Tablets boost Compal’s outlook

EARLY CHRISTMAS::Personal computer sales are not great, but Compal may get to cash in on the tablet market with a chance to help build’s products

By Kevin Chen  /  Staff reporter

Fri, Sep 27, 2013 - Page 14’s launch of its new tablet computers will be a boon for Compal Electronics Inc (仁寶), helping the Taiwanese contract personal computer (PC) maker to ship four times more tablets this year than last year, Citigroup said yesterday.

The US brokerage retained its “buy” rating on Compal’s shares as it joined other analysts in raising expectations for a company that is likely to see stabilization in its notebook business and material contribution from its expanded tablet business.

“Investor sentiment appears more negative on Compal given the lack of diversification outside of notebooks. As such, we believe management has put a special focus on growing the tablet biz with high-profile clients,” Citigroup Global Markets Inc analyst Wei Chen (陳思維) wrote in a note.

On Wednesday, the online retailer released its latest tablet lineup as the company sets high hopes for holiday-season sales in the face of new tablets from Apple Inc, various PC brands and regional “white-box” manufacturers.

Chen said that by securing the new orders from Amazon, Compal’s tablet shipments are expected to hit 8 million units this year, a surge of 400 percent from last year.

“We suspect Compal could also be building iPads for Apple in 2014, which would be an additional catalyst for its tablet business,” Chen said.

Citigroup, keeping its 12-month target price on Compal at NT$25, forecast the company would report earnings per share of NT$1.53 this year, up from last year’s NT$1.45, and NT$2.2 for next year.

Compal shares closed 0.48 percent lower at NT$20.85 yesterday.

Compal, the world’s second-largest contract notebook manufacturer in terms of shipments after Quanta Computer Inc (廣達), counts Taiwan’s Acer Inc (宏碁), China’s Lenovo Group Ltd (聯想) as well as US-based Hewlett-Packard Co and Dell Inc among its major customers.

Faced with the weakening global demand for PCs, Compal last month experienced a flattish performance for notebook shipments during this quarter from last quarter.

The company’s efforts to tap into’s tablet supply chain this year, sharing new orders with Quanta and Hon Hai Precision Industry Co (鴻海) has raised hopes that the low-priced tablets for Amazon could be a catalyst for Compal’s business in this quarter and next quarter.

But there is one catch: Compal is supplying low-end Kindle Fire tablets, while both Quanta and Hon Hai are making high-end models for Amazon, according to Yuanta Securities Co (元大證券).

Yuanta analyst Vincent Chen (陳豊丰) said he expected Compal’s tablet shipments to surge in the fourth quarter driven by Amazon’s low-price model. But the company's projected shipments of 3 million units in the fourth quarter is still lower than market expectations, he said in a separate note yesterday.

Therefore, Yuanta maintains a conservative attitude toward the company, with a target price of NT$18.6, saying that the recent rise in the stock reflected market speculations about the company's potential sale of its subsidiary Vibo Telecom Inc (威寶).

President Securities Corp (統一證券) is also less upbeat about the outlook for Compal and Quanta. It said in a note that lackluster notebook shipments would counter the projected contribution from rising tablet sales to the two firms this year.