One of the best performers on the Australian share market on Tuesday was the Jatenergy Ltd (ASX: JAT) share price.
The infant formula company's shares were up as much as 100% at one stage before closing the day 81.5% higher at 6.9 cents.
Why did Jatenergy's shares double in value today?
This afternoon Jatenergy released its quarterly update and revealed a significant increase in cash receipts.
According to the release, the company saw its cash receipts from sales increase from $320,000 in the June quarter to $10.7 million in the September quarter.
This was notably higher than the $8.7 million estimate that management had provided in August. Management has put this down to synergies between recent acquisitions starting to prove themselves.
Jatenergy did, however, report a net operating outflow for the quarter of $5.5 million. This was due to product manufacturing and operating costs of $15.4 million during the quarter compared to just $446,000 in the prior quarter.
The cash outflow is expected to rise to $16.8 million in the next quarter. Jatenergy finished the quarter with a cash balance of $1.6 million.
Should you buy Jatenergy shares?
As there is no mention of these cash flow figures being audited, I'm going to presume that they are unaudited. In light of this, I would suggest that investors take these sales figures with a pinch of salt.
Furthermore, with its cash balance at such low levels, I suspect a capital raising will be needed in the near future to fund its operations. This could act as a major drag on its share price if it is able to raise funds.
Overall, I think investors should continue to avoid Jatenergy's shares and focus on the shares of fellow infant formula companies A2 Milk Company Ltd (ASX: A2M) and Bellamy's Australia Ltd (ASX: BAL) instead.
