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(Lyle Stafford)
(Lyle Stafford)

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Don't buy Armtec: Raymond James Add to ...

After Armtec Infrastructure Inc.'s dramatic decline, don't buy the stock just because it's cheap, Raymond James analyst Frederic Bastien says.

"Those seeing value at current trading levels may be tempted to step in, but we argue the suspension of the dividend will compel many more yield-seeking investors to head for the exits, creating a massive overhang on the stock in the near term," Mr. Bastien wrote in a research note, in which he slashed his price target from $15 to $5.

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The stock plunged 59 per cent on Thursday, dropping $6.15 to close at $4.35 after the company announced a bigger-than-expected first-quarter loss and suspended its dividend.

Income investors would do better with Genivar Inc. and IBI Group , Mr. Bastien suggested.

He said he was "somewhat surprised" to see the suspension of the dividend only two months after Armtec raised $58-million in equity.

A competitive pricing environment, schedule delays and production inefficiencies will continue to hold back the performance of Armtec's second-quarter results, as will delays in new project awards, Mr, Bastien said.

"They will also prevent Armtec from meeting the earnings test on its senior notes in the third quarter of 2011 and paying dividends. As far as our own projections for Armtec go, a recovery in earnings isn't in the cards until the fourth quarter of 2011 at the earliest," he wrote. He rates the stock "market perform."

Take a look at Globe reporter Boyd Erman's interview with Armtec chief executive officer Charles Phillips on Thursday: New shareholders burned as Armtec suspends dividend

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