It looks like mid-tier telco iiNet will benefit no matter who wins the upcoming federal election.
Analysts at Bank of America Merrill Lynch didn’t wait for Kevin Rudd’s swearing in ceremony to upgrade their share price target on iiNet by 15.5% as they believe the telco’s margins from the National Broadband Network (NBN) will increase regardless of whether Labor or Liberal takes Australia’s highest office (Stand by for a post-election small cap rally) in the coming months.
The well flagged delays over the rollout of fibre to the home and the opposition’s alternative simplified NBN plan will see costs fall. This means gross profit per subscriber is anticipated to hit $25 a month compared with the bank’s initial forecast of $15 a month.
There are three other factors supporting the valuation upgrade. These include potential regulated price cuts (charged to service providers) from 2014-15 onwards, an economic downturn forcing customers to seek out lower cost service providers like iiNet, and cost savings from the multiple acquisitions undertaken by iiNet.
Bank of America is urging investors to buy the small cap stock.