Company report Consumer & Retail Restaurants & Leisure Equity – Hong Kong 

Sands China (1928 HK)

Hold Hold: 3Q15 miss, higher confidence on dividend Target price (HKD) 32.00  We overestimated reclassification impact; mass Share price (HKD) 27.95 Upside/Downside (%) 14.5 performance and non-gaming came in below expectations Dec 2014 a 2015 e 2016 e HSBC EPS (USD) 0.32 0.18 0.19  Management takes a neutral stance towards current political HSBC PE 11.4 19.7 19.4 environment and thinks new openings will grow the market Performance 1M 3M 12M Absolute (%) 0.5 -12.0 -37.6  Maintain Hold, trim TP to HKD32 (from HKD32.3) Relative^ (%) -4.8 -2.2 -37.3

22 October 2015 Result highlights: Property EBITDA came in at USD537m, -4%qoq or -34%yoy. The result came in 5% below our numbers and 3% below consensus. Despite net EBITDA Charlene Liu* Analyst margin improving qoq from 32.2% to 33% on improved gaming mix and higher direct The Hongkong and Shanghai Banking VIP contribution (3Q15: 39% of total rolling vs. 2Q15: 32.5%), it came in below our Corporation Limited, Singapore Branch +65 6658 0615 expectations as we had overestimated the impact from mass reclassification and non- charlene.r.liu@.com.sg gaming contributions. Lastly, win rate has normalized qoq (3Q15: 3.28% vs. 2Q15:

Scott Chan* 3.38%). On a luck adjusted basis, property EBITDA came in at USD528.3m, +1% qoq. Analyst The Hongkong and Shanghai Banking By segment: VIP rolling volume dropped (-14qoq) less than revenue (-16%qoq); apart Corporation Limited from lower win rate, rolling is buffered by higher direct VIP contribution. Direct VIP +852 3941 7005 [email protected] again showed resilience, +3%qoq versus junket volume -21%qoq (market -18%qoq).

Erwan Rambourg* Mass segment underperformed the market, reporting -5%qoq versus the market +3%qoq. Global Co-Head Consumer & Retail The summer holiday seemed to have benefited the newly opened Galaxy Phase 2 The Hongkong and Shanghai Banking more. Grind mass (-2%qoq) was relatively more defensive than the premium segment (- Corporation Limited +852 2996 6572 9%qoq), in line with management’s observation. Slot revenue outpaced market +5% [email protected] versus industry -1%qoq. Even though non-gaming contribution was up 5%qoq, it is View HSBC Global Research at: disappointing given the historical trend suggests 13 – 23%qoq growth. The results were http://www.research.hsbc.com dragged by lower occupancy and room rate, especially on a yoy basis, plus weaker retail. *Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/qualified pursuant to FINRA Future prospects and dividend: Management continues to take a neutral stance towards the regulations current political environment in Macau. They think their emphasis on mass and non-gaming Issuer of report: The Hongkong and is aligned with the government’s plans. Also, they believe new openings are instrumental in Shanghai Banking Corporation Limited growing the overall market in the long run and continue to expect the Parisian to open in 2H16. The parent company confirmed a dividend of USD2.88/share (+11%yoy) for FY16, MICA (P) 073/06/2015 which gives us more confidence in our dividend forecast for Sands China. MICA (P) 136/02/2015 MICA (P) 041/01/2015 Maintain Hold, trim TP to HKD32: We trim FY15/16e EBITDA by 1-2% to factor in more Disclaimer & conservative margin with no change in multiples. We continue to think that Sands’ historical Disclosures valuation premium could narrow as its high asset base would dwarf incremental growth. The This report must be read 7% FY15e dividend yield should provide valuation support, we maintain a Hold rating. with the disclosures and the analyst certifications in ^Index Free float (%) 30 the Disclosure appendix, Index level 22,989 Market cap (USDm) 29,104 and with the Disclaimer, RIC 1928.HK Market cap (HKDm) 225,534 Bloomberg 1928 HK which forms part of it Source: HSBC Source: HSBC Sands China (1928 HK) Hotels Restaurants & Leisure abc 22 October 2015

Changes to our earnings forecasts _____ Group total revenue ______VIP segment ______Mass segment ______FY15e FY16e FY17e FY15e FY16e FY17e FY15e FY16e FY17e Old Revenue (HKDm) 7,044 7,525 8,252 2,199 2,126 2,526 4,002 4,515 4,817 Market share (%) 23.1% 22.9% 23.2% 15.2% 14.5% 16.7% 31.0% 30.5% 28.3% New Revenue (HKDm) 6,973 7,507 8,249 2,223 2,126 2,526 3,968 4,515 4,817 Market share (%) 23.1% 22.9% 23.2% 15.2% 14.5% 16.7% 31.0% 30.5% 28.3%

Financial assumptions ______EPS (HKD) ______EBITDA (HKDm) ______EBITDA margin ______Old 0.19 0.18 0.22 2,155 2,315 2,567 30.6% 30.8% 31.1% New 0.18 0.19 0.21 2,116 2,294 2,565 30.3% 30.6% 31.1% Change (%) -2.1% 2.2% -2.8% -1.8% -0.9% -0.1% -0.3% -0.2% 0.0%

Source: HSBC estimates

3Q15 results

Sands China – 3Q15 financials 3Q15 2Q15 3Q14 yoy qoq revenue - 201 236 274 -27% -15% - Venetian Macao 590 634 818 -28% -7% - Four Seasons Macao 130 167 221 -41% -22% - Sands Cotai Central 475 484 727 -35% -2% Group 1,396 1,521 2,040 -32% -8%

Non-gaming revenue - Sands Macao 17 16 18 -4% 10% - Venetian Macao 146 141 170 -14% 4% - Four Seasons Macao 50 49 57 -12% 2% - Sands Cotai Central 115 107 143 -19% 8% Group 329 313 387 -15% 5%

Less - Promotional Allowances (99) (94) (122) -19% 5%

Net Revenues - Sands Macao 207 242 280 -26% -14% - Venetian Macao 700 740 943 -26% -5% - Four Seasons Macao 168 204 265 -37% -18% - Sands Cotai Central 550 554 817 -33% -1% Group 1,625 1,739 2,305 -29% -7%

Adjusted Property EBITDA - Sands Macao 51 66 88 -42% -23% - Venetian Macao 256 255 353 -27% 1% - Four Seasons Macao 59 74 101 -42% -21% - Sands Cotai Central 171 164 267 -36% 4% Group 537 560 809 -34% -4%

Net EBITDA Margin % - Sands Macao 24.6% 27.4% 31.5% -6.8% -2.8% - Venetian Macao 36.6% 34.5% 37.4% -0.8% 2.2% - Four Seasons Macao 35.0% 36.4% 38.1% -3.1% -1.4% - Sands Cotai Central 31.0% 29.6% 32.7% -1.7% 1.4% Group 33.0% 32.2% 35.1% -2.1% 0.8%

Source: Company data, HSBC

2 Sands China (1928 HK) Hotels Restaurants & Leisure abc 22 October 2015

Sands China - 3Q15 gaming statistics 3Q15 2Q15 3Q14 yoy qoq Rolling Chip Volume - Sands Macao 2,058 2,328 4,319 -52% -12% - Venetian Macao 6,876 7,633 10,128 -32% -10% - Four Seasons Macao 2,822 4,181 6,237 -55% -33% - Sands Cotai Central 4,641 4,827 10,567 -56% -4% Group 16,397 18,969 31,250 -48% -14%

VIP revenue - Sands Macao 73 91 119 -38% -19% - Venetian Macao 212 234 317 -33% -10% - Four Seasons Macao 88 150 215 -59% -41% - Sands Cotai Central 164 166 368 -55% -1% Group 538 641 1,019 -47% -16%

Rolling Chip Win (in %) - Sands Macao 3.57% 3.91% 2.76% 0.8% -0.3% - Venetian Macao 3.08% 3.07% 3.13% -0.1% 0.0% - Four Seasons Macao 3.13% 3.58% 3.45% -0.3% -0.5% - Sands Cotai Central 3.54% 3.43% 3.48% 0.1% 0.1% Group 3.28% 3.38% 3.26% 0.0% -0.1%

Non-Rolling Chip Table Games Drop - Sands Macao 760 769 885 -14% -1% - Venetian Macao 1742 1677 2208 -21% 4% - Four Seasons Macao 281 277 320 -12% 1% - Sands Cotai Central 1459 1463 1891 -23% 0% Group 4,241 4,186 5,304 -20% 1%

Mass revenue - Sands Macao 131 153 169 -23% -15% - Venetian Macao 408 436 545 -25% -7% - Four Seasons Macao 71 60 81 -12% 18% - Sands Cotai Central 319 328 424 -25% -2% Group 929 977 1,219 -24% -5%

Non-Rolling Chip Table Games Win (in %) - Sands Macao 17.2% 19.9% 19.1% -1.9% -2.7% - Venetian Macao 23.4% 26.0% 24.7% -1.3% -2.6% - Four Seasons Macao 25.4% 21.8% 25.2% 0.2% 3.6% - Sands Cotai Central 21.9% 22.4% 22.4% -0.5% -0.5% Group 21.9% 23.3% 23.0% -1.1% -1.4%

Slot Handle - Sands Macao 710.2 658.6 833.4 -15% 8% - Venetian Macao 1,047.8 973.2 1,440.9 -27% 8% - Four Seasons Macao 111.8 126.8 214.6 -48% -12% - Sands Cotai Central 1,503.6 1,500.6 2,025.1 -26% 0% Group 3,373 3,259 4,514 -25% 4%

Slot revenue - Sands Macao 26 24 30 -12% 11% - Venetian Macao 50 48 66 -24% 5% - Four Seasons Macao 8 8 10 -17% 6% - Sands Cotai Central 56 54 69 -19% 3% Group 140 133 175 -20% 5%

Slot Hold (in %) - Sands Macao 3.7% 3.6% 3.6% 0.1% 0.1% - Venetian Macao 4.8% 4.9% 4.6% 0.2% -0.1% - Four Seasons Macao 7.3% 6.1% 4.6% 2.7% 1.2% - Sands Cotai Central 3.7% 3.6% 3.4% 0.3% 0.1% Group 4.2% 4.1% 3.9% 0.3% 0.1%

Source: Company data, HSBC

3 Sands China (1928 HK) Hotels Restaurants & Leisure abc 22 October 2015

Financials & valuation

Financial statements Valuation data Year to 12/2014a 12/2015e 12/2016e 12/2017e Year to 12/2014a 12/2015e 12/2016e 12/2017e Profit & loss summary (USDm) EV/sales 3.0 4.3 4.2 3.9 Revenue 9,629 6,973 7,507 8,249 EV/EBITDA 9.0 14.1 13.6 12.4 EBITDA 3,191 2,116 2,294 2,565 EV/IC 4.8 4.5 4.2 4.3 Depreciation & amortisation -523 -488 -536 -651 PE* 11.4 19.7 19.4 16.9 Operating profit/EBIT 2,668 1,628 1,757 1,914 PB 4.5 5.0 5.5 6.2 Net interest -50 -87 -116 -130 FCF yield (%) 8.0 3.1 2.9 6.1 PBT 2,556 1,489 1,510 1,733 Dividend yield (%) 7.1 7.0 8.0 7.7 HSBC PBT 2,556 1,489 1,510 1,733 * Based on HSBC EPS (diluted) Taxation -8 -10 -10 -10 Net profit 2,548 1,479 1,500 1,723 HSBC net profit 2,548 1,479 1,500 1,723 Price relative Cash flow summary (USDm) 77 77 67 67 Cash flow from operations 3,224 1,948 2,187 2,539 Capex -931 -1,052 -1,382 -752 57 57 Cash flow from investment -917 -1,035 -1,366 -732 Dividends -2,601 -2,071 -2,041 -2,325 47 47 Change in net debt 379 1,263 1,351 667 37 37 FCF equity 2,225 861 822 1,709 27 27 Balance sheet summary (USDm) 17 17 Intangible fixed assets 96 99 101 103 2013 2014 2015 2016 Tangible fixed assets 6,913 7,477 8,323 8,424 Sands China Rel to HANG SENG INDEX Current assets 3,195 2,871 2,579 2,252 Source: HSBC Cash & others 2,535 2,273 1,922 1,529 Total assets 11,348 11,589 12,146 11,923 Operating liabilities 1,718 1,553 1,650 1,753 Note: Priced at close of 21 Oct 2015 Gross debt 3,200 4,200 5,200 5,475 Net debt 665 1,927 3,278 3,946 Shareholders' funds 6,429 5,837 5,296 4,694 Invested capital 5,951 6,621 7,432 7,498

Ratio, growth and per share analysis Year to 12/2014a 12/2015e 12/2016e 12/2017e Y-o-y % change Revenue 7.5 -27.6 7.7 9.9 EBITDA 12.3 -33.7 8.4 11.8 Operating profit 13.9 -39.0 8.0 8.9 PBT 15.3 -41.8 1.4 14.8 HSBC EPS 14.9 -42.0 1.4 14.9 Ratios (%) Revenue/IC (x) 1.6 1.1 1.1 1.1 ROIC 45.1 25.7 24.8 25.5 ROE 39.6 24.1 26.9 34.5 ROA 23.0 13.8 13.7 15.6 EBITDA margin 33.1 30.3 30.6 31.1 Operating profit margin 27.7 23.3 23.4 23.2 EBITDA/net interest (x) 63.8 24.3 19.8 19.8 Net debt/equity 10.3 33.0 61.9 84.1 Net debt/EBITDA (x) 0.2 0.9 1.4 1.5 CF from operations/net debt 484.9 101.1 66.7 64.3 Per share data (USD) EPS reported (diluted) 0.32 0.18 0.19 0.21 HSBC EPS (diluted) 0.32 0.18 0.19 0.21 DPS 0.26 0.25 0.29 0.28 Book value 0.80 0.72 0.66 0.58

4 Sands China (1928 HK) Hotels Restaurants & Leisure abc 22 October 2015

Sands China – Valuation 2015e NAV Per share Per share Divisions Valuation methodology USDm USD HKD % comp. Gaming Sands Macao 13x 2016E EBITDA 3,169 0.39 3.06 9% Venetian Macao 14x 2016E EBITDA 16,075 1.99 15.54 45% Four Seasons 13x 2016E EBITDA 3,116 0.39 3.01 9% Sands Cotai Central 14x 2016E EBITDA 9,674 1.20 9.35 27% Ferry business 12x 2016E EBITDA (113) (0.01) (0.11) 0% Lot 3 12x 2017E EBITDA discounted 10% 4,555 0.56 4.40 13%

Less: Corporate expense 13x 2016E EBITDA (899) (0.14) (1.09) -3% Gross asset value 35,578 4.38 34.18 100% less net (debt)/cash 2016E year-end forecast (1,932) (0.41) (3.17) Net Asset Value 33,646 3.98 31.01

Four Seasons Serviced Apartment HKD10,000/sq ft, 0.8mn sellable GFA 1,026 0.13 0.99 Target valuation 4.10 32.00

Source: HSBC estimates

Valuation and risks Company Sum-of-the-parts valuation components Risks Sands China 1) Sands Macao and the Four Seasons at 13x 2016e Upside risks: 1) earlier and more-than-expected macro easing in (1928 HK, Hold, EBITDA; 2) Venetian at 14x 2016e EBITDA, 3) Sands China, 2) earlier opening in its Parisian project, 3) higher than TP HKD32.0) Cotai Central at 14x 2016e EBITDA; 4) ferry business at expected valuation at the Four Seasons serviced apartments and 4) 13x 2016e EBITDA; and 6) Parisian project valued at 13x market share gain upon yield enhancement or more aggressive FY17e EBITDA discounted back one year at 10% pa, promotion. assuming the project will open in 2016 with its full year Downside risks: 1) China macro slowdown, 2) substantial delay in its operations in 2017 (all unchanged). With 14.5% upside to Parisian project, 3) regulatory risks, especially from China, 4) loss of our TP, we maintain our Hold rating. market share due to competition. Source: HSBC

5 Sands China (1928 HK) Hotels Restaurants & Leisure abc 22 October 2015

Disclosure appendix

Analyst Certification The following analyst(s), economist(s), and/or strategist(s) who is(are) primarily responsible for this report, certifies(y) that the opinion(s) on the subject security(ies) or issuer(s) and/or any other views or forecasts expressed herein accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Charlene Liu, Scott Chan and Erwan Rambourg Important disclosures Equities: Stock ratings and basis for financial analysis HSBC believes an investor's decision to buy or sell a stock should depend on individual circumstances such as the investor's existing holdings, risk tolerance and other considerations and that investors utilise various disciplines and investment horizons when making investment decisions. Ratings should not be used or relied on in isolation as investment advice. Different securities firms use a variety of ratings terms as well as different rating systems to describe their recommendations and therefore investors should carefully read the definitions of the ratings used in each research report. Further, investors should carefully read the entire research report and not infer its contents from the rating because research reports contain more complete information concerning the analysts' views and the basis for the rating.

From 23rd March 2015 HSBC has assigned ratings on the following basis: The target price is based on the analyst’s assessment of the stock’s actual current value, although we expect it to take six to 12 months for the market price to reflect this. When the target price is more than 20% above the current share price, the stock will be classified as a Buy; when it is between 5% and 20% above the current share price, the stock may be classified as a Buy or a Hold; when it is between 5% below and 5% above the current share price, the stock will be classified as a Hold; when it is between 5% and 20% below the current share price, the stock may be classified as a Hold or a Reduce; and when it is more than 20% below the current share price, the stock will be classified as a Reduce.

Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation or resumption of coverage, change in target price or estimates).

Upside/Downside is the percentage difference between the target price and the share price.

Prior to this date, HSBC’s rating structure was applied on the following basis: For each stock we set a required rate of return calculated from the cost of equity for that stock’s domestic or, as appropriate, regional market established by our strategy team. The target price for a stock represented the value the analyst expected the stock to reach over our performance horizon. The performance horizon was 12 months. For a stock to be classified as Overweight, the potential return, which equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated, had to exceed the required return by at least 5 percentage points over the succeeding 12 months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock was expected to underperform its required return by at least 5 percentage points over the succeeding 12 months (or 10 percentage points for a stock classified as Volatile*). Stocks between these bands were classified as Neutral.

*A stock was classified as volatile if its historical volatility had exceeded 40%, if the stock had been listed for less than 12 months (unless it was in an industry or sector where volatility is low) or if the analyst expected significant volatility. However, stocks which we did not consider volatile may in fact also have behaved in such a way. Historical volatility was defined as the past month's average of the daily 365-day moving average volatilities. In order to avoid misleadingly frequent changes in rating, however, volatility had to move 2.5 percentage points past the 40% benchmark in either direction for a stock's status to change.

6 Sands China (1928 HK) Hotels Restaurants & Leisure abc 22 October 2015

Rating distribution for long-term investment opportunities As of 21 October 2015, the distribution of all ratings published is as follows: Buy 46% (31% of these provided with Investment Banking Services) Hold 40% (29% of these provided with Investment Banking Services) Sell 14% (17% of these provided with Investment Banking Services)

For the purposes of the distribution above the following mapping structure is used during the transition from the previous to current rating models: under our previous model, Overweight = Buy, Neutral = Hold and Underweight = Sell; under our current model Buy = Buy, Hold = Hold and Reduce = Sell. For rating definitions under both models, please see “Stock ratings and basis for financial analysis” above. Share price and rating changes for long-term investment opportunities

Sands China (1928.HK) Share Price performance HKD Vs HSBC rating history Recommendation & price target history From To Date

Overweight (V) Neutral (V) 25 November 2012 69 Neutral (V) Neutral 12 March 2013 Neutral N/A 18 March 2013 59 N/A Overweight 18 September 2013 49 Overweight Neutral 22 January 2015 Neutral Underweight 04 March 2015 39 Underweight Hold 23 March 2015 Hold Reduce 22 April 2015 29 Reduce Hold 09 July 2015 Target Price Value Date 19 Price 1 34.28 25 November 2012 9 Price 2 35.38 20 January 2013 Price 3 38.23 12 March 2013 Price 4 N/A 18 March 2013 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Price 5 56.50 18 September 2013 Source: HSBC Price 6 70.80 30 January 2014 Price 7 68.80 02 July 2014 Price 8 70.70 03 July 2014 Price 9 59.20 03 September 2014 Price 10 58.90 14 October 2014 Price 11 37.00 22 January 2015 Price 12 39.10 29 January 2015 Price 13 32.00 04 March 2015 Price 14 28.00 22 April 2015 Price 15 30.40 09 July 2015 Price 16 31.30 22 July 2015 Price 17 32.30 12 October 2015 Source: HSBC

7 Sands China (1928 HK) Hotels Restaurants & Leisure abc 22 October 2015

HSBC & Analyst disclosures Disclosure checklist Company Ticker Recent price Price Date Disclosure SANDS CHINA 1928.HK 27.95 21-Oct-2015 11 Source: HSBC

1 HSBC has managed or co-managed a public offering of securities for this company within the past 12 months. 2 HSBC expects to receive or intends to seek compensation for investment banking services from this company in the next 3 months. 3 At the time of publication of this report, HSBC Securities (USA) Inc. is a Market Maker in securities issued by this company. 4 As of 30 September 2015 HSBC beneficially owned 1% or more of a class of common equity securities of this company. 5 As of 31 August 2015, this company was a client of HSBC or had during the preceding 12 month period been a client of and/or paid compensation to HSBC in respect of investment banking services. 6 As of 31 August 2015, this company was a client of HSBC or had during the preceding 12 month period been a client of and/or paid compensation to HSBC in respect of non-investment banking securities-related services. 7 As of 31 August 2015, this company was a client of HSBC or had during the preceding 12 month period been a client of and/or paid compensation to HSBC in respect of non-securities services. 8 A covering analyst/s has received compensation from this company in the past 12 months. 9 A covering analyst/s or a member of his/her household has a financial interest in the securities of this company, as detailed below. 10 A covering analyst/s or a member of his/her household is an officer, director or supervisory board member of this company, as detailed below. 11 At the time of publication of this report, HSBC is a non-US Market Maker in securities issued by this company and/or in securities in respect of this company

HSBC and its affiliates will from time to time sell to and buy from customers the securities/instruments (including derivatives) of companies covered in HSBC Research on a principal or agency basis.

Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment banking revenues.

Whether, or in what time frame, an update of this analysis will be published is not determined in advance.

For disclosures in respect of any company mentioned in this report, please see the most recently published report on that company available at www.hsbcnet.com/research. Additional disclosures 1 This report is dated as at 22 October 2015. 2 All market data included in this report are dated as at close 21 October 2015, unless otherwise indicated in the report. 3 HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research operate and have a management reporting line independent of HSBC's Investment Banking business. Information Barrier procedures are in place between the Investment Banking and Research businesses to ensure that any confidential and/or price sensitive information is handled in an appropriate manner.

8 Sands China (1928 HK) Hotels Restaurants & Leisure abc 22 October 2015

Disclaimer

* Legal entities as at 30 May 2014 Issuer of report ‘UAE’ HSBC Bank Middle East Limited, Dubai; ‘HK’ The Hongkong and Shanghai Banking Corporation The Hongkong and Shanghai Banking Limited, Hong Kong; ‘TW’ HSBC Securities (Taiwan) Corporation Limited; 'CA' HSBC Bank Canada, Corporation Limited Toronto; HSBC Bank, Paris Branch; HSBC France; ‘DE’ HSBC Trinkaus & Burkhardt AG, Düsseldorf; 000 HSBC Bank (RR), Moscow; ‘IN’ HSBC Securities and Capital Markets (India) Private Limited, Level 19, 1 Queen’s Road Central Mumbai; ‘JP’ HSBC Securities (Japan) Limited, Tokyo; ‘EG’ HSBC Securities Egypt SAE, Cairo; ‘CN’ Hong Kong SAR HSBC Investment Bank Asia Limited, Beijing Representative Office; The Hongkong and Shanghai Banking Telephone: +852 2843 9111 Corporation Limited, Singapore Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Fax: +852 2596 0200 Securities Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Branch; HSBC Website: www.research.hsbc.com Securities (South Africa) (Pty) Ltd, Johannesburg; HSBC Bank plc, London, Madrid, Milan, Stockholm, Tel Aviv; ‘US’ HSBC Securities (USA) Inc, New York; HSBC Yatirim Menkul Degerler AS, Istanbul; HSBC México, SA, Institución de Banca Múltiple, Grupo Financiero HSBC; HSBC Bank Brasil SA – Banco Múltiplo; HSBC Bank Australia Limited; HSBC Bank Argentina SA; HSBC Saudi Arabia Limited; The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch incorporated in Hong Kong SAR; The Hongkong and Shanghai Banking Corporation Limited, Bangkok Branch This document has been issued by The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) in the conduct of its Hong Kong regulated business for the information of its institutional and professional investor (as defined by Securities and Future Ordinance (Chapter 571)) customers; it is not intended for and should not be distributed to retail customers in Hong Kong. The Hongkong and Shanghai Banking Corporation Limited is regulated by the Hong Kong Monetary Authority. All enquires by recipients in Hong Kong must be directed to your HSBC contact in Hong Kong. If it is received by a customer of an affiliate of HSBC, its provision to the recipient is subject to the terms of business in place between the recipient and such affiliate. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. HSBC has based this document on information obtained from sources it believes to be reliable but which it has not independently verified; HSBC makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of the Research Division of HSBC only and are subject to change without notice. HSBC and its affiliates and/or their officers, directors and employees may have positions in any securities mentioned in this document (or in any related investment) and may from time to time add to or dispose of any such securities (or investment). HSBC and its affiliates may act as market maker or have assumed an underwriting commitment in the securities of companies discussed in this document (or in related investments), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform investment banking or underwriting services for or relating to those companies. HSBC Securities (USA) Inc. accepts responsibility for the content of this research report prepared by its non-US foreign affiliate. All U.S. persons receiving and/or accessing this report and wishing to effect transactions in any security discussed herein should do so with HSBC Securities (USA) Inc. in the United States and not with its non-US foreign affiliate, the issuer of this report. In the UK this report may only be distributed to persons of a kind described in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005. The protections afforded by the UK regulatory regime are available only to those dealing with a representative of HSBC Bank plc in the UK. In Singapore, this publication is distributed by The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch for the general information of institutional investors or other persons specified in Sections 274 and 304 of the Securities and Futures Act (Chapter 289) (“SFA”) and accredited investors and other persons in accordance with the conditions specified in Sections 275 and 305 of the SFA. This publication is not a prospectus as defined in the SFA. It may not be further distributed in whole or in part for any purpose. The Hongkong and Shanghai Banking Corporation Limited Singapore Branch is regulated by the Monetary Authority of Singapore. Recipients in Singapore should contact a "Hongkong and Shanghai Banking Corporation Limited, Singapore Branch" representative in respect of any matters arising from, or in connection with this report. In Australia, this publication has been distributed by The Hongkong and Shanghai Banking Corporation Limited (ABN 65 117 925 970, AFSL 301737) for the general information of its “wholesale” customers (as defined in the Corporations Act 2001). Where distributed to retail customers, this research is distributed by HSBC Bank Australia Limited (AFSL No. 232595). These respective entities make no representations that the products or services mentioned in this document are available to persons in Australia or are necessarily suitable for any particular person or appropriate in accordance with local law. No consideration has been given to the particular investment objectives, financial situation or particular needs of any recipient. This publication is distributed in New Zealand by The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch incorporated in Hong Kong SAR. In Japan, this publication has been distributed by HSBC Securities (Japan) Limited. It may not be further distributed in whole or in part for any purpose. In Korea, this publication is distributed by The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch ("HBAP SLS") for the general information of professional investors specified in Article 9 of the Financial Investment Services and Capital Markets Act (“FSCMA”). This publication is not a prospectus as defined in the FSCMA. It may not be further distributed in whole or in part for any purpose. HBAP SLS is regulated by the Financial Services Commission and the Financial Supervisory Service of Korea. In Canada, this document has been distributed by HSBC Bank Canada and/or its affiliates. Where this document contains market updates/overviews, or similar materials (collectively deemed “Commentary” in Canada although other affiliate jurisdictions may term “Commentary” as either “macro-research” or “research”), the Commentary is not an offer to sell, or a solicitation of an offer to sell or subscribe for, any financial product or instrument (including, without limitation, any currencies, securities, commodities or other financial instruments). © Copyright 2015, The Hongkong and Shanghai Banking Corporation Limited, ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of The Hongkong and Shanghai Banking Corporation Limited. MICA (P) 073/06/2015 , MICA (P) 136/02/2015 and MICA (P) 041/01/2015

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Global Consumer Brands & Retail Research Team

Europe Asia Consumer Brands & Retail Consumer Brands & Retail Antoine Belge Erwan Rambourg Head of Consumer Brands and Retail Equity Research Head of Consumer Brands and Retail Equity Research +33 1 56 52 43 47 [email protected] +852 2996 6572 [email protected] Christopher Leung Anne-Laure Jamain Analyst Analyst +852 2996 6531 [email protected] +44 207 991 6587 [email protected] Lina Yan David McCarthy Analyst Head of Consumer Retail, Europe +852 2822 4344 [email protected] +44 207 992 1326 [email protected] Catherine Chao Andrew Porteous Analyst Analyst +852 2996 6570 [email protected] +44 20 7992 4647 [email protected] Charlene Liu Paul Rossington Analyst Analyst +65 6658 0615 [email protected] +44 20 7991 6734 [email protected] Scott Chan +852 3941 7005 [email protected] Jérôme Samuel Analyst Karen Choi +33 1 56 52 44 23 [email protected] Analyst +822 3706 8781 [email protected] Emmanuelle Vigneron Analyst Permada (Mada) Darmono +33 1 56 52 43 19 [email protected] Analyst +65 6658 0613 [email protected] Graham Jones Analyst Amit Sachdeva +44 20 7992 5347 [email protected] Analyst +91 22 2268 1240 [email protected] Damian McNeela Kuldeep Gangwar Analyst Analyst +44 20 7992 4223 [email protected] +91 22 3396 0686 [email protected] Anthony Bucalo Chloe Wu Analyst - Beverages Analyst +44 20 7991 9815 [email protected] + 8862 6631 2866 [email protected] CEEMEA Jenny Chae Associate Consumer Brands & Retail +822 3706 8774 [email protected] Bulent Yurdagul Analyst North & Latin America +90 212 3764612 [email protected] Consumer & Retail Jeanine Womersley Richard Cathcart Analyst Analyst +27 21 6741082 [email protected] +55 11 2169 4429 [email protected] Ankur P Agarwal Ana C Hernandez Analyst Associate +966 11 299 2103 [email protected] +52 55 5721 2745 [email protected] Yazeed Al Turki Mariana Vergueiro Analyst Associate +966 11 299 2260 [email protected] +55 11 3847 6066 [email protected] Food & Beverage Carlos Laboy Specialist Sales Global Head of Beverages Research David Harrington +1 212 525 6972 [email protected] +44 20 7991 5389 [email protected] James Watson, CFA Analyst +1 212 525 4905 [email protected] Agricultural Products Ravi Jain Analyst +1 212 525 3442 [email protected] Gustavo Gregori Analyst +55 11 3847 9881 [email protected]