Infant formula share Jatenergy Ltd (ASX:JAT) rockets higher

The market may be sinking notably lower on Wednesday, but that hasn’t stopped the Jatenergy Ltd (ASX: JAT) share price from rocketing higher.

In late morning trade the infant formula hopeful has seen its share price rise 11.5% to 14.5 cents.

Why are Jatenergy’s shares rocketing higher?

This morning Jatenergy announced that it has entered into a binding agreement to open a retail outlet within the new Hui Yue Kid’s City shopping complex in Zhengzhou, China.

The company will open a JAT Maternity and Children store in the soon to open shopping complex designed specifically to cater to the mother and baby market.

Kid’s City will be the largest indoor children’s themed shopping centre in Zhengzhou spanning 18,000 square meters over three levels.

Management believes that this is a great opportunity for the company to build its presence in China and generate meaningful revenues.

Pleasingly, this will come at little cost to the company. Thanks largely to the shopping mall being owned by one of its directors, Jatenergy has been offered a three-year rent-free period.

Furthermore, depending on its success, this could be the first of many stores for the company. The current agreement can be replaced with a Flagship Store Agreement in the future if things go well. This will give the company access to other shopping centres throughout the country.

Should you invest?

I think this is a very promising development for Jatenergy and could give its Golden Koala infant formula a foot in the door in the lucrative Chinese market.

However, it is still very early days and there is no guarantee that Chinese parents will warm to its products as they have to the products of A2 Milk Company Ltd (ASX: A2M) and Bellamy’s Australia Ltd (ASX: BAL).

In light of this, I would suggest investors keep Jatenergy on their watchlists alongside fellow infant formula hopeful Bubs Australia Ltd (ASX: BUB).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. 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 Scott Phillips.

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