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Some of the analysts who once said investors should buy Armtec Infrastructure are now saying that even after a huge selloff, shares of Armtec aren't a value play.

Armtec shares have been savaged since the company eliminated its dividend, losing half their value Thursday and declining further in Toronto trading on Friday.

Canaccord analyst Yuri Lynk said in a note Friday that "despite selloff not a value play yet." He now rates the company a sell, and he cut his target price to $2.50 from $18. Prior to Armtec's announcement, Mr. Lynk had rated the company a buy.

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That's in line with the advice Friday from Raymond James analyst Frederic Bastien, who said there will likely be more selling as investors who had bought Armtec for the dividend bail out. (See this link for a story on Mr. Bastien's report.)

Mr. Lynk said he has reduced his estimate this year for Armtec's earnings before interest, taxes, depreciation and amortization to $30-million from $69-million this year and to $54 million from $86 million next year.

Add that to multiple contraction and the outlook for the shares falls big time. Mr. Lynk said that while Armtec historically had a 7-8 times forward EBITDA multiple, it will no likely shrink to 5-6 times.

"With no yield to support the shares, limited financial flexibility, and significant headline risk, we believe a multiple re-rating is very much likely," Mr. Lynk said.

M Partners analyst Michael Krestell is more bullish. Mr. Krestell had recommended just prior to the Armtec announcement that investors use a sell-off in the shares prior to the dividend cut to buy, saying the "buying opportunity is a compelling one." At that point, the stock had just closed at $10.84 and he had a price target of $22.

Now, Mr. Krestell says the stock is still a buy, and his new target is $10. He said the target is based on a multiple of 6.5 times enterprise value to Ebitda, down from 8 times prior to the announcement.

TD Securities analyst Michael Tupholme is in the middle. He had a hold rating on the stock prior to the announcement and a target of $17.50. Now, he has a target of $5.50 but still can't recommend investors buy the stock even though that implies some upside.

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Mr. Tupholme wrote in a report that the "return to our target is not high enough justify a Buy rating, given the near to medium-term uncertainty and risks we see on Armtec. Factors influencing our decision to maintain our HOLD recommendation include: 1) a weakened outlook for 2011 and 2012; 2) increased uncertainty surrounding Armtec's revenue and margin outlook; 3) financial covenant risks; and 4) our view that, in general, negative sentiment surrounding the stock is likely to continue for some time."

This post has been corrected to show that Mr. Tupholme's original target price was $17.50, not $15 as previously stated.

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