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J.P.Morgan has downgraded iiNet (IIN) to Underweight from Neutral based on a remodelled valuation which reflects a significant re-basing of its margins in an NBN environment and faster roll-out under a Coalition government. The broker believes that the NBN gives iiNet greater scope to grow its subscriber base by making non-metro markets more accessible and raising broadband penetration. Resellers in the fixed-line industry will earn significantly lower margins but for iiNet this will be somewhat diluted given the proportion of low-margin off-net customers. J.P.Morgan has placed a price target of $4.41 (currently $6.48) with an expected return of -32%.


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