Thursday newspaper share tips: Deutsche Boerse/LSE, Cape

An out-vote in the upcoming Brexit referendum would not derail the proposed tie-up between Deutsche Borse and the LSE, but regulators or a last-minute bid from a competitor might yet throw a spanner into the proposed deal, the Financial Times’s Lex column said.

Regarding a hypothetical Brexit, Deutsche chief Carsten Kengeter has already said he would not see that as an obstacle.

Nevertheless, while a committee been set up to manage that possibility one might have expected a more concrete plan, the tipster quipped.

More pertinently, the possibility still existed that Brussels might object to the tie-up, given that LSE on its own already clears 90% of over-the-counter currency and interest rate derivative trades worldwide.

Furthermore, recent share price gains mean the potential cost synergies of €2.5bn outlined by Deutsche Boerse have already been priced-in.

That means the German firm would be hard-pressed to justify a higher bid should a competing offer materialise now.

One option might be for Deutsche Boerse to convert part of its bid into cash by raising its debt levels from under one time operating profits to over two times, but that might be an unsavoury alternative for both LSE and Deutsche Boerse shareholders.

In any case, the 16-year old courtship has now come to an end and wedding bells have rung, Lex said.

Cape might be a stock to watch, with the shares one of the best positioned for any upturn, The Times’s Tempus said.

Shares in the provider of industrial services to the energy and natural resources sectors were trading just about unchanged in comparison to their levels one year ago and its full-year operating earnings and total dividend had held up well in the meantime.

To take note of, the latter was covered twice by the company’s earnings, the tipster pointed out.

The company’s revenues from the oil and gas space were mainly extracted from maintenance, “which should be holding up well”, Tempus said.

Having said that, management itself cautioned that prospects for that segment are weaker this year with the oil price apparently stuck at around $40 per barrel.

Cape was also trying to move into new geographies, such as Kuwait, Malaysia and South Korea and there is work available in the Middle East, while projects are continuing to progress in Australia.

Furthermore, the sustainable dividend provides a yield of almost 6.0%, which makes the stock worth the wait before the next upturn, so Buy, Tempus said.