The Investment Column: Fly with Travelzest for a rewarding adventure

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The Independent Online

Our view: Hold

Share price: 144.5p (+4p)

Travelzest describes itself as a specialist travel company. That means it offers holiday deals that you are unlikely to get from an agent on the high street for people who want something more than two weeks in Spain sunbathing next to a swimming pool. So if you fancy touring Vietnam or Cambodia or decide you would like to go on a naturist break to Croatia, the AIM-listed group can fix the trip for you.

It tends to target empty-nesters, who make up the bulk of its customers. With their children grown up, it is they who have the time and money to spend on more exotic holidays. And, as yesterday's results from Travelzest show, this is a great part of the travel business to have exposure to. For the year to 31 October, pre-tax profits rose to £404,000 from £58,000 in the previous year. The figures comfortably beat City expectations and were the first since Travelzest's acquisition of itravel2000.com in October.

Itravel2000.com is Canada's largest online travel retailer - bigger even than Expedia - with the tie-up between the two making great strategic sense. Travelzest is now in a position to offer its specialist holidays to the Canadian company's sizeable customer base. Its upcoming launch of websites holiday.co.uk and flight.co.uk should boost the company's customer base further, creating a full service holiday portal via which families can create the holiday that suits them best.

Itravel2000.com helped increase Travelzest's profit margins from 26 per cent to 38 per cent. Analysts believe they will rise further in the current year - probably to around 43 per cent - driving pre-tax profits up to around £3.6m by the end of 2007. At 15 times forward earnings, the stock is well worth holding.

Galliford Try

Our view: Hold

Share price: 151.5p (+0.75p)

Galliford Try's hybrid business models serve it well. It sees the group plough the cash generated by its construction operations into its housebuilding unit, which enjoys far bigger profit margins.

In this way, Galliford has generated solid earnings growth for every one of the past four years. This winning run is unlikely to end any time soon. Yesterday the group unveiled contracts in the affordable housing and regeneration space with two housing associations worth £71m in total.

Increasingly, the group is focusing on the affordable housing sector where it has carved a niche for itself. In this space, it does not compete with the big beasts of the housebuilding world and the key to being successful is in pursuing good quality land developments. With Galliford's management track record in doing just that, the group's shares are well worth holding on to despite their 50 per cent increase during the last 12 months.

ContentFilm

Our view: Buy

Share price: 18.5p (+1p)

ContentFilm has transformed itself from a film production company to simply an owner of TV series and films. Without doubt, this is a far less sexy part of the media industry, but it is a more predictable and profitable one.

Understandably, the transformation has been music to investors' ears and Content shares have registered a fivefold increase over the last 18 months. They extended this advance yesterday after the group put out a bullish trading statement in which it boasted that its library of TV programmes is enjoying strong sales. Recent catalogue sales include the licensing of the sci-fi series Andromeda to ITV. It is currently playing prime time on ITV4.

In relation to newly acquired rights, Content has secured new sales in several countries for its Young Dracula and Whistler series.

Content found that the problem with the film-making business is that it is unpredictable and therefore very risky. It is very difficult to know whether a film is going to be a success know matter how high profile the actors, writers or director. Today, Content owns more than 6,000 hours of TV, 800 feature films, including cult classics such as The Crow, and can comfortably say that its results this year will meet expectations because a substantial proportion of its revenues have already been contracted.

Hence, it is pretty much a certainty that its pre-tax profits will reach £3m in 2007 and rise to £4m in 2008. Given this earnings visibility and the discount at which Content trades relative to rivals, its stock is worth tucking away.

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