SINGAPORE (May 5): Singapore Airlines will release its 4Q17 on May 18.

In a Friday preview report, UOB KayHian analyst K Ajith expects SIA to meet consensus earnings, at least on the operating level, with 4Q17 core net profit rising 25% on year due to higher pax loads and improving cargo profitability.

At the group level, Ajith foresees higher operating profit growth due to higher profits at parent airline and improving cargo profitability. At the non-operating level, Ajith has imputed S$112 million in provisions for cargo fines, which SIA has announced, and S$31 million in impairment of TigerAir brand.

“We estimate that SIA will declare 15 Singapore cents in final dividend (inclusive of 5 Singapore cents special).” says Ajith.

According to Ajith, there is also potential for re-rating in the event that cargo losses swing into a significant profit, airline associate losses narrow substantially or yields improve by a better than expected quantum.

SIA is also expected to move into net debt in FY18, says Ajith. He reiterates the fact that SIA’s cash hoard of S$4-5 billion was not a reason to be bullish on the stock given its relatively high capital commitments.

“Thus the street should not be surprised with SIA’s debt profile, which is still significantly better than its competitors,” says Ajith.

UOB KayHian is maintaining its “hold” call on SIA with a target price of S$10.40.

SIA shares are up 3 Singapore cents at S$10.38.