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September 20, 2017

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Compal Electronics' shares up by 3.36 percent on Q1 results

TAIPEI -- Shares of Compal Electronics Inc. (仁寶), one of Taiwan's leading contract notebook computer makers, moved higher yesterday morning after the company reported better-than-expected results for the first quarter, dealers said.

The first quarter results showed Compal defied conventional wisdom to report a slightly sequential increase in net profit in the first quarter, which is usually a slow period for the global PC industry, dealers said.

As of 11:10 a.m., shares of Compal had climbed 3.36 percent to NT$23.10 (US$0.77) with 30.68 million shares changing hands. The weighted index on the Taiwan Stock Exchange was down 0.35 percent at 8,899.31 points.

"Compal's first quarter results were impressive as it took advantage of the Chinese yuan's depreciation against the U.S. dollar to generate higher foreign exchange gains," Ta Ching Securities analyst Andy Hsu said.

At an investor conference Thursday, Compal said it posted NT$2.61 billion in net profit for the first quarter, up about 1 percent from a quarter earlier and 88 percent year-on-year.

Its first quarter earnings per share stood at NT$0.57, little changed from the fourth quarter of last year but higher than the NT$0.31 recorded in the same period of 2013. Its first-quarter consolidated sales fell 12 percent from the previous quarter to NT$170.64 billion but showed a 2 percent increase from a year earlier.

According to Compal, it generated NT$637 million in foreign exchange gains in the first quarter, compared with NT$65 million in foreign exchange gains in the previous quarter and NT$239 million in foreign exchange losses recorded in first quarter of last year.

"Judging from the statistics, foreign exchange gains did boost Compal's bottom line in the first quarter, although the global PC market remained slow," Hsu said.

"In addition, Compal's gross margin improved in the first quarter, which reflected the company's efforts to reform its product portfolio," he said.

In the first quarter, Comapl's gross margin rose to 4.3 percent from 3.97 percent the previous quarter. The first quarter figure was also higher than the 3.93 percent in the same period of last year.

Compal said its notebook computer shipments for the first quarter totaled 8.9 million units and are expected to rise more than 10 percent sequentially in the second quarter.

"The shipment growth will come from a wave of replacements as Microsoft has ended support for its Windows XP operating system," Hsu said. "If Compal achieves over 10 percent growth, it will outperform the entire PC business, which is forecast to grow 5-7 percent."

Hsu said Compal will continue to benefit from its efforts to improve its product mix by cutting notebook computer production in favor of mobile devices.

"Compal has brought smartphone assembler Compal Communications Inc. fully under its corporate umbrella (since February). The handheld manufacturing operations are expected to further boost Compal's profitability for the rest of this year," Hsu said.

Compal said its mobile device shipments could rise at a double digit rate to 35 million units in 2014.

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