The Investment Column: With Lara Croft on the rampage, Sci Entertainment may be cheap

Our view: Buy

Share price: 465p (-10p)

Lara Croft is once again working her magic for Sci Entertainment. The computer game publisher told the City yesterday that sales of Tomb Raider Legend, its latest release featuring the cyber beauty, had hit a record 2.9 million since its April launch.

This puts Sci on track to deliver an underlying profit of £25m this year compared with a loss of £4.7m in 2005. But strong sales are not the only reason for this performance. Good working capital management has done its bit too, and has helped the firm amass a cash pile of £30m, nearly double market expectations.

With the acquisition of its rival Eidos now fully integrated, there looks to be little holding Sci back. The positive trend for Lara Croft should continue for some time as Tomb Raider Legend is launched on the Nintendo DS, Gameboy Advance and Gamecube consoles later this year.

Readers should not come away with the impression that Sci is a one-trick pony. Although the Lara Croft franchise is important (it came courtesy of the Eidos deal), Hitman Blood Money sold 1.5 million copies over a five-week period to 30 June as the title charted at number one in all the firm's key territories, while Championship Manager 2006 also performed strongly.

In the meantime, new areas for the company such as games for mobile phones and online games continue to grow and are playing an increasingly importantly role.

Despite the positive news yesterday, Sci shares lost ground. Over the past six weeks they have fallen nearly 15 per cent and now trade a just 14 times forward earnings. That is a discount of 45 per cent to Ubisoft, its closest peer, and is unjustified. Earlier this year, takeover talks with American computer games developer Midway came to nothing. If Sci remains on such a lowly rating for too long, readers should not be surprised to see the company on the receiving end of a fresh bid approach. Buy.

TT Electronics

Our view: Buy

Share price: 182.25p (+1.25p)

A slew of new products launches is behind booming sales at TT Electronics. Business is going so well that the group announced yesterday that trading in the first half of its financial year will be better than that seen in 2005.

Among the new gadgets from the company is a state-of-the-art steering sensor called Autopad. The group bought the intellectual property to the product not long ago for just £1.4m. It has already notched up sales worth £100m. Originally, TT meant it only for expensive cars but the product has quickly gone mass market and can now be found in more run-of-the-mill models. Analysts say the success of Autopad has made the group a world leader in low-cost sensors for power steering.

In total, 40 per cent of TT's sales come from making sensors for car makers such as BMW, Volkswagen and Audi. However, revenues at its other businesses, which include an outfit that makes resistors, a cable-making operation and a power systems unit are also benefiting from innovation. The most exciting is a product that TT's resistors division has developed which helps reduce the heat that light emitting diodes (or LEDs) give out, making them more efficient.

Increasingly LEDs are tipped as an alternative to light bulbs and if this happens in any meaningful way it is likely to become a major money-spinner for the group. TT already has an order for its gadget from a US company which makes fruit machines for Las Vegas casinos, so there is no doubt about its efficacy.

On the cost side of the business, TT has been busy cutting outgoings by moving production facilities to low-cost countries such as Mexico, Malaysia and China. Working in such parts of the world is up to 18 per cent cheaper than in the UK, according to the company.

At 182.25p, the group's shares trade at just 14 times forward earnings. Although TT is quite vulnerable to a slowdown in the global economy, the potential of its new products outweighs this risk. A dividend yield of 5.5 per cent only adds to the attractiveness of the stock. Buy.

2ergo Group

Our view: Hold

Share price: 215.5p (-2p)

2ergo Group has built a software platform which facilitates the distribution of mobile phone data irrespective of handset maker or network provider. Its clients include supermarkets, high street banks and estate agents, all of which are increasingly marketing their goods and services to customers through mobile phones.

Yesterday, 2ergo unveiled the purchase of Vics Limited, a spin-off from Manchester University Umist. It will allow the AIM-listed group to distribute video clips to mobile phones along with traditional data. The deal, done for an undisclosed sum, significantly enhances 2ergo's product offering to new and existing clients.

Analysts expect the company to make a profit of £2.7m this year rising to £3.6m in 2007, which leaves its stock trading at a whopping 32 times forward earnings. Despite the strong growth 2ergo is enjoying, this makes its shares just a hold.