華寶8078

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華寶8078

  1. 1. August 22, 2011ACTIONBuyCompal Communications (8078.TW)Return Potential: 67% Equity ResearchShare price correction reflects over-stated concern; reiterate CL-BuySource of opportunity Investment Profile Low HighCompal Comm (CCI) shares traded limit down on Aug 22. Apart from the Growth Growthbroad tech weakness this was due to a Commercial Times article (8/21) Returns * Returns *suggesting CCI’s turnaround hopes could be fading given HP’s official Multiple Multipleannouncement that it will discontinue its WebOS hardware business, for Volatility Volatilitywhich CCI is one of the ODM partners (the other is FIH). We believe this article Percentile 20th 40th 60th 80th 100th Compal Communications (8078.TW)exaggerated the impact of HP’s decision, since CCI currently has very limited Asia Pacific Technology Peer Group Averagesales exposure to HP/Palm (we estimated <5% in 3Q11 and this will continue * Returns = Return on Capital For a complete description of theto drop significantly), and CCI has already re-allocated most of its WebOS investment profile measures please refer to the disclosure section of this document.supporting resources to other projects such as Windows Phone (WP). Key data CurrentCatalyst Price (NT$) 29.90We reiterate our Buy rating (on Conv. List). Our turnaround thesis on CCI is 12 month price target (NT$) 50.00 Market cap (NT$ mn / US$ mn) 18,101.0 / 624.1based in majority on the first-ever substantial smartphone outsourcing Foreign ownership (%) 5.4opportunity from Nokia on WP7 + Qualcomm platform, where CCI is currentlythe sole ODM partner with Nokia. We continue to see CCI as the best stock 12/10 12/11E 12/12E 12/13E EPS (NT$) (0.56) (0.65) 1.86 2.45for investors to benefit from the low-end smartphone growth, given CCI’s EPS growth (%) (142.6) (17.3) 383.6 31.9strong business potential with Nokia on low-end WP7 smartphones for EPS (diluted) (NT$) (0.56) (0.65) 1.86 2.45 EPS (basic pre-ex) (NT$) (0.56) (0.65) 1.86 2.45emerging markets in 2012, and it has very limited legacy high-end business to P/E (X) NM NM 16.1 12.2 P/B (X) 1.8 1.9 1.7 1.4be dilutive. Catalysts: (1) near term monthly sales: we believe its near term EV/EBITDA (X) NM NM 8.4 5.5monthly sales should pick up gradually from Aug and accelerate in Nov/Dec, Dividend yield (%) 3.3 0.0 0.0 3.1 ROE (%) (3.2) (4.0) 10.9 12.6on completion of model transition and customer product launch; (2) Nokia’s CROCI (%) (19.3) (7.0) 27.0 31.9aggressive marketing push in 4Q: according to Nokia’s VP Chris Weber,Nokia and Microsoft will be pushing marketing activities on the WP7 device Price performance chart 40 10,000aggressively, increasing consumer interest in Nokia’s WP7-based devices. 38 9,700 36 9,400 34 9,100Valuation 32 8,800Our 12-m TP of NT$50 is based on 5.2X ‘12E EV/GCI derived from the 30 8,500 28 8,200historical matrix since 2003 (implying 2.8X or 27X ‘12E P/B or P/E). 26 7,900 24 7,600 22 7,300Key risks 20 7,000 Aug-10 Nov-10 Feb-11 Jun-11Market acceptance of Nokia’s WP7 and Nokia’s outsourcing strategy. Compal Communications (L) Taiwan SE Weighted Index (R)INVESTMENT LIST MEMBERSHIPAsia Pacific Buy List Share price performance (%) 3 month 6 month 12 monthAsia Pacific Conviction Buy List Absolute 24.6 3.8 12.4 Rel. to Taiwan SE Weighted Index 50.9 25.0 21.4Coverage View: Neutral Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 8/19/2011 close.Robert Yen Goldman Sachs does and seeks to do business with companies+886(2)2730-4196 rob.yen@gs.com Goldman Sachs (Asia) L.L.C., Taipei BranchIris Wu covered in its research reports. As a result, investors should be+886(2)2730-4186 iris.wu@gs.com Goldman Sachs (Asia) L.L.C., Taipei Branch aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC see the end of the text. For other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non- US affiliates are not registered/qualified as research analysts with FINRA in the U.S.The Goldman Sachs Group, Inc. Global Investment Research
  2. 2. August 22, 2011 Compal Communications (8078.TW) Compal Communications: Summary FinancialsProfit model (NT$ mn) 12/10 12/11E 12/12E 12/13E Balance sheet (NT$ mn) 12/10 12/11E 12/12E 12/13ETotal revenue 14,423.8 14,163.2 31,902.3 40,459.5 Cash & equivalents 8,887.1 8,444.9 8,585.2 10,425.3Cost of goods sold (12,826.1) (12,519.9) (28,664.9) (36,683.2) Accounts receivable 1,925.6 3,444.5 6,343.5 6,638.4SG&A (529.6) (567.2) (596.7) (655.2) Inventory 1,983.3 4,542.5 8,565.7 9,090.6R&D (1,813.4) (1,669.7) (1,838.8) (2,008.7) Other current assets 388.1 181.5 181.5 181.5Other operating profit/(expense) 0.0 0.0 0.0 0.0 Total current assets 13,184.2 16,613.4 23,675.9 26,335.7ESO expense -- -- -- -- Net PP&E 1,156.9 887.1 713.5 612.9EBITDA (156.6) (172.6) 1,137.8 1,391.0 Net intangibles 0.0 0.0 0.0 0.0Depreciation & amortization (588.6) (421.0) (335.9) (278.5) Total investments 16.7 16.4 16.4 16.4EBIT (745.3) (593.7) 801.9 1,112.5 Other long-term assets 174.7 177.2 177.2 177.2Interest income 55.5 69.2 83.5 113.3 Total assets 14,532.4 17,694.1 24,583.1 27,142.3Interest expense 0.0 0.0 0.0 0.0Income/(loss) from uncons. subs. 7.7 (0.2) 0.0 0.0 Accounts payable 2,507.2 6,333.1 11,876.3 12,697.0Others 327.7 129.7 333.1 407.4 Short-term debt 14.6 0.0 0.0 0.0Pretax profits (354.4) (395.0) 1,218.6 1,633.3 Other current liabilities 1,722.6 1,476.0 1,502.7 1,501.1Income tax (1.1) (0.9) (95.0) (150.7) Total current liabilities 4,244.5 7,809.2 13,379.0 14,198.2Minorities 17.9 (0.2) 0.0 0.0 Long-term debt 0.0 0.0 0.0 0.0Net income pre-preferred dividends (337.6) (396.1) 1,123.6 1,482.5 Other long-term liabilities 295.9 277.8 277.8 277.8Preferred dividends 0.0 0.0 0.0 0.0 Total long-term liabilities 295.9 277.8 277.8 277.8Net income (pre-exceptionals) (337.6) (396.1) 1,123.6 1,482.5 Total liabilities 4,540.4 8,086.9 13,656.7 14,475.9Post-tax exceptionals 0.0 0.0 0.0 0.0Net income (337.6) (396.1) 1,123.6 1,482.5 Preferred shares 0.0 0.0 0.0 0.0 Total common equity 9,992.1 9,607.1 10,926.3 12,666.2EPS (basic, pre-except) (NT$) (0.56) (0.65) 1.86 2.45 Minority interest (0.1) 0.1 0.1 0.1EPS (basic, post-except) (NT$) (0.56) (0.65) 1.86 2.45EPS (diluted, post-except) (NT$) (0.56) (0.65) 1.86 2.45 Total liabilities & equity 14,532.4 17,694.1 24,583.1 27,142.3EPS excl. ESO expense (basic) (NT$) (0.56) (0.65) 2.15 2.83EPS excl. ESO expense (dil.) (NT$) (0.56) (0.65) 2.15 2.83 BVPS (NT$) 16.51 15.87 18.05 20.92DPS (NT$) 1.00 0.00 0.00 0.93Dividend payout ratio (%) (179.3) 0.0 0.0 37.9Free cash flow yield (%) (6.8) (1.9) 1.1 10.5 Ratios 12/10 12/11E 12/12E 12/13EGrowth & margins (%) 12/10 12/11E 12/12E 12/13E CROCI (%) (19.3) (7.0) 27.0 31.9Sales growth (42.0) (1.8) 125.2 26.8 ROE (%) (3.2) (4.0) 10.9 12.6EBITDA growth (113.2) (10.2) 759.1 22.3 ROA (%) (2.0) (2.5) 5.3 5.7EBIT growth (290.1) 20.3 235.1 38.7 ROACE (%) (48.8) (40.8) 59.7 60.2Net income growth (142.6) (17.3) 383.6 31.9 Inventory days 66.7 95.1 83.5 87.8EPS growth (142.6) (17.3) 383.6 31.9 Receivables days 69.9 69.2 56.0 58.6Gross margin 11.1 11.6 10.1 9.3 Payable days 112.6 128.9 115.9 122.3EBITDA margin (1.1) (1.2) 3.6 3.4 Net debt/equity (%) (88.8) (87.9) (78.6) (82.3)EBIT margin (5.2) (4.2) 2.5 2.7 Interest cover - EBIT (X) 13.4 8.6 NM NMCash flow statement (NT$ mn) 12/10 12/11E 12/12E 12/13E Valuation 12/10 12/11E 12/12E 12/13ENet income pre-preferred dividends (337.6) (396.1) 1,123.6 1,482.5D&A add-back 588.6 421.0 335.9 278.5 P/E (analyst) (X) NM NM 16.1 12.2Minorities interests add-back (17.9) 0.2 0.0 0.0 P/B (X) 1.8 1.9 1.7 1.4Net (inc)/dec working capital (533.9) (31.6) (1,151.3) 33.1 EV/EBITDA (X) NM NM 8.4 5.5Other operating cash flow (974.2) (247.0) (5.6) 223.8 EV/GCI (X) 2.2 2.2 1.6 1.3Cash flow from operations (1,275.0) (253.5) 302.6 2,018.0 Dividend yield (%) 3.3 0.0 0.0 3.1Capital expenditures 87.2 (92.6) (104.5) (120.1)Acquisitions (50.4) (60.3) (57.8) (57.8)Divestitures 47.7 0.0 0.0 0.0Others (71.7) (21.2) 0.0 0.0Cash flow from investments 12.8 (174.1) (162.2) (177.9)Dividends paid (common & pref) (605.4) 0.0 0.0 0.0Inc/(dec) in debt 14.6 (14.6) 0.0 0.0Common stock issuance (repurchase) (322.7) 11.2 0.0 0.0Other financing cash flows 295.6 (11.2) 0.0 0.0Cash flow from financing (617.9) (14.7) 0.0 0.0 Note: Last actual year may include reported and estimated data.Total cash flow (1,880.1) (442.2) 140.3 1,840.1 Source: Company data, Goldman Sachs Research estimates. Analyst Contributors Robert Yen rob.yen@gs.com Iris Wu iris.wu@gs.com Goldman Sachs Global Investment Research 2
  3. 3. August 22, 2011 Compal Communications (8078.TW)Exhibits Exhibit 1: WebOS device accounts for a very limited portion of CCI’s revenues; we expect Nokia’s WP7 smartphones to be the major growth driver NT$mn Compal Comm (8078.TW) - Revenues by customer 45,000 Others 40,000 11% 35,000 5% PC OEMs (including 5% HP)...etc 30,000 16% Palm (before HP 25,000 acquisition) 7% 11% 76% 20,000 Nokia 13% 89% 65% 15,000 LGE 10,000 45% 57% 65% 5,000 10% 25% 4% Motorola 17% 13% 19% 26% - 2008 2009 2010 2011E 2012E 2013E Source: Company data, Goldman Sachs Research estimates.Exhibit 2: We expect CCI’s share price to continue Exhibit 3: We don’t think market has factored in CCI’strending higher on the back of strong CROCI recovery strong ROE expansion potential in 2012ECCI historical EV/GCI vs. CROCI chart CCI historical P/B vs. ROE chart P/B (X)EV/GCI (X) Compal Comm (8078.TW) EV/GCI vs. CROCI CROCI Compal Comm (8078.TW) P/B vs. ROE 10.0 Fwd P/B (L) Median P/B (L) ROE (R) Median ROE (R) 60%70.0 EV/GCI (L) Median EV/GCI (L) CROCI (R) Median CROCI (R) 600% 9.0 50%60.0 500% 8.0 7.0 40%50.0 400% 6.0 30%40.0 300% 5.0 20% 4.030.0 200% Median ROE: 12% 3.0 10% Median. P/B: 2.8X20.0 100% 2.0 Median: 71% Current: 1.7X 0% 1.0 Median: 9.2X10.0 0% 0.0 -10% Current: 2.0X Dec-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 0.0 -100% Dec-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11Source: Datastream, company data, Goldman Sachs Research estimates. Source: Datastream, company data, Goldman Sachs Research estimates.Goldman Sachs Global Investment Research 3
  4. 4. August 22, 2011 Compal Communications (8078.TW)Exhibit 4: CCI’s quarterly profit model (consolidated, NT$mn)Summary P&L (GAAP) 1Q2011 2Q2011E 3Q2011E 4Q2011E 1Q2012E 2Q2012E 3Q2012E 4Q2012E 2010 2011E 2012E 2013ENet sales 2,806 2,876 2,615 5,866 4,666 7,448 8,565 11,222 14,424 14,163 31,902 40,460 Cost of good sold (COGS) (2,453) (2,528) (2,304) (5,234) (4,168) (6,673) (7,699) (10,125) (12,826) (12,520) (28,665) (36,683)Gross profits 352 348 311 632 499 776 866 1,097 1,598 1,643 3,237 3,776 Operating expenses (524) (529) (537) (647) (551) (597) (604) (684) (2,343) (2,237) (2,435) (2,664) SG&A (135) (138) (138) (155) (130) (150) (153) (163) (530) (567) (597) (655) R&D (389) (391) (398) (491) (421) (447) (451) (520) (1,813) (1,670) (1,839) (2,009)Operating profits (172) (182) (226) (14) (52) 179 262 413 (745) (594) 802 1,112Non-operating income/(loss) 48 33 32 85 71 100 110 136 391 199 417 521Earnings before tax (EBT) (124) (148) (193) 71 19 279 372 549 (354) (395) 1,219 1,633 Income tax credit/(expense) (0) (0) (1) 0 (1) (20) (29) (44) (1) (1) (95) (151) Extraordinary gain/(loss) - - - - - - - - - - - - Minority Interests (0) - - - - - - - 18 (0) - -Earnings after tax (EAT) (125) (149) (194) 71 17 258 344 504 (338) (396) 1,124 1,483EPS (NT$) (0.21) (0.25) (0.32) 0.12 0.03 0.43 0.57 0.83 (0.56) (0.65) 1.86 2.45EPS (NT$, fully diluted) (0.21) (0.25) (0.32) 0.12 0.03 0.43 0.57 0.83 (0.56) (0.65) 1.86 2.45Ratio analysis and assumptionsAs % of sales Gross margin 12.6% 12.1% 11.9% 10.8% 10.7% 10.4% 10.1% 9.8% 11.1% 11.6% 10.1% 9.3% Operating expense ratio -18.7% -18.4% -20.5% -11.0% -11.8% -8.0% -7.1% -6.1% -16.2% -15.8% -7.6% -6.6% Operating margin -6.1% -6.3% -8.6% -0.2% -1.1% 2.4% 3.1% 3.7% -5.2% -4.2% 2.5% 2.7% Pre-tax margin -4.4% -5.2% -7.4% 1.2% 0.4% 3.7% 4.3% 4.9% -2.5% -2.8% 3.8% 4.0% Tax rate (as % of EBT) -0.2% -0.2% -0.3% -0.3% 7.0% 7.4% 7.7% 8.1% -0.3% -0.2% 7.8% 9.2% Net margin -4.4% -5.2% -7.4% 1.2% 0.4% 3.5% 4.0% 4.5% -2.3% -2.8% 3.5% 3.7%QoQ growth (%) Sales -33.1% 2.5% -9.1% 124.3% -20.5% 59.6% 15.0% 31.0% Gross profits -30.4% -1.2% -10.5% 103.2% -21.1% 55.6% 11.7% 26.6% Operating profits NM NM NM NM NM NM 46.5% 57.5% Non-operating profits -60.7% -30.6% -3.4% 164.5% -16.9% 41.0% 10.5% 23.2% Pre-tax profits NM NM NM NM -73.8% 1402.9% 33.6% 47.3% Net profits NM NM NM NM -75.7% 1397.2% 33.1% 46.7% EPS (weighted averaged) NM NM NM NM -75.7% 1397.2% 33.1% 46.7%Yoy growth (%) Sales -30.6% -4.6% -17.7% 40.0% 66.3% 159.0% 227.5% 91.3% -42.0% -1.8% 125.2% 26.8% Gross profits -22.1% -10.8% 24.8% 24.8% 41.6% 123.0% 178.4% 73.5% -48.1% 2.9% 97.0% 16.6% Operating profits NM NM NM NM NM NM NM NM NM NM NM 38.7% Non-operating profits -27.6% -73.4% -58.2% -30.4% 47.4% 199.5% 242.6% 59.5% -27.0% -49.2% 109.7% 25.0% Pre-tax profits NM NM NM 17.1% NM NM NM 675.4% NM NM NM 34.0% Net profits NM NM NM 18.5% NM NM NM 610.5% NM NM NM 31.9% EPS (weighted averaged) NM NM NM 18.5% NM NM NM 610.5% NM NM NM 31.9%Dividend policies Cash dividends (NT$ per share) 1.00 - - 0.93 Payout ratio (%) 76.4% - - 50.0%Source: Company data, Goldman Sachs Research estimates.Financial Advisory disclosure Goldman Sachs & Co., and/or one of its affiliates is acting as advisor to Autonomy Corp Plc in connection with a proposed transaction by Hewlett Packard, and as such is an associate of Autonomy Corp Plc for the purpose of the Takeover Panel Rules.Goldman Sachs Global Investment Research 4
  5. 5. August 22, 2011 Compal Communications (8078.TW)Reg ACI, Robert Yen, 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)Robert Yen: 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.There are no company-specific disclosures for: Compal Communications (NT$29.90)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. August 22, 2011 Compal Communications (8078.TW)Price target and rating history chart(s) Com pal Com m unications (8078.TW) Stock Price Currency : Taiw an Dollar Goldman Sachs rating and stock price target history 60 10,000 50 44 50 23 45 31 23 20 9,000 27 8,000 40 33 18 34 26 7,000 30 57 6,000 53 20 5,000 10 4,000 Nov 9 Jan 6 Stock Price Index Price NA B S 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 Robert Yen, Apr 28, 2009 to S from B Jul 9, 2009 to N from S Price target as of Nov 9, 2008 Sep 6, 2009 to B f rom N Price target at removal Not covered by current analyst Nov 17, 2009 to N from B Jun 26, 2011 to B f rom S 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. August 22, 2011 Compal Communications (8078.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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