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EQUITIES Tencent Holdings Ltd. (700 HK) INTERNET 

Buy: Platform strategy offsets weak game performance China

 Strong 3Q revenue despite soft mobile games MAINTAIN BUY  Performance ads and payment revenue beat expectations TARGET PRICE (HKD) PREVIOUS TARGET (HKD)  Maintain Buy and trim TP to HKD245 from HKD256 245.00 256.00 3Q results highlight power of its platform. The key strength of Tencent's strategy, in our view, is the different ways it can monetize the high user base and engagement SHARE PRICE (HKD) UPSIDE/DOWNSIDE on all of its social properties. When one monetization engine slows, it is able to fire 196.90 +24.4% up another engine. In 3Q, total revenue grew 52% y-o-y, beating our estimate by 2%, (as of 16 Nov 2016)

as lower than expected smartphone game revenue (its biggest revenue category) MARKET DATA was offset by social subscription, payment and strong performance-based ads Market cap (HKDm) 1,864,046 Free float 52% Market cap (USDm) 240,306 BBG 700 HK revenue. Tencent has the traffic, products and ad inventory to manage through short- 3m ADTV (USDm) 426 RIC 0700.HK term weaknesses in a particular business to maintain very strong revenue growth. FINANCIALS AND RATIOS (CNY) Strong revenue growth with slight miss on EPS. Total revenue grew 52% y-o-y to Year to 12/2015a 12/2016e 12/2017e 12/2018e MB40bn, 3% above consensus. EPS of RMB1.24 was 4% below our estimate but in- HSBC EPS 3.44 4.80 6.84 8.31 HSBC EPS (prev) - 4.86 7.47 9.35 line with consensus. Gross margins of 54% missed our estimate by 133bps, due to Change (%) - -1.2 -8.4 -11.1 channel costs for smartphone gaming and higher video content costs. Adjusted Consensus EPS 3.21 4.63 6.04 7.61 PE (x) 50.7 36.3 25.5 21.0 operating margins of 37% also missed our estimate due to promotional spending on Dividend yield (%) 0.0 0.2 0.4 0.5 games and payment. We expect continued high spending on video content and EV/EBITDA (x) 35.6 25.5 19.6 15.3 ROE (%) 28.8 32.0 37.9 35.9 licensed games to negatively impact gross margins. Sales and marketing costs will also remain elevated due to merchant education for payment adoption, promotion of 52-WEEK PRICE (HKD) mobile utility apps and advertising costs to promote its hit video content. 260.00

Soft mobile games but strong ad and other revenue. Smartphone gaming grew 185.00 87% y-o-y to RMB 9.9bn, 9% lower than our estimate. While Tencent has over 100m 110.00 DAUs for mobile game, including 40m for Honor of Kings, it only released 2 casual 11/15 05/16 11/16 Target price: 245.00 games and 3 mid-core games in 3Q. We point out that Tencent's strategy is to High: 218.20 Low: 133.10 Current: 196.90 amass users and then increase monetization gradually. Rising monetization and new Source: Thomson Reuters IBES, HSBC estimates games will drive mobile game revenue next year. Social revenue increased 58% y-o- y due to digital content subscriptions and the consolidation of China Music Corp. Chi Tsang*, CFA Head of Internet Research, Asia Pacific Tencent had 20m video subscribers in October. Brand advertising only grew 21% y- The Hongkong and Shanghai Banking Corporation Limited o-y, due to weak demand but also due to cannibalization from subscription revenue [email protected] +852 2822 2590 and to Tencent changing its news feed ad products from time-based to click based. Qin Wang* This helped performance (P4P) ads beat estimates, growing 83% y-o-y. Given the Associate weak outlook for brand advertising given macro uncertainty, Tencent will see faster The Hongkong and Shanghai Banking Corporation Limited [email protected] growth from P4P ads than brand ads in 2017. While WeChat moments continue to be +852 2822 4393 the biggest driver of P4P ads, ad load will likely remain low at 1/user/day, as management focuses on efficiency and targeting instead of ad inventory. Other * Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is revenue was very strong, up 348% y-o-y, reaching 12% of revenue. Cloud revenue not registered/ qualified pursuant to FINRA regulations doubled q-o-q from a small base but payments remained the biggest component and commission revenue from merchants will likely continue to grow rapidly.

Disclosures & Disclaimer Issuer of report: The Hongkong and Shanghai Banking Corporation Limited This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it. View HSBC Global Research at: https://www.research.hsbc.com

EQUITIES ● INTERNET 17 November 2016 

Financials & valuation: Tencent Holdings Ltd. Buy

Financial statements Valuation data Year to 12/2015a 12/2016e 12/2017e 12/2018e Year to 12/2015a 12/2016e 12/2017e 12/2018e Profit & loss summary (CNYm) EV/sales 15.8 10.7 7.4 5.7 Revenue 102,863 152,329 215,293 266,923 EV/EBITDA 35.6 25.5 19.6 15.3 EBITDA 45,805 64,083 81,311 100,437 EV/IC 15.9 12.3 12.4 12.1 Depreciation & amortisation -6,635 -9,836 -8,880 -12,596 PE* 50.7 36.3 25.5 21.0 Operating profit/EBIT 40,627 56,705 74,766 91,635 PB 13.7 12.0 9.7 7.1 Net interest 709 525 433 1,891 FCF yield (%) 5.7 -0.2 3.9 4.6 PBT 36,216 52,354 73,671 91,340 Dividend yield (%) 0.0 0.2 0.4 0.5 HSBC PBT 36,216 52,354 73,671 91,340 * Based on HSBC EPS (diluted) Taxation -7,108 -10,520 -14,734 -18,268 Net profit 28,806 41,367 58,348 72,341 HSBC net profit 28,806 41,373 58,348 72,341 Issuer information Cash flow summary (CNYm) Share price (HKD) 196.90 Free float 52% Cash flow from operations 35,996 -1,909 70,146 77,885 Target price (HKD) 245.00 Sector Internet Capex -7,709 -15,606 -23,668 -27,235 Reuters (Equity) 0700.HK Country China Cash flow from investment -63,605 -15,606 -23,668 -27,235 Bloomberg (Equity) 700 HK Analyst Chi Tsang, CFA Dividends -2,643 -3,774 -5,731 -8,074 Market cap (USDm) 240,306 Contact +852 2822 2590 Change in net debt -1,399 3,388 -35,391 -65,029

FCF equity 93,693 -2,903 64,958 75,580 Balance sheet summary (CNYm) Price relative Intangible fixed assets 15,732 38,394 38,394 38,394 Tangible fixed assets 135,708 162,189 182,994 202,964 266.00 266.00 Current assets 155,378 132,079 178,145 250,897 Cash & others 80,769 100,568 135,960 200,989 216.00 216.00 Total assets 306,818 332,663 399,533 492,256 Operating liabilities 123,275 99,554 135,018 164,200 Gross debt 61,443 84,630 84,630 84,630 166.00 166.00 Net debt -19,326 -15,938 -51,330 -116,359 Shareholders' funds 120,035 138,327 169,734 233,274 116.00 116.00 Invested capital 102,774 132,540 128,556 127,067 66.00 66.00 2014 2015 2016 Ratio, growth and per share analysis Tencent Holdings Ltd. Rel to HSCEI

Year to 12/2015a 12/2016e 12/2017e 12/2018e Source: HSBC Y-o-y % change Note: Priced at close of 16 Nov 2016 Revenue 30.3 48.1 41.3 24.0 EBITDA 40.0 39.9 26.9 23.5 Operating profit 33.0 39.6 31.8 22.6 PBT 24.8 44.6 40.7 24.0 HSBC EPS 30.0 39.6 42.6 21.6 Ratios (%) Revenue/IC (x) 1.2 1.3 1.6 2.1 ROIC 41.0 40.9 45.7 56.4 ROE 28.8 32.0 37.9 35.9 ROA 12.9 13.6 16.6 16.8 EBITDA margin 44.5 42.1 37.8 37.6 Operating profit margin 39.5 37.2 34.7 34.3 EBITDA/net interest (x) Net debt/equity -15.8 -10.7 -28.5 -47.8 Net debt/EBITDA (x) -0.4 -0.2 -0.6 -1.2 CF from operations/net debt Per share data (CNY) EPS Rep (diluted) 3.05 4.36 6.15 7.62 HSBC EPS (diluted) 3.44 4.80 6.84 8.31 DPS 0.00 0.40 0.61 0.86 Book value 12.73 14.57 17.88 24.57

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3Q16 results RMB millions except HKD EPS ______3Q16 ______Delta ______Actual HSBC Consensus HSBC Consensus Smartphone gaming 9,900 10,865 -9% PC Game 11,802 11,480 3% Social network 9,809 9,259 6% Online advertising 7,449 7,488 -1% Others 4,964 3,827 30% Total Revenues 40,388 39,442 39,045 2% 3% memo: QoQ growth 13.2% 10.5% 17.1% memo: YoY growth 51.9% 48.3% 46.8%

Gross profits 21,828 21,842 22,038 0% -1% memo: QoQ growth 6.7% 6.8% memo: YoY growth 40.1% 40.2% Gross Margins (bps) 54.0% 55.4% 56.4% -133 -240 Gross Margin VAS 65.2% 64.5% 65 Online Advertising 36.3% 44.3% -804 Other 18.1% 10.0% 813

Selling and marketing (3,277) (2,961) 11% memo: QoQ growth 38.6% 25.2% memo: YoY growth 60.5% 45.0% memo: % of revenue 8.1% 7.5% G&A (5,883) (5,694) 3% memo: QoQ growth 11.0% 7.5% memo: YoY growth 34.3% 30.0% memo: % of revenue 14.6% 14.4%

Non-GAAP Operating profit 15,037 15,545 -3% Non-GAAP Operating Margins 37.2% 39.4% -218

Non-GAAP net income 11,737 12,152 11,680 -3% 0% Adjusted EPS CNY CNY 1.24 CNY 1.28 CNY 1.23 -4% 0% memo: QoQ growth 3.5% 7.4% memo: YoY growth 40.3% 45.5% Adjusted EPS HKD HKD 1.43 HKD 1.50 HKD 1.41 -4% 2% Source:Company data, Bloomberg, HSBC

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HSBC estimates changes RMB mn 4Q16e 1Q17e 2016e 2017e Current Revenue 44,255 46,953 152,329 215,293 VAS 30,393 32,724 109,012 142,250 Mobile gaming 11,715 13,530 39,415 62,303 Legacy gaming 11,923 12,257 46,186 48,495 Online advertising 7,905 7,081 26,587 37,502 GM 54.0% 53.7% 55.6% 52.9% Operating profit 14,518 18,087 56,705 74,766 OPM 32.8% 38.5% 37.2% 34.7% Non-GAAP EPS CNY 1.31 CNY 1.66 CNY 4.80 CNY 6.84 Previous Revenue 43,899 46,369 151,027 208,088 VAS 31,401 33,461 110,172 143,295 Mobile gaming 12,780 13,940 41,445 64,576 Legacy gaming 11,923 12,084 45,508 47,783 Online advertising 7,906 7,397 26,627 37,393 GM 54.8% 57.3% 56.2% 56.0% Operating profit 15,229 20,167 57,633 84,406 OPM 34.7% 43.5% 38.2% 40.6% Non-GAAP EPS CNY 1.33 CNY 1.79 CNY 4.86 CNY 7.47

Delta Revenue 1% 1% 1% 3% VAS -3% -2% -1% -1% Mobile gaming -8% -3% -5% -4% Legacy gaming 0% 1% 1% 1% Online advertising 0% -4% 0% 0% E-commerce GM bps (83) (358) (60) (317) Operating profits -5% -10% -2% -11% OPM bps (188) (497) (94) (584) Non-GAAP EPS (CNY) -1% -7% -1% -9% Source:HSBC estimates

Estimate changes. We raise our revenue to reflect faster other revenue, offsetting slowing smartphone gaming. We lowered mobile gaming revenue by 5/4%, but raise total revenue by 1/3% for 2016/2017e.

Further, we trim margins on higher video content costs and promotion costs for payment, mobile utility apps and video. We lowered gross margin by 60bps/317bps for 2016/17e to reflect the continued rising content cost on advertising business as well as the increase revenue contribution from mobile game with lower gross margin.

Additionally, we lowered operating margin by 94bps/584bps to factor in the lower gross margin as well as elevated selling and marketing expenses to promote mobile apps, payment, mobile games etc.

Valuation and risks

SOTP-based target price of HKD245 (range is HKD188 to HKD245) We continue to use a sum-of-the parts approach to value Tencent, using same multiples, believing it is the best way to capture the full value of the company.

Our target price of HKD245 implies 31x 2017e non-GAAP EPS. Our thesis rests on 2 points. First, Tencent is the leading social platform in China in users and time spent across multiple products. Second, Tencent is able to monetize its users in multiple ways.

Based on 2017 estimates, we value PC gaming business at 12-17x 2017 NOPAT (unchanged), amounting to HKD30-43/share vs HKD30-42/share previously. PC gaming should grow at a 3% CAGR from 2016-2019e.

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We value the smartphone gaming business at 25-30x 2017 NOPAT (unchanged), translating into HKD69-82/share vs. HKD72-86/share previously. Smartphone gaming revenue is expected to grow at a CAGR of 31% for 2016-19e with high operating margins of 45% for 2017. We believe these multiples reflect the different growth rates for PC and mobile games.

We value subscription and digital content business at 30-35x 2017e NOPAT (unchanged). This amounts to HKD42-48/share vs. HKD41-48/share previously. In our model, subscription and digital content revenue is expected to grow at a 22% CAGR from 2016-2019e with high operating margins of 60% for 2017.

Total VAS is valued at HKD140-173/share.

We value online advertising business at 30-35x 2017e NOPAT (unchanged). This amounts to HKD10-12/share vs. HKD19-20/share previously. The decrease is primarily attributable to lower operating margin outlook for the business line from 35% to 23%, as a result of skyrocketing content cost, which increased 43% y-o-y to RMB6.6bn while brand advertising revenue only increased 21% y-o-y. The company expects the content spending continue to rise in 2017 as they view video platform as a strategic asset to drive user engagement and stickiness. Therefore, we lowered the valuation for the business line itself, but viewing it be a potential upside. In our model, online advertising revenue is expected to grow at a 32% CAGR from 2016-2019e.

The Other segment includes Internet finance, Tencent Pictures, cloud and others. Since these businesses are still at a fast growing stage (over 348% y-o-y growth in 3Q16) and have not yet reached stable margins, we value the business line using 5-10x 2017 revenue (unchanged). This yields HKD22-43/share vs. HKD17-34/share previously.

We continue to include Tencent’s investments in associates and available-for-sale financial assets at book value and net cash, HKD16/share (unchanged) and HKD1/share vs.HKD8/share in 2Q16.

We believe investors will continue to reward strong operating momentum at WeChat and shrewd investments and alliances by management. Thus, instead of setting our target price at the mid-point of the range, we set it at the high end of HKD245, which implies 31/25x 2017/2018e PE, which we believe is reasonable. With c25% upside implied from current levels, we reiterate our Buy rating.

Risks Key downside risks include: (1) Tencent’s failure to continue to offer expansion packs and features that lead to higher monetisation of games; (2) failure to take advantage of the leading position in the digital consumptions, especially video, music, sports etc that leads to less user engagement on the platform; (3) Tencent’s ability to generate revenue from WeChat below our forecast; and (4) online advertising being below expectations.

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172016 November EQUITIES

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Current SOTP valuation ______2017 ______Adjusted ____ Range ______Value ______Per Share ____

RMB m Revenue Gross Profit Operating Profit NOPAT Methodology Low High Low High Low High ●

PC gaming 48,495 31,384 25,702 20,562 Multiple of NOPAT 12 17 246,744 349,553 30 43 INTERNET memo: margin 64.7% 53.0%

Smartphone gaming 62,303 37,382 28,036 22,429 Multiple of NOPAT 25 30 560,723 672,867 69 82 memo: margin 60.0% 45.0%

Subscription and digital content 31,453 23,589 14,154 11,323 Multiple of NOPAT 30 35 339,688 396,303 42 48 memo: margin 75.0% 60.0%

Online advertising 37,502 14,639 3,367 2,694 Multiple of NOPAT 30 35 80,807 94,275 10 12 memo: margin 39.0% 23.0%

Others (internet finance, cloud, movie) 35,541 7,108 1,777 1,422 Multiple of Revenue 5 10 177,703 355,407 22 43 memo: margin 20.0% 12.0%

Investments in associates 72,868 72,868 Available-for-sale financial assets 54,827 54,827 Total investments 127,695 127,695

Investment portfolio 127,695 127,695 16 16 Sub-Total 1,015,968 1,244,390 HKD 187 HKD 244 Add net cash per share HKD 1 HKD 1 Total value per share HKD 188 HKD 245 Source: HSBC

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EQUITIES ● INTERNET 17 November 2016 

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: Chi Tsang, CFA and Qin Wang

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.

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Rating distribution for long-term investment opportunities As of 16 November 2016, the distribution of all independent ratings published by HSBC is as follows: Buy 44% ( 25% of these provided with Investment Banking Services ) Hold 40% ( 26% of these provided with Investment Banking Services ) Sell 16% ( 20% 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.

For the distribution of non-independent ratings published by HSBC, please see the disclosure page available at http://www.hsbcnet.com/gbm/financial-regulation/investment-recommendations-disclosures.

Share price and rating changes for long-term investment opportunities Tencent Holdings Ltd. (0700.HK) share price Rating & target price history performance HKD Vs HSBC rating history From To Date Analyst Neutral Overweight 14 May 2014 Chi Tsang Overweight Neutral 13 Aug 2014 Chi Tsang Neutral Buy 24 Apr 2015 Chi Tsang 229 Target price Value Date Analyst 179 Price 1 138.41 11 Mar 2014 Chi Tsang Price 2 124.83 20 Mar 2014 Chi Tsang Price 3 132.02 14 May 2014 Chi Tsang 129 Price 4 141.00 13 Aug 2014 Chi Tsang Price 5 134.00 12 Nov 2014 Chi Tsang 79 Price 6 145.00 28 Jan 2015 Chi Tsang Price 7 181.00 24 Apr 2015 Chi Tsang 29 Price 8 182.00 13 May 2015 Chi Tsang Price 9 173.00 12 Aug 2015 Chi Tsang

Price 10 183.00 10 Nov 2015 Chi Tsang

Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Nov-11 Price 11 191.00 17 Mar 2016 Chi Tsang Source: HSBC Price 12 185.00 18 May 2016 Chi Tsang Price 13 204.00 17 Aug 2016 Chi Tsang Price 14 256.00 07 Oct 2016 Chi Tsang Source: HSBC To view a list of all the independent fundamental ratings disseminated by HSBC during the preceding 12-month period, please see the disclosure page available at www.research.hsbc.com/A/Disclosures.

HSBC & Analyst disclosures Disclosure checklist

Company Ticker Recent price Price date Disclosure TENCENT HOLDINGS LTD. 0700.HK 196.90 16 Nov 2016 2, 4, 5, 6, 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 31 October 2016 HSBC beneficially owned 1% or more of a class of common equity securities of this company. 5 As of 30 September 2016, 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 30 September 2016, 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 30 September 2016, 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.

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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 12 As of 11 November 2016, HSBC beneficially held a net long position of more than 0.5% of this company’s total issued share capital, calculated according to the SSR methodology. 13 As of 09 November 2016, HSBC beneficially held a net short position of more than 0.5% of this company’s total issued share capital, calculated according to the SSR methodology. HSBC and its affiliates will from time to time sell to and buy from customers the securities/instruments, both equity and debt (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, sales & trading, and principal trading revenues.

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

Economic sanctions imposed by the EU and OFAC prohibit transacting or dealing in new debt or equity of Russian SSI entities. This report does not constitute advice in relation to any securities issued by Russian SSI entities on or after July 16 2014 and as such, this report should not be construed as an inducement to transact in any sanctioned securities.

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. In order to find out more about the proprietary models used to produce this report, please contact the authoring analyst.

Additional disclosures 1. This report is dated as at 17 November 2016.

2. All market data included in this report are dated as at close 16 November 2016, unless a different date and/or a specific time of day is 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, Principal Trading, and Research businesses to ensure that any confidential and/or price sensitive information is handled in an appropriate manner.

4. You are not permitted to use, for reference, any data in this document for the purpose of (i) determining the interest payable, or other sums due, under loan agreements or under other financial contracts or instruments, (ii) determining the price at which a financial instrument may be bought or sold or traded or redeemed, or the value of a financial instrument, and/or (iii) measuring the performance of a financial instrument.

Production & distribution disclosures 1. This report was produced and signed off by the author on 16 Nov 2016 19:08 GMT.

2. In order to see when this report was first disseminated please see the disclosure page available at https://www.research.hsbc.com/R/34/hnMcXcj

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Disclaimer

Legal entities as at 1 July 2016 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 Level 19, 1 Queen’s Road Central HSBC Bank (RR), Moscow; ‘IN’ HSBC Securities and Capital Markets (India) Private Limited, Mumbai; Hong Kong SAR ‘JP’ HSBC Securities (Japan) Limited, Tokyo; ‘EG’ HSBC Securities Egypt SAE, Cairo; ‘CN’ HSBC Telephone: +852 2843 9111 Investment Bank Asia Limited, Beijing Representative Office; The Hongkong and Shanghai Banking Fax: +852 2596 0200 Corporation Limited, Singapore Branch; The Hongkong and Shanghai Banking Corporation Limited, Website: www.research.hsbc.com Seoul Securities Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Branch; HSBC 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 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. 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Global Telecoms, Media & Technology Research Team

Global Asia

Analyst, Global Sector Head Analyst Analyst Stephen Howard +44 20 7991 6820 Yogesh Aggarwal +91 22 2268 1246 John Liu +852 2822 4392 [email protected] [email protected] [email protected]

Analyst Europe Associate Vivek Gedda +91 22 6164 0693 Aric Hui +852 2822 3165 Analyst [email protected] [email protected] Nicolas Cote-Colisson +44 20 7991 6826 [email protected] Analyst Associate Vikas Ahuja +91 22 3396 0690 Qin Wang +852 2822 4393 Analyst [email protected] [email protected] Antonin Baudry +33 1 56 52 43 25 [email protected] Analyst Associate Neale Anderson +852 2996 6716 Wayne Wang +852 2914 9935 Analyst [email protected] [email protected] Christopher Johnen +49 211 910 2852 [email protected] Analyst Associate Angela Tay +65 6658 0612 Kenneth Shim +822 3706 8779 Analyst [email protected] [email protected] Dominik Klarmann, CFA +49 211 910 2769 [email protected] Analyst Associate Joyce Chen +8862 6631 2862 David Huang +886 2 66312865 Analyst [email protected] [email protected] Luigi Minerva +44 20 7991 6928 [email protected] Analyst

Jenny Lai +8862 6631 2860 Analyst [email protected] Specialist Sales Olivier Moral +33 1 5652 4322 [email protected] Analyst Kubilay Yalcin +49 211 9104880 Carrie Liu +8862 6631 2864 [email protected] Analyst [email protected] Adam Fox-Rumley +44 20 7991 6819 Myles McMahon +852 2822 4676 [email protected] Analyst [email protected] Bruce Lu +8862 6631 2861 Americas [email protected]

Analyst Analyst Christopher A Recouso +1 212 525 2279 Steven C Pelayo +852 2822 4391 [email protected] [email protected]

Analyst Analyst Ronny Berger, CFA 44 20 7991 2750 Ricky Seo +822 37068777 [email protected] [email protected]

Analyst Analyst Sunil Rajgopal +1 212 525 0267 Rajiv Sharma +91 22 2268 1239 [email protected] [email protected]

Global Emerging Markets (GEMs) Analyst Darpan Thakkar +91 22 6164 0695 Analyst [email protected] Hervé Drouet +44 20 7991 6827 [email protected] Analyst Piyush Choudhary +65 6658 0607 Emerging Europe, Middle East & Africa [email protected]

(EMEA) Analyst Analyst Jerry Tsai +8862 6631 2863 Ziyad Joosub +27 11 676 4223 [email protected] [email protected] Analyst Analyst Chi Tsang +852 2822 2590 Eric Chang +971 4 423 6554 [email protected] [email protected] Analyst Terry Chen +852 2996 6635 [email protected]

Analyst Jena Han +822 3706 8772 [email protected]

Analyst Will Cho +822 3706 8765 [email protected]