Why Jatenergy Ltd (ASX:JAT) shares rocketed 53% higher

The Jatenergy Ltd (ASX:JAT) share price was a big mover on Wednesday and rocketed 53% higher. Here's why…

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One of the biggest movers on the market on Wednesday was the Jatenergy Ltd (ASX: JAT) share price.

The infant formula company's shares finished the day a whopping 53% higher at 9.2 cents.

Why did Jatenergy's shares rocket higher?

Investors were fighting to get hold of the company's shares after the release of announcement on Wednesday afternoon.

That announcement revealed that the company has signed a memorandum with Guangzhou Eastern Bridge Import & Export Co Ltd at the China International Import Expo in Shanghai.

According to the release, Eastern Bridge intends to import Jatenergy's Golden Koala infant formulas and milk powders, Neurio products, and Cobbitty Country products.

The total order quantity is estimated to be worth a total of $8 million in 2019.

What is Eastern Bridge?

The release explains that Eastern Bridge imports a wide range of consumer and commercial goods from around the world and distributes them across China through online and offline channels.

Its online channels span websites, apps, cross-border ecommerce shops, and Wechat sales specialists. Whereas its offline retailers include the likes of GrandBuy, Kwangchow Friendship Store, Guangdong Jinkang Chain Pharmacy, and Meijoybest.

Given its sizeable distribution network, investors may believe that the order quantity could grow significantly in the future if things go well with this initial order.

Should you invest?

I wouldn't suggest investing on the back of this announcement. In fact, I would be very cautious due to the fact that this is only a memorandum and not a legally binding contract. This means there is no guarantee that it will ultimately go ahead.

Overall, instead of risking money in Jatenergy, I think investors ought to consider established players such as A2 Milk Company Ltd (ASX: A2M) Bellamy's Australia Ltd (ASX: BAL). Especially considering their shares are trading at attractive levels again following recent declines.

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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