Mobile ‘convergence’ enabler 2ergo is spinning off its 2safeguard subsidiary onto AIM on the 6 March under the new moniker of Broca, as foreshadowed by Growth Company Investor in November.

Loss-making Broca, boasts joint managing director Neale Graham, is a ‘potential industry standard’ whose technology helps authenticate mobile phone traffic, thereby ‘enabling m-commerce’ by turning phones into ‘mobile chip and pin devices’. It can also be used as a device to secure traditional e-commerce transactions. 2ergo has been ‘encouraged by the strength of enquiries’ for Broca so far, with a ‘small number of initial contracts’ already signed. 2ergo is taking around £7.5 million worth of Broca shares to cover inter-company debt, as well as a £1.9 million cash injection. 2ergo shareholders will receive one Broca share, to be worth 52p each, for every 2ergo share they hold.

As for the flourishing 2ergo business, investors were recently treated to news at the AGM that trading was ‘on target to exceed market expectations’ for the current year to August, with the UK market becoming increasingly open to convergent mobile communications. This has ensured an excellent pipeline of new business, particularly from the media sector. In addition, operations across the Pond are going swimmingly with new work having been won from the likes of Disney and ABC. Graham sees the US market, which is catching up with the European market, as a terrific growth opportunity and only sees prospects accelerating over the coming months.

Following the demerger news, analyst David Toms of house broker Numis left his forecasts intact, although he did suggest that spinning off the loss-making Broca could lead to upgrades later this year. Interim results are out in May, though forecasts for the full year point to profits of £4 million and 10.3p of earnings from £40.5 million sales.

2ergo, originally tipped at 120.5p, has dialled up terrific gains for our readers and we have urged bouts of profit-taking in the past, while remaining supportive of the growth story. At the current 335.5p, the forward p/e is a rather stretched 32.5, although we still feel the shares are well worth holding.