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8078

  1. 1. September 13, 2011ACTIONBuyCompal Communications (8078.TW)Return Potential: 89% Equity ResearchIncreasing conviction in Nokia product cycle ramp; reiterate CL-BuySource of opportunity Investment Profile Low HighWe reiterate our Buy rating (on Conviction List) on Compal Comm (CCI), Growth Growthand raise our 2012E-13E EPS on its stronger Nokia product cycle ramp on Returns * Returns *Windows Phone 7 (WP7) smartphones. Even though CCI has outperformed Multiple MultipleTAIEX by 58% in the past 3 months, we still see great upside potential for Volatility Volatilityinvestors to benefit from Nokia’s first smartphone outsourcing Percentile 20th 40th 60th 80th 100thopportunity. Windows Marketplace, the application store on WP7, has Compal Communications (8078.TW) Asia Pacific Technology Peer Group Averageseen a spike in number of apps similar to the initial growth trajectory of * Returns = Return on Capital For a complete description of theApple’s App Store, suggesting to us that app developers, usually the investment profile measures please refer to the disclosure section of this document.leading indicator, are optimistic on WP7’s growth outlook on user base. Key data CurrentCatalyst Price (NT$) 37.00(1) Nokia’s product launch: based on Nokia’s guidance, we expect Nokia 12 month price target (NT$) 70.00 Market cap (NT$ mn / US$ mn) 22,399.3 / 766.9officially to bring its first WP7 model, ‘JDM-ed’ by CCI (JDM: joint design Foreign ownership (%) 11.6manufacturing), to the market in the next few weeks, possibly outlining itsplan of promotion/availability/operator partnership, helping drive market 12/10 12/11E 12/12E 12/13E EPS (NT$) New (0.56) (1.06) 2.69 3.18expectation on CCI‘s stronger growth outlook; (2) strong 4Q11 sales EPS revision (%) 0.0 (44.8) 49.8 33.3ramp: due to weaker 3Q11 (on customer transition) and stronger 4Q11 EPS growth (%) (142.6) (90.6) 352.7 18.3 EPS (dil) (NT$) New (0.56) (1.06) 2.69 3.18product cycle ramp, we expect CCI’s 4Q11 sales to grow >200% qoq (vs. P/E (X) NM NM 13.8 11.6 P/B (X) 2.2 2.5 2.1 1.7Reuters consensus c.170%); (3) likely continued Nokia strength in 1Q12: as EV/EBITDA (X) NM NM 7.9 5.9CCI’s first model for Nokia will only be available in selected markets in Dividend yield (%) 2.7 0.0 0.0 3.6 ROE (%) (3.2) (6.8) 16.3 16.04Q11, we expect CCI’s 1Q12 sales to be above-seasonal (GSe -10% qoq vs. CROCI (%) (19.3) (18.5) 33.9 32.65-year avg. of -28% qoq) when Nokia launches this model in more markets. Price performance chart 40 10,000Valuation 38 9,700We cut ‘11E EPS to NT$-1.06 from NT$-0.73 on a weaker 3Q11E. We raise 36 9,400 34 9,100‘12E-‘13E EPS by 33%-50% on stronger Nokia shipments. Accordingly, we 32 8,800raise our 12-m TP to NT$70 from NT$52, on 4.4X ‘12E EV/GCI (prior 3.4X 30 8,500 28 8,200due to higher CROCI estimates), implying 26X 2012E EPS (vs. 29X prior). 26 7,900 24 7,600 22 7,300Key risks 20 7,000 Sep-10 Dec-10 Mar-11 Jun-11Disappointing Nokia smartphone demand; weak macro environment. Compal Communications (L) Taiwan SE Weighted Index (R)INVESTMENT LIST MEMBERSHIPAsia Pacific Buy List Share price performance (%) 3 month 6 month 12 monthAsia Pacific Conviction Buy List Absolute 34.1 27.1 36.5 Rel. to Taiwan SE Weighted Index 58.0 47.4 49.5Coverage View: Neutral Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 9/13/2011 close.Robert Yen Goldman Sachs does and seeks to do business with companies+886(2)2730-4196 rob.yen@gs.com Goldman Sachs (Asia) L.L.C., Taipei BranchIris Wu covered in its research reports. As a result, investors should be+886(2)2730-4186 iris.wu@gs.com Goldman Sachs (Asia) L.L.C., Taipei Branch aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC see the end of the text. For other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non- US affiliates are not registered/qualified as research analysts with FINRA in the U.S.The Goldman Sachs Group, Inc. Global Investment Research
  2. 2. September 13, 2011 Compal Communications (8078.TW) Compal Communications: Summary FinancialsProfit model (NT$ 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 13,736.7 40,218.5 49,010.9 Cash & equivalents 8,887.1 7,029.7 6,332.7 8,836.4Cost of goods sold (12,826.1) (12,255.8) (36,248.6) (44,469.1) Accounts receivable 1,925.6 3,165.7 6,922.2 6,702.4SG&A (529.6) (467.7) (510.0) (549.5) Inventory 1,983.3 3,979.0 8,768.8 8,598.1R&D (1,813.4) (1,692.4) (1,919.8) (2,138.4) Other current assets 388.1 310.9 310.9 310.9Other operating profit/(expense) 0.0 0.0 0.0 0.0 Total current assets 13,184.2 14,485.3 22,334.6 24,447.8ESO expense -- -- -- -- Net PP&E 1,156.9 1,332.3 1,341.9 1,370.6EBITDA (156.6) (245.2) 2,032.0 2,314.5 Net intangibles 0.0 0.0 0.0 0.0Depreciation & amortization (588.6) (434.0) (491.9) (460.6) Total investments 16.7 16.6 16.6 16.6EBIT (745.3) (679.2) 1,540.1 1,853.9 Other long-term assets 174.7 165.2 165.2 165.2Interest income 55.5 65.6 61.9 89.3 Total assets 14,532.4 15,999.4 23,858.2 26,000.1Interest expense 0.0 0.0 0.0 0.0Income/(loss) from uncons. subs. 7.7 5.4 0.0 0.0 Accounts payable 2,507.2 5,333.3 11,390.3 11,253.1Others 327.7 (34.7) 160.9 176.4 Short-term debt 14.6 0.0 0.0 0.0Pretax profits (354.4) (643.0) 1,762.9 2,119.6 Other current liabilities 1,722.6 1,433.5 1,326.5 1,347.6Income tax (1.1) (0.2) (137.1) (195.6) Total current liabilities 4,244.5 6,766.9 12,716.8 12,600.7Minorities 17.9 (0.1) 0.0 0.0 Long-term debt 0.0 0.0 0.0 0.0Net income pre-preferred dividends (337.6) (643.3) 1,625.9 1,924.0 Other long-term liabilities 295.9 242.4 242.4 242.4Preferred dividends 0.0 0.0 0.0 0.0 Total long-term liabilities 295.9 242.4 242.4 242.4Net income (pre-exceptionals) (337.6) (643.3) 1,625.9 1,924.0 Total liabilities 4,540.4 7,009.3 12,959.2 12,843.1Post-tax exceptionals 0.0 0.0 0.0 0.0Net income (337.6) (643.3) 1,625.9 1,924.0 Preferred shares 0.0 0.0 0.0 0.0 Total common equity 9,992.1 8,990.0 10,898.9 13,157.0EPS (basic, pre-except) (NT$) (0.56) (1.06) 2.69 3.18 Minority interest (0.1) 0.1 0.1 0.1EPS (basic, post-except) (NT$) (0.56) (1.06) 2.69 3.18EPS (diluted, post-except) (NT$) (0.56) (1.06) 2.69 3.18 Total liabilities & equity 14,532.4 15,999.4 23,858.2 26,000.1EPS excl. ESO expense (basic) (NT$) (0.56) (1.06) 3.12 3.68EPS excl. ESO expense (dil.) (NT$) (0.56) (1.06) 3.12 3.68 BVPS (NT$) 16.51 14.85 18.00 21.73DPS (NT$) 1.00 0.00 0.00 1.34Dividend payout ratio (%) (179.3) 0.0 0.0 42.3Free cash flow yield (%) (6.8) (7.9) (2.9) 11.4 Ratios 12/10 12/11E 12/12E 12/13EGrowth & margins (%) 12/10 12/11E 12/12E 12/13E CROCI (%) (19.3) (18.5) 33.9 32.6Sales growth (42.0) (4.8) 192.8 21.9 ROE (%) (3.2) (6.8) 16.3 16.0EBITDA growth (113.2) (56.5) 928.8 13.9 ROA (%) (2.0) (4.2) 8.2 7.7EBIT growth (290.1) 8.9 326.7 20.4 ROACE (%) (48.8) (46.0) 48.1 41.5Net income growth (142.6) (90.6) 352.7 18.3 Inventory days 66.7 88.8 64.2 71.3EPS growth (142.6) (90.6) 352.7 18.3 Receivables days 69.9 67.6 45.8 50.7Gross margin 11.1 10.8 9.9 9.3 Payable days 112.6 116.8 84.2 92.9EBITDA margin (1.1) (1.8) 5.1 4.7 Net debt/equity (%) (88.8) (78.2) (58.1) (67.2)EBIT margin (5.2) (4.9) 3.8 3.8 Interest cover - EBIT (X) 13.4 10.4 NM NMCash flow statement (NT$ mn) 12/10 12/11E 12/12E 12/13E Valuation 12/10 12/11E 12/12E 12/13ENet income pre-preferred dividends (337.6) (643.3) 1,625.9 1,924.0D&A add-back 588.6 434.0 491.9 460.6 P/E (analyst) (X) NM NM 13.8 11.6Minorities interests add-back (17.9) 0.1 0.0 0.0 P/B (X) 2.2 2.5 2.1 1.7Net (inc)/dec working capital (533.9) (423.7) (2,470.8) 252.9 EV/EBITDA (X) NM NM 7.9 5.9Other operating cash flow (974.2) (560.6) 157.5 355.6 EV/GCI (X) 2.2 3.1 2.0 1.6Cash flow from operations (1,275.0) (1,193.3) (195.5) 2,993.0 Dividend yield (%) 2.7 0.0 0.0 3.6Capital expenditures 87.2 (570.4) (447.7) (435.6)Acquisitions (50.4) (43.8) (53.8) (53.8)Divestitures 47.7 4.0 0.0 0.0Others (71.7) (39.2) 0.0 0.0Cash flow from investments 12.8 (649.4) (501.5) (489.4)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) (358.8) 0.0 0.0Other financing cash flows 295.6 358.7 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) (1,857.5) (696.9) 2,503.7 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. September 13, 2011 Compal Communications (8078.TW) Exhibit 1: We see a similar growth pattern in number of apps on Microsoft’s Windows Marketplace to Apple’s App Store, suggesting WP7’s strong growth potential Number of apps - Apple’s App Store, Android Market, & Windows Phone Marketplace Number of applications (k) Windows Phone Marketplace 60 iOS App Store Android Market 55 50 40 35 Marketplace: Nokia announced 30 its partnership with Microsoft on 30 Windows Phone in Feb 2011 20 20 20 15 9 12 10 8 3 2 0 0 3 6 9 12 Launched date: Months after launch *iOS App Store: 2007 July *Android Market: 2008 Oct *Windows Phone Marketplace: 2010 Nov Source: Company data, Goldman Sachs Research.Exhibit 2: We expect CCI’s share price to be driven by its Exhibit 3: Earnings turnaround could be a driver for sharesales momentum in 4Q11 price, in our viewCCI’s market cap vs. monthly sales CCI’s market cap vs. its quarterly EPS US$mn Compal Comm - share price vs monthly sales NT$mn Compal Comm - share price vs quarterly EPS US$mn Market cap (L) Quarterly EPS (R) NT$ Market cap (L) Monthly sales (R)3,500 E 9,000 3,500 3.0 E 8,000 2.53,000 3,000 7,000 2.02,500 2,500 6,000 1.52,000 2,000 5,000 ? ? 1.01,500 4,000 1,500 0.5 3,0001,000 1,000 0.0 2,000 500 500 (0.5) 1,000 0 0 0 (1.0) Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12Source: Company data, Datastream, Goldman Sachs Research estimates. Source: Company data, Datastream, Goldman Sachs Research estimates.Goldman Sachs Global Investment Research 3
  4. 4. September 13, 2011 Compal Communications (8078.TW)Exhibit 4: We raise our 2012-13E EPS on higher shipment and ASP assumptionsCompal Communications (8078.TW)P&L (GAAP, NT$mn) 2011E New 2011E Old Diff. 2012E New 2012E Old Diff. 2013E New 2013E Old Diff.Revenues 13,737 13,547 1% 40,218 34,408 17% 49,011 42,886 14%Gross profits 1,481 1,520 -3% 3,970 3,482 14% 4,542 4,013 13%Operating profits (679) (635) NM 1,540 926 66% 1,854 1,295 43%Non-operating income 36 191 -81% 223 251 -11% 266 296 -10%Pretax earnings (643) (444) NM 1,763 1,177 50% 2,120 1,591 33%Net earnings (643) (444) NM 1,626 1,085 50% 1,924 1,444 33%EPS (fully diluted, NT$) (1.06) (0.73) NM 2.69 1.79 50% 3.18 2.38 33%Ratio analysisGross margin (%) 10.8% 11.2% 9.9% 10.1% 9.3% 9.4%EBIT margin (%) (4.9%) (4.7%) 3.8% 2.7% 3.8% 3.0%Tax & minority (as % of EBT) (0.1%) (0.1%) 7.8% 7.8% 9.2% 9.2%Net margin (%) (4.7%) (3.3%) 4.0% 3.2% 3.9% 3.4%Return analysisROA (%, annualized) (4.2%) (2.9%) 8.2% 5.8% 7.7% 6.3%ROE (%, annualized) (6.8%) (4.6%) 16.3% 11.0% 16.0% 12.8%Key assumption 2011E New 2011E Old Diff. 2012E New 2012E Old Diff. 2013E New 2013E Old Diff.Shipment (k units) 3,412 3,459 -1% 10,152 9,068 12% 15,855 14,767 7%ASP (US$) 138 134 3% 137 131 4% 107 100 6%Source: Company data, Goldman Sachs Research estimates.Exhibit 5: We see potential upside to CCI’s share price on Exhibit 6: An upward trending ROE implies potentialsignificant improvement of its cash generation (CROCI) share price upside from the current level, in our viewEV/GCI (X) Compal Comm (8078.TW) EV/GCI vs. CROCI CROCI P/B (X) Compal Comm (8078.TW) P/B vs. ROE EV/GCI (L) Median EV/GCI (L) CROCI (R) Median CROCI (R) 10.0 Fwd P/B (L) Median P/B (L) ROE (R) Median ROE (R) 60%70.0 600% 9.0 50%60.0 500% 8.0 40%50.0 400% 7.0 30% 6.040.0 300% 5.0 20%30.0 200% 4.0 Median ROE: 14% 10% 3.020.0 Median: 71% 100% Median. P/B: 2.8X 0% 2.0 Current: 2.1X Median: 9.1X -10%10.0 0% 1.0 Current: 1.9X 0.0 -20% 0.0 -100% Dec-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Dec-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11Source: Company data, Datastream, Goldman Sachs Research estimates. Source: Company data, Datastream, Goldman Sachs Research estimates.Goldman Sachs Global Investment Research 4
  5. 5. September 13, 2011 Compal Communications (8078.TW)Exhibit 7: Compal Comm quarterly financials (NT$mn; consolidated)Summary P&L (GAAP) 1Q2011 2Q2011 3Q2011E 4Q2011E 1Q2012E 2Q2012E 3Q2012E 4Q2012E 2010 2011E 2012E 2013ENet sales 2,806 2,766 1,884 6,281 5,654 9,648 10,877 14,040 14,424 13,737 40,218 49,011 Cost of good sold (COGS) (2,453) (2,458) (1,676) (5,668) (5,090) (8,667) (9,801) (12,690) (12,826) (12,256) (36,249) (44,469)Gross profits 352 308 208 613 564 980 1,075 1,350 1,598 1,481 3,970 4,542 Operating expenses (524) (522) (534) (580) (571) (581) (603) (675) (2,343) (2,160) (2,430) (2,688) SG&A (135) (103) (106) (123) (123) (123) (128) (136) (530) (468) (510) (549) R&D (389) (419) (428) (457) (448) (458) (475) (539) (1,813) (1,692) (1,920) (2,138)Operating profits (172) (214) (326) 33 (7) 399 472 675 (745) (679) 1,540 1,854Non-operating income/(loss) 48 62 (59) (15) 38 54 59 73 391 36 223 266Earnings before tax (EBT) (124) (152) (385) 18 31 453 531 748 (354) (643) 1,763 2,120 Income tax credit/(expense) (0) 0 0 (0) (2) (33) (41) (61) (1) (0) (137) (196) Extraordinary gain/(loss) - - - - - - - - - - - - Minority Interests (0) 0 - - - - - - 18 (0) - -Earnings after tax (EAT) (125) (152) (385) 18 29 420 490 687 (338) (643) 1,626 1,924EPS (NT$) (0.21) (0.25) (0.64) 0.03 0.05 0.69 0.81 1.14 (0.56) (1.06) 2.69 3.18EPS (NT$, fully diluted) (0.21) (0.25) (0.64) 0.03 0.05 0.69 0.81 1.14 (0.56) (1.06) 2.69 3.18Ratio analysis and assumptionsAs % of sales Gross margin 12.6% 11.1% 11.0% 9.8% 10.0% 10.2% 9.9% 9.6% 11.1% 10.8% 9.9% 9.3% Operating expense ratio -18.7% -18.9% -28.3% -9.2% -10.1% -6.0% -5.5% -4.8% -16.2% -15.7% -6.0% -5.5% Operating margin -6.1% -7.7% -17.3% 0.5% -0.1% 4.1% 4.3% 4.8% -5.2% -4.9% 3.8% 3.8% Pre-tax margin -4.4% -5.5% -20.4% 0.3% 0.6% 4.7% 4.9% 5.3% -2.5% -4.7% 4.4% 4.3% Tax rate (as % of EBT) -0.2% 0.0% 0.0% 0.0% 7.0% 7.4% 7.7% 8.1% -0.3% 0.0% 7.8% 9.2% Net margin -4.4% -5.5% -20.4% 0.3% 0.5% 4.3% 4.5% 4.9% -2.3% -4.7% 4.0% 3.9%QoQ growth (%) Sales -33.1% -1.4% -31.9% 233.4% -10.0% 70.6% 12.7% 29.1% Gross profits -30.4% -12.5% -32.6% 195.0% -7.9% 73.8% 9.7% 25.5% Operating profits NM NM NM NM NM NM 18.2% 43.0% Non-operating profits -60.7% 29.8% NM NM NM 40.8% 9.6% 23.6% Pre-tax profits NM NM NM NM 76.3% 1349.4% 17.2% 40.9% Net profits NM NM NM NM 64.0% 1344.0% 16.7% 40.3% EPS (weighted averaged) NM NM NM NM 64.0% 1344.0% 16.7% 40.3%Yoy growth (%) Sales -30.6% -8.2% -40.7% 49.9% 101.5% 248.8% 477.3% 123.5% -42.0% -4.8% 192.8% 21.9% Gross profits -22.1% -20.9% -16.7% 21.0% 60.2% 218.2% 417.7% 120.3% -48.1% -7.3% 168.1% 14.4% Operating profits NM NM NM NM NM NM NM 1951.1% NM NM NM 20.4% Non-operating profits -27.6% -50.2% NM NM -20.8% -14.1% NM NM -27.0% -90.7% 514.0% 19.3% Pre-tax profits NM NM NM -70.7% NM NM NM 4119.8% NM NM NM 20.2% Net profits NM NM NM -70.4% NM NM NM 3778.4% NM NM NM 18.3% EPS (weighted averaged) NM NM NM -70.4% NM NM NM 3778.4% NM NM NM 18.3%Dividend policies Cash dividends (NT$ per share) 1.00 - - 1.34 Payout ratio (%) 76.4% - - 50.0%Source: Company data, Goldman Sachs Research estimates.Goldman Sachs Global Investment Research 5
  6. 6. September 13, 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), Airtac International, ASUSTeKComputer, AU Optronics, BYD Electronic, Catcher Technology, Cheng Uei Precision (Foxlink), Chimei Innolux, China Wireless Technologies,Chipbond Technology Corp., Chroma ATE, Compal Communications, Compal Electronics, Coretronic, Delta Electronics, E Ink Holdings Inc, Epistar,Everlight Electronics, Foxconn Intl Holdings, Foxconn Technology, Hiwin Technologies, Hon Hai Precision, HTC Corp., Kinsus InterconnectTechnology, Largan Precision, Lenovo Group, Lite-On Technology, Nan Ya PCB, Novatek Microelectronics, Pegatron, Powertech Technology,Quanta Computer, Radiant Opto-Electronics, Siliconware Precision, Siliconware Precision (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$37.00)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 13, 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. 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  9. 9. September 13, 2011 Compal Communications (8078.TW)No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without theprior written consent of The Goldman Sachs Group, Inc.Goldman Sachs Global Investment Research 9

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