011 year end target from 100 stores to near Foreign ownership (%) 24.690 stores and announced 2012 year end target of 130 stores. Also,following its 2Q net loss of NT$99mn, we think PQI, the DRAM module 12/10 12/11E 12/12E 12/13E EPS (NT$) New 3.71 4.84 5.60 6.17maker, may suffer a bigger loss than we earlier expected in 2H due to EPS revision (%) 0.0 (9.3) (7.9) (9.1)weak DRAM demand and falling ASP. Foxlink has lowered 2H sales growth EPS growth (%) 21.9 30.3 15.7 10.1 EPS (dil) (NT$) New 3.35 4.73 5.47 6.03(incl PQI and Studio A) guidance (2H:1H of 60:40, implying 50% hoh P/E (X) 21.9 16.8 14.5 13.2 P/B (X) 1.9 1.8 1.7 1.6growth) to 30%-50% hoh, which is still well above the overall tech industry EV/EBITDA (X) 8.8 9.2 6.9 6.1but below GSe’s original forecast of 60% hoh. We therefore revise down Dividend yield (%) 3.0 3.6 4.1 4.5 ROE (%) 9.1 11.3 12.3 12.82011E/12E/13E sales by 6%/4%/3% and net income by 10%/8%/10% as 1) CROCI (%) 15.3 12.1 18.0 13.8PQI may continue to suffer from weakening DRAM price, 2) product mixmay be less favorable at the margin (low margin battery and power supply Price performance chart 90 9,700increase in the product mix); and 3) 3Q/4Q sales may grow 19%/12% qoq 85 9,400vs. prior GSe of 30%/15% qoq. Though we remain positive on Foxlink’s 80 9,100fundamentals, we suggest investors lock in gains at this point. 75 8,800 70 8,500Valuation: Our 12m TP of NT$85 is based on 15X NTM core earnings and 65 8,200 60 7,90020X Studio A earnings, from NT$91 (based on 15X NTM EPS ex-dividend), 55 7,600as we believe this better reflects the value of the two business units. 50 7,300 45 7,000Key risks: Component shortages and slowdown of global economy. Aug-10 Dec-10 Mar-11 Jun-11 Cheng Uei Precision (Foxlink) (L) Taiwan SE Weighted Index (R)INVESTMENT LIST MEMBERSHIPNeutral Share price performance (%) 3 month 6 month 12 month Absolute 13.2 44.9 58.9 Rel. to Taiwan SE Weighted Index 31.5 61.0 56.3Coverage View: Neutral Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 8/31/2011 close.Henry King Goldman Sachs does and seeks to do business with companies+852-2978-0748 henry.king@gs.com Goldman Sachs (Asia) L.L.C.Angel Wei covered in its research reports. As a result, investors should be+886(2)2730-4187 angel.wei@gs.com Goldman Sachs (Asia) L.L.C. aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC see the end of the text. For other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non- US affiliates are not registered/qualified as research analysts with FINRA in the U.S.The Goldman Sachs Group, Inc. Global Investment Research
  2. 2. September 1, 2011 Cheng Uei Precision (Foxlink) (2392.TW) Cheng Uei Precision (Foxlink): Summary FinancialsProfit model (NT$ mn) 12/10 12/11E 12/12E 12/13E Balance sheet (NT$ mn) 12/10 12/11E 12/12E 12/13ETotal revenue 56,996.7 85,701.3 115,133.9 137,009.6 Cash & equivalents 5,755.0 8,036.9 8,860.6 10,554.9Cost of goods sold (49,904.8) (75,303.4) (101,188.2) (120,827.3) Accounts receivable 14,368.6 16,060.3 21,551.9 25,019.6SG&A (4,288.9) (6,324.3) (8,062.7) (9,388.3) Inventory 7,630.4 10,309.5 14,686.4 16,881.5R&D (1,219.8) (1,600.1) (2,044.8) (2,422.0) Other current assets 1,816.7 2,263.3 3,238.9 3,899.7Other operating profit/(expense) 0.0 (270.0) (400.0) (400.0) Total current assets 29,570.7 36,670.0 48,337.8 56,355.6ESO expense (148.0) -- 0.0 0.0 Net PP&E 16,246.0 18,478.0 19,908.7 20,651.0EBITDA 4,045.1 4,704.4 6,842.7 8,196.1 Net intangibles 1,224.0 1,342.9 1,342.9 1,342.9Depreciation & amortization (2,461.9) (2,500.9) (3,404.5) (4,224.1) Total investments 3,825.9 3,891.4 3,912.0 3,932.5EBIT 1,583.1 2,203.6 3,438.2 3,972.0 Other long-term assets 665.0 682.0 569.9 457.8Interest income 23.4 20.0 64.3 132.9 Total assets 51,531.4 61,064.4 74,071.3 82,739.8Interest expense (218.2) (243.8) (281.0) (367.4)Income/(loss) from uncons. subs. (41.1) 20.6 20.6 20.6 Accounts payable 10,823.2 14,330.6 18,718.0 20,703.7Others 863.7 949.7 339.9 339.9 Short-term debt 9,145.3 12,727.2 17,527.2 22,327.2Pretax profits 2,211.0 2,950.1 3,581.9 4,097.9 Other current liabilities 5,997.5 11,342.4 13,614.1 13,738.6Income tax (417.9) (547.6) (633.9) (717.1) Total current liabilities 25,966.0 38,400.2 49,859.4 56,769.6Minorities (58.6) (137.1) (326.2) (492.9) Long-term debt 4,811.2 486.6 486.6 486.6Net income pre-preferred dividends 1,734.4 2,265.3 2,621.8 2,887.9 Other long-term liabilities 276.0 303.7 303.7 303.7Preferred dividends 0.0 0.0 0.0 0.0 Total long-term liabilities 5,087.2 790.3 790.3 790.3Net income (pre-exceptionals) 1,734.4 2,265.3 2,621.8 2,887.9 Total liabilities 31,053.2 39,190.5 50,649.6 57,559.8Post-tax exceptionals 0.0 0.0 0.0 0.0Net income 1,734.4 2,265.3 2,621.8 2,887.9 Preferred shares 0.0 0.0 0.0 0.0 Total common equity 19,600.3 20,623.0 21,885.6 23,200.4EPS (basic, pre-except) (NT$) 3.71 4.84 5.60 6.17 Minority interest 878.0 1,250.9 1,536.1 1,979.6EPS (basic, post-except) (NT$) 3.71 4.84 5.60 6.17EPS (diluted, post-except) (NT$) 3.35 4.73 5.47 6.03 Total liabilities & equity 51,531.4 61,064.4 74,071.3 82,739.8EPS excl. ESO expense (basic) (NT$) 3.96 5.28 7.00 8.28EPS excl. ESO expense (dil.) (NT$) 3.35 4.73 5.47 6.03 BVPS (NT$) 41.98 44.07 46.77 49.58DPS (NT$) 2.48 2.90 3.36 3.70Dividend payout ratio (%) 66.6 60.0 60.0 60.0Free cash flow yield (%) (8.8) 0.1 (5.3) (2.5) Ratios 12/10 12/11E 12/12E 12/13EGrowth & margins (%) 12/10 12/11E 12/12E 12/13E CROCI (%) 15.3 12.1 18.0 13.8Sales growth 35.0 50.4 34.3 19.0 ROE (%) 9.1 11.3 12.3 12.8EBITDA growth (65.4) 16.3 45.5 19.8 ROA (%) 3.8 4.0 3.9 3.7EBIT growth 8.0 39.2 56.0 15.5 ROACE (%) 7.6 9.3 10.5 10.2Net income growth 24.2 30.6 15.7 10.1 Inventory days 45.0 43.5 45.1 47.7EPS growth 21.9 30.3 15.7 10.1 Receivables days 74.7 64.8 59.6 62.0Gross margin 12.4 12.1 12.1 11.8 Payable days 62.8 61.0 59.6 59.5EBITDA margin 7.1 5.5 5.9 6.0 Net debt/equity (%) 40.0 23.7 39.1 48.7EBIT margin 2.8 2.6 3.0 2.9 Interest cover - EBIT (X) 8.1 9.8 15.9 16.9Cash flow statement (NT$ mn) 12/10 12/11E 12/12E 12/13E Valuation 12/10 12/11E 12/12E 12/13ENet income pre-preferred dividends 1,734.4 2,265.3 2,621.8 2,887.9D&A add-back 2,461.9 2,500.9 3,404.5 4,224.1 P/E (analyst) (X) 21.9 16.8 14.5 13.2Minorities interests add-back 58.6 137.1 326.2 492.9 P/B (X) 1.9 1.8 1.7 1.6Net (inc)/dec working capital (3,886.9) (863.5) (5,481.0) (3,677.0) EV/EBITDA (X) 8.8 9.2 6.9 6.1Other operating cash flow 745.0 (423.5) 1,275.5 (556.8) EV/GCI (X) 0.9 1.1 1.0 0.9Cash flow from operations 1,113.1 3,616.4 2,147.0 3,371.0 Dividend yield (%) 3.0 3.6 4.1 4.5Capital expenditures (3,535.5) (3,595.1) (4,179.5) (4,310.5)Acquisitions (1,534.0) (511.3) (543.7) (543.7)Divestitures 0.0 0.0 0.0 0.0Others 237.0 (13.9) 0.0 0.0Cash flow from investments (4,832.4) (4,120.3) (4,723.1) (4,854.2)Dividends paid (common & pref) (1,096.3) (1,155.8) (1,359.2) (1,573.1)Inc/(dec) in debt 5,543.9 3,000.0 4,800.0 4,800.0Common stock issuance (repurchase) 0.0 0.0 0.0 0.0Other financing cash flows (17.8) 941.6 (40.9) (49.4)Cash flow from financing 4,429.8 2,785.8 3,399.9 3,177.5 Note: Last actual year may include reported and estimated data.Total cash flow 925.6 2,281.8 823.7 1,694.3 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 Cheng Uei Precision (Foxlink) (2392.TW)A catch-up Apple supplier One of the key reasons we upgraded Foxlink to Buy in May was its significant stock underperformance vs. major Apple players (Catcher, TPK, Foxconn Tech, Largan, etc), suggesting possible share price catch-up (see Exhibit 2). We argued that Foxlink can be considered a proxy for Apple (component involvement in almost all Apple’s products with 35%–40% revenue exposure to Apple). Foxlink’s share price has outperformed other Apple component suppliers in the past few months (see Exhibit 3).Exhibit 1: Foxlink’s price performance up to early May, Exhibit 2: Foxlink’s price performance as of Aug 30, 20112011 Foxlink’s share price performance has caught up other majorFoxlink’s share price was lagging major Apple component Apple component supplierssuppliers in May 65% Apple suppliers relative performance in 2011ytd Still in 2011, Foxlinks share price performance has continued to lag that of the other major Apple component suppliers 140% 55% Catcher 120% CATCHER ,111% 45% 100% 35% 80% TPK 25% 60% Largan 15% Foxconn Tech 40% Foxlink, 24% 5% APPLE, 18% Apple 20% LARGAN, 15% TWSE Jan-11 Feb-11 Apr-11 Mar-11 TPK, 5% -5% TWSELEC 0% Jun-11 Jul-11 Aug-11 Sep-11 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Foxlink FTC, -12% TWSE, -15% -15% -20% TW-ELTRN, -20%Source: Datastream, Goldman Sachs Research estimates Source: Datastream, Goldman Sachs Research estimatesStudio A expansion to slightly miss 2011 target of 100 stores While Studio A remains the key growth driver with near 63 stores in late Aug, Studio has lowered its full year target from previous expansion to 100 stores to near 90 stores by the end of 2011 and announced plans to expand to 130 stores by the end of 2012. Exhibit 3: Studio A store expansion in 2011E 100 Apple store: slightly falls short of 2011s original target of 100 stores across four regions 90 10 80 70 3 60 33 2 50 - 26 23 4 40 20 3 2 30 2 20 40 31 32 27 10 - 1Q11 2Q11E 3Q11E 4Q11E Taiwan HK Korea China Source: Company data, Goldman Sachs Research estimates.Goldman Sachs Global Investment Research 3
  4. 4. September 1, 2011 Cheng Uei Precision (Foxlink) (2392.TW) Exhibit 4: Goldman Sachs revisions Consolidated financials Revised Original Revised Original Revised Original (fully-loaded) (fully-loaded) (fully-loaded) (fully-loaded) (fully-loaded) (fully-loaded) (NT$ mn) 2011E 2011E Difference 2012E 2012E Difference 2013E 2013E Difference Revenue 85,701 90,911 -5.7% 115,134 119,892 -4.0% 137,010 140,777 -2.7% Gross profits 10,398 11,166 -6.9% 13,946 14,390 -3.1% 16,182 16,538 -2.2% Operating profits 2,204 2,595 -15.1% 3,438 3,718 -7.5% 3,972 4,395 -9.6% Pretax earnings 2,950 3,349 -11.9% 3,582 3,867 -7.4% 4,098 4,537 -9.7% Net earnings 2,265 2,511 -9.8% 2,622 2,861 -8.4% 2,888 3,194 -9.6% Gross margin 12.1% 12.3% 12.1% 12.0% 11.8% 11.7% Operating margin 2.6% 2.9% 3.0% 3.1% 2.9% 3.1% Net margin 2.6% 2.8% 2.3% 2.4% 2.1% 2.3% Source: Company data, Goldman Sachs Research estimates.Exhibit 5: Foxlink’s quarterly P&L Summary 2011E 2012E 2013E 1Q11 2Q11 3Q11E 4Q11E 1Q12E 2Q12E 3Q12E 4Q12E 1Q13E 2Q13E 3Q13E 4Q13E 2010 2011E 2012E 2013ENet sales 14,749 20,121 23,991 26,840 23,818 25,597 31,380 34,338 30,196 31,676 36,140 38,997 56,997 85,701 115,134 137,010Gross profits 1,888 2,375 2,925 3,210 2,892 3,105 3,864 4,085 3,504 3,675 4,353 4,650 7,092 10,398 13,946 16,182Operating profits (loss) 392 301 721 790 675 672 1,051 1,041 793 773 1,164 1,243 1,583 2,204 3,438 3,972Pretax profits 548 826 773 804 710 707 1,087 1,078 823 803 1,196 1,276 2,211 2,950 3,582 4,098Net profits 390 624 624 627 516 499 815 792 579 545 858 906 1,734 2,265 2,622 2,888Basic EPS 0.84 1.34 1.33 1.34 1.10 1.07 1.74 1.69 1.24 1.16 1.83 1.94 3.75 4.84 5.60 6.17Ratio analysis% of salesGross margins 12.8% 11.8% 12.2% 12.0% 12.1% 12.1% 12.3% 11.9% 11.6% 11.6% 12.0% 11.9% 12.4% 12.1% 12.1% 11.8%Operating expense 10.1% 10.3% 9.2% 9.0% 9.3% 9.5% 9.0% 8.9% 9.0% 9.2% 8.8% 8.7% 9.7% 9.6% 9.1% 8.9%Operating margins 2.7% 1.5% 3.0% 2.9% 2.8% 2.6% 3.3% 3.0% 2.6% 2.4% 3.2% 3.2% 2.8% 2.6% 3.0% 2.9%Tax rate (fully tax at 25%) 22.5% 22.5% 15.2% 15.0% 18.0% 18.0% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 18.9% 18.6% 17.7% 17.5%Net margins 2.6% 3.1% 2.6% 2.3% 2.2% 1.9% 2.6% 2.3% 1.9% 1.7% 2.4% 2.3% 3.0% 2.6% 2.3% 2.1%Qoq grow th (%)Sales (23.4%) 36.4% 19.2% 11.9% (11.3%) 7.5% 22.6% 9.4% (12.1% ) 4.9% 14.1% 7.9%Gross profits (20.2%) 25.8% 23.1% 9.8% (9.9%) 7.4% 24.5% 5.7% (14.2% ) 4.9% 18.5% 6.8%Operating profits (45.4%) (23.3% ) 139.5% 9.6% (14.6%) (0.3% ) 56.3% (1.0%) (23.8% ) (2.5%) 50.6% 6.8%Non-operating profits (222.3%) 236.8% (90.1%) (73.3% ) 153.0% (1.2% ) 4.7% 1.1% (16.5% ) (1.3%) 5.4% 1.3%Net profits (15.6%) 59.8% 0.1% 0.3% (17.6%) (3.3% ) 63.4% (2.9%) (26.9% ) (5.8%) 57.4% 5.5%Yoy grow th (%)Sales 73.4% 61.3% 43.2% 39.4% 61.5% 27.2% 30.8% 27.9% 26.8% 23.7% 15.2% 13.6% 35.0% 50.4% 34.3% 19.0%Gross profits 114.0% 57.7% 25.1% 35.7% 53.2% 30.7% 32.1% 27.2% 21.2% 18.3% 12.7% 13.8% 22.5% 46.6% 34.1% 16.0%Operating profits 3,262.5% 138.9% (0.8%) 9.8% 71.9% 123.4% 45.8% 31.8% 17.5% 14.9% 10.7% 19.5% 8.0% 39.2% 56.0% 15.5%Non-operating profits 100.2% 214.9% (89.8%) (111.0% ) (77.3%) (93.3% ) (30.0%) 164.8% (12.6% ) (12.7%) (12.2% ) (12.0%) 78.4% 18.9% (80.8%) (12.4%)Net profits 778.2% 180.9% (37.9%) 35.5% 32.2% (20.0% ) 30.5% 26.3% 12.2% 9.3% 5.3% 14.4% 24.2% 30.6% 15.7% 10.1%Source: Company data, Goldman Sachs Research estimates.Goldman Sachs Global Investment Research 4
  5. 5. September 1, 2011 Cheng Uei Precision (Foxlink) (2392.TW) Exhibit 6: Share price performance vs. peer group Closing prices as of Aug 31, 2011 Price Price as of Price performance 3 month price 6 month price 12 month price Company Ticker Primary analyst currency 08/31/11 since 05/05/11 performance performance performance Asia Pacific Technology Peer Group Cheng Uei Precision (Foxlink) 2392.TW Henry King NT$ 81.50 29.4% 13.2% 44.9% 58.9% AAC Technologies 2018.HK Robert Yen HK$ 16.30 -22.2% -18.9% -16.7% 14.5% Acer 2353.TW Henry King NT$ 35.00 -34.6% -37.6% -51.3% -53.4% Advanced Semiconductor Engineering 2311.TW Edward Yen NT$ 26.00 -13.6% -18.1% -13.0% 31.5% Advanced Semiconductor Engineering (ADR) ASX Edward Yen $ 4.49 -15.4% -18.6% -12.5% 47.7% Anhui USTC iFLYTEK 002230.SZ Sam Li Rmb 36.00 -18.4% -3.4% -21.0% 10.1% AsiaInfo-Linkage ASIA Donald Lu, Ph.D $ 11.44 -43.2% -36.2% -43.8% -35.9% ASM Pacific Technology 0522.HK Donald Lu, Ph.D HK$ 80.40 -25.8% -24.0% -22.1% 27.7% ASUSTeK Computer 2357.TW Henry King NT$ 245.00 11.3% -0.4% 11.1% 40.0% AU Optronics 2409.TW Liang-chun Lin NT$ 13.80 -40.1% -41.4% -48.7% -50.1% AutoNavi Holdings Ltd. AMAP Sam Li $ 15.18 -16.1% -11.4% -4.5% -2.3% Beijing Bewinner Communications 002148.SZ Sam Li Rmb 17.28 -12.9% -1.8% -36.9% -32.1% Beijing Ultrapower Software 300002.SZ Sam Li Rmb 33.33 -1.4% 7.2% -20.3% -31.7% BYD Electronic 0285.HK Robert Yen HK$ 2.34 -45.3% -41.5% -52.7% -37.4% Camelot Information Systems CIS Evan Xu $ 5.91 -67.9% -68.0% -71.7% -60.7% Catcher Technology 2474.TW Henry King NT$ 227.50 21.0% 21.7% 83.5% 221.3% Chimei Innolux 3481.TW Liang-chun Lin NT$ 12.60 -55.6% -56.3% -60.1% -61.9% China Wireless Technologies 2369.HK Robert Yen HK$ 1.48 -49.0% -21.3% -48.8% -54.0% Chipbond Technology Corp. 6147.TWO Edward Yen NT$ 26.50 -38.9% -47.3% -47.9% -31.7% Compal Communications 8078.TW Robert Yen NT$ 31.35 33.4% 11.6% 11.0% 25.1% Compal Electronics 2324.TW Henry King NT$ 31.10 -3.0% -10.5% -10.5% -13.4% Coretronic 5371.TWO Liang-chun Lin NT$ 26.15 -41.9% -43.5% -45.1% -39.0% Delta Electronics 2308.TW Robert Yen NT$ 85.00 -34.9% -25.4% -31.2% -30.0% E Ink Holdings Inc 8069.TWO Robert Yen NT$ 62.40 2.3% -3.4% 20.0% 31.5% Epistar 2448.TW Liang-chun Lin NT$ 62.00 -30.3% -34.7% -38.9% -24.9% Everlight Electronics 2393.TW Liang-chun Lin NT$ 54.20 -32.6% -31.0% -34.9% -34.1% Foxconn International Holdings 2038.HK Robert Yen HK$ 3.87 -10.8% -11.8% -29.8% -25.1% Foxconn Technology 2354.TW Henry King NT$ 103.00 -25.4% -21.9% 2.0% 17.8% HCL Technologies Ltd. HCLT.BO Balaji V. Prasad Rs 411.20 -17.1% -19.2% -7.0% 4.7% Hon Hai Precision 2317.TW Henry King NT$ 73.30 -25.3% -19.8% -26.0% -28.6% HTC Corp. 2498.TW Robert Yen NT$ 756.00 -36.5% -34.9% -25.5% 35.7% Hunan Talkweb Information System 002261.SZ Sam Li Rmb 17.43 -17.5% -9.1% -29.7% -15.4% Hynix Semiconductor 000660.KS Marcus Shin W 19,100.00 -41.1% -36.5% -32.6% -9.5% Infosys Ltd. INFY.BO Balaji V. Prasad Rs 2,342.80 -17.6% -15.7% -22.0% -13.1% Infosys Ltd. (ADR) INFY Balaji V. Prasad $ 51.62 -18.5% -16.4% -22.6% -9.9% Kinsus Interconnect Technology 3189.TW Edward Yen NT$ 105.00 1.0% -18.6% 13.5% 64.1% Largan Precision 3008.TW Robert Yen NT$ 829.00 -11.1% -12.1% 2.2% 43.4% Lenovo Group 0992.HK Henry King HK$ 5.22 21.1% 14.0% 10.8% 17.0% LG Display 034220.KS Michael Bang W 20,900.00 -45.8% -41.8% -41.6% -37.2% LG Electronics 066570.KS Michael Bang W 66,600.00 -36.9% -31.5% -40.0% -30.9% LG Innotek Co. 011070.KS Michael Bang W 71,600.00 -32.1% -27.0% -43.8% -45.8% Lite-On Technology 2301.TW Robert Yen NT$ 31.50 -13.3% -13.6% -14.4% -14.2% Mediatek 2454.TW Donald Lu, Ph.D NT$ 291.50 -16.1% -8.9% -12.7% -33.2% Mphasis MBFL.BO Balaji V. Prasad Rs 353.45 -17.4% -24.8% -18.0% -43.2% MStar Semiconductor 3697.TW Donald Lu, Ph.D NT$ 158.50 -25.7% -11.4% -34.8% NA Nan Ya PCB 8046.TW Edward Yen NT$ 95.60 -4.4% -14.7% -7.1% -4.4% Nationz Technologies 300077.SZ Sam Li Rmb 26.84 -20.1% -5.2% -43.5% -48.6% NavInfo Co. 002405.SZ Sam Li Rmb 29.00 -3.9% 0.1% -27.4% -17.5% Novatek Microelectronics 3034.TW Liang-chun Lin NT$ 76.00 -15.3% -22.4% -16.3% -0.5% Patni Computer Systems Ltd. PTNI.BO Rishi Jhunjhunwala Rs 288.75 -25.6% -20.8% -35.7% -37.7% Patni Computer Systems Ltd. (ADR) PTI Rishi Jhunjhunwala $ 12.83 -24.6% -17.6% -34.5% -32.8% Pegatron 4938.TW Henry King NT$ 28.10 -7.1% -8.9% -19.7% -29.9% Powertech Technology 6239.TW Edward Yen NT$ 69.70 -25.9% -28.3% -25.9% -19.3% Quanta Computer 2382.TW Henry King NT$ 58.70 -3.1% -9.8% 1.0% 20.8% Radiant Opto-Electronics 6176.TW Liang-chun Lin NT$ 95.70 4.6% -8.7% 49.3% 136.4% Rolta India ROLT.BO Rishi Jhunjhunwala Rs 99.35 -25.0% -27.7% -28.9% -39.0% Samsung Electro-Mechanics 009150.KS Marcus Shin W 67,500.00 -35.7% -27.3% -47.7% -40.8% Samsung Electronics 005930.KS Michael Bang W 744,000.00 -18.7% -17.5% -19.4% -1.6% Samsung SDI Co 006400.KS Marcus Shin W 140,000.00 -25.5% -20.7% -15.9% -16.7% Samsung Techwin 012450.KS Marcus Shin W 58,400.00 -32.0% -27.0% -26.3% -47.1% Seoul Semiconductor 046890.KQ Marcus Shin W 27,300.00 -17.1% 0.7% -35.2% -25.2% Siliconware Precision Industries 2325.TW Edward Yen NT$ 26.45 -32.0% -31.4% -35.3% -8.3% Siliconware Precision Industries (ADR) SPIL Edward Yen $ 4.59 -31.9% -31.1% -32.4% 2.9% Silitech Technology 3311.TW Robert Yen NT$ 77.90 9.7% 9.1% 4.3% -11.2% SK C&C 034730.KS Seung Shin W 141,500.00 25.8% 8.8% 49.1% 54.8% Tata Consultancy Services Ltd. TCS.BO Balaji V. Prasad Rs 1,040.60 -6.6% -9.8% -6.5% 22.9% TCL Communication 2618.HK Robert Yen HK$ 4.71 -34.9% -24.8% -41.1% 10.8% TPK Holding 3673.TW Liang-chun Lin NT$ 704.00 -21.4% -20.9% -9.6% NA TPV Technology 0903.HK Liang-chun Lin HK$ 3.49 -20.5% -23.6% -23.8% -24.8% Tripod Technology 3044.TW Edward Yen NT$ 97.60 -18.2% -19.8% -17.9% -1.5% TSMC 2330.TW Donald Lu, Ph.D NT$ 69.40 -7.2% -9.5% -1.6% 17.8% TSMC (ADR) TSM Donald Lu, Ph.D $ 11.97 -11.7% -12.4% -2.6% 27.3% UFIDA Software Co. 600588.SS Evan Xu Rmb 23.99 19.2% 21.6% 9.6% 3.6% Unimicron 3037.TW Edward Yen NT$ 41.95 -11.1% -20.8% -23.7% -17.3% United Microelectronics Corp. 2303.TW Donald Lu, Ph.D NT$ 11.30 -24.7% -23.6% -26.6% -13.1% United Microelectronics Corp. (ADR) UMC Donald Lu, Ph.D $ 1.99 -28.2% -26.8% -28.9% -22.6% Wintek 2384.TW Liang-chun Lin NT$ 25.00 -36.3% -28.4% -51.8% -30.9% Wipro Ltd. WIPR.BO Balaji V. Prasad Rs 335.05 -22.5% -24.1% -23.6% -15.9% Wipro Ltd. (ADR) WIT Balaji V. Prasad $ 9.98 -26.0% -27.8% -24.2% -22.2% Wistron 3231.TW Henry King NT$ 36.10 -25.4% -29.8% -28.3% -24.3% Young Fast Optoelectronics 3622.TW Liang-chun Lin NT$ 85.60 -53.1% -53.9% -65.6% -73.1% ZTE Corporation (A) 000063.SZ Donald Lu, Ph.D Rmb 18.65 -14.6% -13.9% -30.7% -9.9% ZTE Corporation (H) 0763.HK Donald Lu, Ph.D HK$ 21.60 -19.7% -22.0% -27.8% -10.3% Taiwan SE Weighted Index 7,741 -14.2% -13.9% -10.0% 1.6% Note: Prices as of most recent available close, which could vary from the price date indicated above. This table shows movement in absolute share price and not total shareholder return. Results presented should not and cannot be viewed as an indicator of future performance. Source: Factset, Quantum DatabaseGoldman Sachs Global Investment Research 5
  6. 6. September 1, 2011 Cheng Uei Precision (Foxlink) (2392.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 beneficially owned 1% or more of common equity (excluding positions managed by affiliates and business units not required to beaggregated under US securities law) as of the month end preceding this report: Cheng Uei Precision (Foxlink) (NT$81.50)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 6
  7. 7. September 1, 2011 Cheng Uei Precision (Foxlink) (2392.TW)Price target and rating history chart(s) Cheng Uei Precis ion (Foxlink) (2392.TW) Stock Price Currency : Taiw an Dollar Goldman Sachs rating and stock price target history 100 10,000 65.35 80 90 67.33 59.41 64 9,000 80 58.24 51.45 61.39 52.42 44.65 8,000 70 43.68 60 7,000 50 92 6,000 40 5,000 30 20 4,000 Stock Price Index Price N A S O N D J F MA MJ 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 May 4, 2011 to B f rom N 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 7
  8. 8. September 1, 2011 Cheng Uei Precision (Foxlink) (2392.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. 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 & Partners Australia Pty Ltd (ABN 21 006 797 897) on behalf of Goldman Sachs; in Brazil by GoldmanSachs do Brasil Banco Múltiplo S.A.; in Canada by Goldman Sachs & Co. regarding Canadian equities and by Goldman Sachs & Co. (all otherresearch); in Hong Kong by Goldman Sachs (Asia) L.L.C.; in India by Goldman Sachs (India) Securities Private Ltd.; in Japan by Goldman SachsJapan Co., Ltd.; in the Republic of Korea by Goldman Sachs (Asia) L.L.C., Seoul Branch; in New Zealand by Goldman Sachs & Partners NewZealand Limited on behalf of Goldman Sachs; in Russia by OOO Goldman Sachs; in Singapore by Goldman Sachs (Singapore) Pte. (CompanyNumber: 198602165W); and in the United States of America by Goldman Sachs & Co. 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