This section from FT Alphaville's Markets Live, an excerpt from a Nomura report, caught my eye yesterday:

DSGi is priced to fail, in our view. We believe the probability of this is over-stated, and see significant upside potential to DSGi’s share price. We therefore upgrade the stock to a Buy rating. DSGi has a number of strategic options, including disposals which could help to raise cash, pay down debt and increase headroom versus covenants. This will see DSGi trade through peak and allow it to execute its transformation plan. Execution of the plan will be key as the market continues to deteriorate. Failure to execute effectively could see further downside risk. We believe management is well positioned to see DSGi through the cycle. (link)
There is contrary. And then there is what FT Alphaville term kamikaze. But far be it for anyone to suggest that the analyst in question is out on a weekend pass - DSG shares have risen +70% on the back of this call.

Still, DSGi is one of those short list short favourites of mine. And everyone else until this bounce. The case against is brief: catastrophic UK high street retail environment for discretionary electronics; cash bleeding away; mucho leverage; and covenants most definitely under dire threat.

The elegant 5 point plan cited on FT Alphaville assumes a smooth and timely disposals process and wholly ignores Murphy's Law. The key lesson of Mr Murphy is that models fail. DSGi's has and it cannot today be repaired. It will be an expensive failure unless you believe, ardently, in the "transformation" (to what?) story.

The price approaches shortdom once more.


Top 10 Murphy Sub-laws:
  1. Just when you see the light at the end of the tunnel, the roof caves in.
  2. Anything you try to fix will take longer and cost more than anticipated.
  3. The things that go missing end up broken.
  4. If there is a worst time for something to go wrong it will happen then.
  5. If you make it idiot-proof someone will make a better idiot.
  6. If everything seems to be going well you have overlooked something.
  7. The cool solutions are never cheap.
  8. Everyone has a plan for getting rich that won't work.
  9. The repair guy will never have seen a model quite like yours before.
  10. Smile! Next year will be worse.

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