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Why infant formula small cap Jatenergy Ltd (ASX:JAT) rocketed higher today

The Bellamy’s Australia Ltd (ASX: BAL) share price has been flying high on Tuesday after a series of declines following the release of a broker note out of Goldman Sachs last week.

But it isn’t the biggest mover in the infant formula industry today. That honour goes to energy-cum-infant formula company Jatenergy Ltd (ASX: JAT) which has seen its share price rocket 24% to 9.2 cents.

Why are Jatenergy’s shares rocketing higher?

Today’s gain appears to be related to news that the company has secured exhibition space at the 18th Shanghai International Children Baby and Maternity Products Industry Expo later this month.

According to the release, Jatnergy has an 18 square metre exhibition space that will showcase the portfolio of products the company has been developing since the switch from energy to fast moving consumer goods trading.

Chief among them will be its partly owned Golden Koala infant formula range which it will be offering product samples of to visitors in the hope of attracting suppliers.

Management sees a lot of value in the trade fair. Stating that: “These trade fairs offer excellent brand exposure. More importantly, visitors are trade professionals looking for new products and new suppliers and planning to place orders.”

Should you invest?

Jatenergy has signed a number of promising agreements recently with the likes of Cyclone E-Commerce and JD.com.

While this is undoubtedly a positive and the trade fair could prove to be a good strategy, I still think it is far too soon to invest in its shares.

After all, there’s no guarantee that these distribution agreements or the trade fair will ultimately lead to a notable lift in sales any time soon.

Because of this I would suggest that investors continue to stay away from Jatenergy and stick to the companies that are already successfully selling infant formula products into the lucrative China market such as Bellamy’s and A2 Milk Company Ltd (ASX: A2M).

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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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