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2ergo

Companies: RGO   
25/10/2005

Mobile communications play 2ergo, backed by Growth Company Investor at 120.5p, continues to stoke interest with good market updates. The latest missive is news of a joint venture with The Music Factory giving 2ergo’s content customers access to a vast range of ‘sound-a-like’ music hits in the form of basic, polyphonic and ‘true’ ring-tones. These sound-a-like versions of classic hits are accurate replicas, but boast handsome cost advantages regarding licensing.

Joint managing director Neale Graham says the joint venture, in which 2ergo holds a majority slug with a ten-year option to take the rest, addresses a gap in the market caused by the current over-pricing by music companies. 2ergo will distribute the catalogue to mobile users through its network of mobile content customers, whilst in the less mature US, 2 ergo will handle content delivery directly. Other news flow highlights include the roll out of a series of text message alert services in the US, including weather, sport and entertainment alerts, as well as the acquisition of Natural Response, an automated intuitive voice technology that boosted 2ergo’s Voice business.

Graham has already stated the group will beat forecasts with full year figures to August – analysts were going for pre-tax profits of £1.5m and earnings of 4.1p. The half to February revealed an 84% rise in profits to £737,000, on turnover lifted 100% to £8.9m. After a great run, the shares trade on a pricey forward multiple of 45.7. GCI still sees this a great growth stock in a market with high entry barriers, but readers sitting on bumper gains might lock these in. Reduce.

Market cap: £53m
PE Forecast: 45.7
Share price: 187.5p

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