DMG says it’s optimistic on the potential arising from Singapore Airlines’ (C6L.SG) acquisition of a 16% stake worth $65 million in China Cargo Airlines, announced Monday.

“While management has not provided any guidance on the outlook specifics, SIA’s pivotal role in the route optimization of China Cargo Airline’s freighter carriers could potentially see SIA offering direct connectivity between China and Singapore (and Asean for the matter) and Australia, while China Cargo Airlines would be dedicated to traffic in/from the mainland China region.”

Maintains stock’s Buy rating with an unchanged target price of $18.50. The house adds, the cash injection and reconfigured shareholding structure will allow China Cargo Airline to expand its fleet base and re-optimize its routes, to better compete with Cathay’s cargo venture with Air China, which is set to commence next year.

Shares are +1.6% at $15.42.