Tong Tseng

"Wang is on the strategy side of things, while Lanci is the operations guy," said Merrill Lynch analyst Tong Tseng.

"Our 'buy' rating is supported by (a) superior revenue outlook for 2007, upward operating margin trend, and steady improvement of loss-making affiliates," Tong Tseng, a research analyst with Merrill Lynch, said in a report. "Strong clientele and improved cost structure boosted first quarter operating earnings to a record high," he said, adding that the investment bank has raised its earnings per share (EPS) forecast by 11 pct to 3.2 twd in 2007 and by 18 pct to 3.9 twd in 2008. Parent net profit for the maker of notebook personal computers is estimated to come in at 12.21 bln twd this year and 14.87 bln twd in 2008 after 8.75 bln twd last year."Its investor-friendly cash dividend and employee bonus and possible deployment in Vietnam also look positive," Tseng added.Compal Electronics' board has proposed a cash dividend of 1.70 twd per share and a 0.5 pct stock dividend for 2006. "Its strong positioning at HP/Acer/Toshiba and improving PC cycle have led us to raise (the) unit target to 21 mln for 2007," the report said, noting it would represent 45 pct year-on-year growth. Improved efficiency at its new plant and tighter cost controls will help expand the operating margin by 20 basis points from a year earlier to 3.2 pct in 2007, reversing the narrowing trend during 2003-2006, Tseng added.The bank said that the target price of 36.0 twd is based on average 2007-2008 EPS estimates."Given its 5.8 pct cash dividend yield and 40 pct net earnings growth rate for 2007, Compal's current valuation appears attractive." Moreover, Tseng added that Compal's proposed 2007 employee bonus (about 14 pct of net earnings) looks investor-friendly and lower than the Taiwan tech sector average of 25-30 pct, which provide further strong support for Compal's current share-price performance.

"Wang is on the strategy side of things, while Lanci is the operations guy," said Merrill Lynch analyst Tong Tseng.