The Bubs Australia Ltd (ASX: BUB) share price is on course to finish the week on a very positive note.
In afternoon trade the goat milk infant formula company's shares are up 7% to $1.28, putting them within touching distance of a new all-time high.
This latest gain means the company's shares have now rallied an incredible 178% since the start of the year.
Why is the Bubs share price up 178% in 2019?
Investors have been scrambling to get hold of the company's shares this year on the belief that recent developments have positioned it to compete with A2 Milk Company Ltd (ASX: A2M) and Bellamy's Australia Ltd (ASX: BAL) in the massive China market.
The two major developments that have occurred recently were its acquisition of Australia Deloraine Dairy and the signing of a binding heads of agreement with the Chemist Warehouse Retail Group.
In respect to the acquisition of Australia Deloraine Dairy, the company paid $35 million in cash and shares to acquire the CNCA approved infant formula manufacturing facility.
According to the company's CEO and founder, Kristy Carr, the acquisition is expected to have a materially positive impact on its business.
She advised that this will be "through a material reduction in our production costs, as well as placing Bubs in the best possible position to achieve SAMR brand registration to enable the Company to export their infant formula products to China to be sold in physical Mother and Baby stores."
The reduction in production costs is certainly needed. In its third quarter update the company posted cash receipts of $9 million, but an $11.5 million cash outflow from product manufacturing and operating costs.
The second development, its binding heads of agreement with the Chemist Warehouse Retail Group, has also got investors excited.
The agreement is expected to commence on June 1 and will see Bubs products sold across Chemist Warehouse retail stores throughout Australia, including its domestic and Tmall online stores.
Should you invest?
With a total of 509.6 million shares on issue, Bubs now has a market capitalisation of ~$650 million, making it roughly half the size of Bellamy's.
Whilst the company certainly does have a lot of potential, it is unclear just how big the market is for its goat milk infant formula in China.
So with so much future growth already priced in, I would suggest investors sit this one out and see how things develop over the next 12 months.
