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Why this share gained 200% in a day

eCargo Holdings Ltd (ASX: ECG) shareholders enjoyed gains exceeding 230 per cent on Monday as the company announced it had entered an agreement to acquire Jessica’s Suitcase Pty Ltd.

eCargo, which is also listed in Hong Kong, provides e-commerce services, offering clients a range of outsourcing options including operation of online sales channels, warehousing, customer delivery and marketing expertise.

The China-based e-commerce company stated it will acquire a 45 per cent stake in Jessica’s Suitcase for an additional 53.4 million CDIs in eCargo plus $5million.

Jessica’s Suitcase was established by Jessica Rudd, daughter of former prime minister Kevin Rudd and a director of the Australian Agricultural Company Ltd (ASX: AAC), and targets Chinese consumers looking to buy Australian products.

The online retailer sells numerous well-known Australian brands such as Sukin skin care products, manufactured by BWX Ltd (ASX: BWX), various wine labels including Penfolds, owned by Treasury Wine Estates Ltd (ASX: TWE) and milk products from Bubs Australia Ltd (ASX: BUB), to list a few.

Once the deal is complete, Ms Rudd will be appointed as a director of eCargo Holdings.

The recent surge in the eCargo Holdings share price will come as a welcome reprieve for the company’s shareholders who have watched the price of their stock sink over the past few years.

In late 2015 eCargo Holdings shares were trading for around 44 cents but had sunk to 8 cents by Friday last week.

And, despite the recent gains exceeding 233 per cent, the eCargo Holdings share price has only increased by 33 per cent over the past year.

In 2016 eCargo Holdings, with a market value of about $45 million, reported a gross profit of HK$62.2 million on revenues of HK$124.5 million.

Jessica’s Suitcase’s profit for the first five months of Financial Year 2018 came to $5,392, according to eCargo Holdings.

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Motley Fool contributor Steve Holland has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BWX Limited. The Motley Fool Australia has recommended Treasury Wine Estates Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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