WesternOne (TSE:WEQ) is still battling macro concerns, according to Dundee Capital Markets, which retained its neutral rating on the company, citing a balance sheet overhang and a challenging micro environment.
The company, which is focused on acquiring businesses in the construction and infrastructure services sectors, released its fourth quarter results, which Dundee said proved to be "not bad".
Revenue came in at $88.2 million, below Dundee's estimate of $92.2 million and consensus expectations of $91.2 million, while earnings per share beat views.
Dundee noted, however, that the fourth quarter results were largely a function of a legacy "and much more positive macro environment."
The broker added: "Balance sheet remains an overhang: Macro backdrop will not help 2015 while leverage will need to be addressed over time.
"While the company's recent decision to suspend its dividend and scale back capex spending for 2015 marks a positive shift in capital allocation priorities, the undertakings don't address overnight the company's leverage issues."
Dundee analyst Maxim Sytchev said that the balance sheet still remains a "material overhang" as inclusive of converts, leverage stands at 4.3 times for 2015.
"Prudent management of internal cash flows is the focus of company’s management. We would like to see a visible inflection point on the operational front before becoming more constructive on the name," the analyst wrote in a report released after markets closed on Friday.
Dundee has a neutral rating on WesternOne, with a C$2.50 per share price target. Shares closed at C$1.30 on Friday, down more than 58 percent year-to-date.