Tencent Holdings Ltd.

The stable outlook reflects our expectation that Tencent will have solid revenue growth (in excess of 20%) over the next several years driven by mobile games, online advertising, cloud computing, and payments. We believe the company will generate strong cash flows to enable further investments in cloud computing, content, and acquisitions. We could lower the rating if Tencent's adjusted debt leverage (including operating lease obligations) exceeds 1.5x. The most likely scenario for this to happen would be large debt-financed acquisitions. This further assumes that the acquisitions do not bring an immediate benefit to Tencent's competitive position and do not involve some period of execution. A significant deterioration in Tencent's competitive position could also result in a downgrade. This would likely

... competition. We expect Tencent Holdings Ltd. to maintain its top market position in several online platforms such as communications and social, games, and select media and entertainment services. The company is also in a tight race for leadership in "industrial internet" services, namely cloud and mobile payments. However, competition across Tencent's online platforms remains intense, including from large internet companies such as Baidu Inc., Alibaba Group Holding Ltd., and Netease Inc. Rising investment appetite to drive debt growth. Tencent's investment appetite is growing, resulting in an increase in debt leverage in 2018, although down somewhat from the peak in second quarter 2018. However, we expect debt leverage to remain well below our downgrade trigger of 1.5x, given the company's significant operating cash flow generation. Meanwhile, these investments should strengthen Tencent's competitive position in its core businesses such...

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