A little-known business is just as capable of producing good returns as a high-profile name. In-fact, companies flying under the radar may be trading on a more appealing valuation because of the little amount of investor attention they receive.

We're going to take a look at two names that a lot more Australians should to know about.

Redox Pty Ltd (ASX: RDX)

Broker UBS describes Redox as a leading supplier of chemicals, ingredients and raw materials in ANZ, as well as operations in Malaysia and a growing presence in the US.

UBS was impressed by the company's FY25 result, which showed a resilient gross profit margin and lower costs through a period of moderating like for like (LFL) volume growth.

At the time of that result, management reiterated it expects to deliver long-term growth of around 10% per year, with some years leaner than that and others stronger. FY25 was a year of headwinds including price deflation, margin normalisation and more subdued demand.

UBS noted the ASX share reported a solid start to FY26, with July top-line growth of 13% year-over-year.

While there is uncertainty in FY26, the broker suggests conditions will improve towards longer-term trends in FY26 with price deflation in the rear-view mirror.

UBS also notes that acquisitions remain "on the agenda" and the broke has seen a shift in tone towards the US as a focus after completing three bolt-on acquisitions in Australia. The broker suggested that the balance sheet is well-funded for more deals and the long-term story remains "positive".

The broker forecasts that the business could generate $82 million of net profit in FY26, putting the ASX share at 19x FY26's estimated earnings. It's projected to grow its earnings by 55% between FY26 and FY30.

UBS has a buy rating on Redox, with a price target of $3.40.

Hansen Technologies Ltd (ASX: HSN)

Another ASX share that UBS rates as a buy is Hansen Technologies. The broker describes the business as a global software provider mainly to the energy, telecommunications, pay-TV and water verticals.

UBS said that the company's billing and customer care software allows clients to "efficiently manage and automate key business functions, such as customer billing, processing, collections, general revenue management, customer acquisition, and customer service."

It has hundreds of customers globally, with dozens of offices across the continents.

The most recent note from UBS discussed the company's acquisition called Digitalk, giving new exposure to the growing mobile virtual network operator (MVNO) segment of the telecommunications market.

This acquisition came with an enterprise value price tag of $66 million. It's a billing, cloud-based software provider to the MVNO segment of the telco market.

UBS noted that MVNOs have been taking market share globally thanks to lower price points and more convenient type plan offerings, so this sector "should be viewed as a growth market". Digitalk has delivered revenue growth of at least 10% per year consistently over the last three years, driven by a range of telco wins supporting increased MNVO market share gains in the UK and Europe.

The broker then said about the ASX share:

Given its cloud/SaaS based nature, the revenue growth has come alongside consistent margin expansion to current FY25 levels of 31.4%. Quite simply we believe this is a small albeit very impressive founder led business that Hansen has acquired.

…For core Hansen, we remain constructive on its ability to deliver top line and earnings growth in FY26, acknowledging this remains an area of market debate. We forecast FY26 revenue growth of 5% to A$408mn. Within this, we expect (1) 12% growth in recurring Saas / Support & Maintenance revenue as recently won / renewed Licence revenues go live, (2) +8% growth in predictable Application or Services revenue, offset by (3) an expected 35% decline in up-front Licence sales to A$32mn after a very strong FY25 (A$50mn).

The solid top-line growth will, in our view, more importantly be also met with another year of operating leverage as the company continues to realise recent efficiency benefits and Powercloud cost outs.

UBS has a buy rating on Hansen shares, with a price target of $7.50 on the ASX share.

The post Brokers rate these 2 top ASX shares as buys in January appeared first on The Motley Fool Australia.

If you're considering investing in any of these companies and want to catch the next dividend payment, you must act before the ex-dividend day.

What happens on ex-dividend day?

Share prices usually fall on ex-dividend days simply because they are less appealing without the upcoming dividend attached.

Plus, investors know the impending dividend payment will take a chunk of cash off the company's balance sheet.

However, the ex-dividend day can provide a useful dollar-cost averaging opportunity if you already own the stock and are committed to the investment for the long term.

Here are a bunch of ASX shares going ex-dividend next week.

30 ASX shares about to go ex-dividend

The post 30 ASX shares going ex-dividend next week appeared first on The Motley Fool Australia.

The ASX reports that $1.1 billion of IPO capital was raised among 45 IPO listings in 2023. The five-year average for ASX IPOs is $5.4 billion among 120 listings per year.

But the total quoted market capitalisation from all new market entrants in 2023 was higher than in 2022.

The total for IPOs, demergers, and new dual and direct listings was $33.7 billion, up 8% from the previous year.

In an article published on asx.com.au today, Alice Nguyen from ASX Listings said this was a global trend because growth companies faced strong economic headwinds last year.

But she said ASX IPO conditions may be better this year.

The biggest ASX IPO of 2023

Redox Pty Ltd (ASX: RDX) was the largest ASX IPO last year, raising $402 million and achieving a market cap of $1.3 billion at the time of listing in July.

Redox is a family-owned chemical and ingredient distributor. The owners sold a 30% stake with the aim of raising capital for offshore expansion.

The biggest new listings by value

The most significant listing by value was the dual-listing of US mining behemoth Newmont Corporation CDI (ASX: NEM). This follows Newmont's acquisition of ASX gold mining stock Newcrest.

Another mega-merger was the $11 billion marriage and dual listing of Livent Corp and Allkem to form new ASX lithium share, Arcadium Lithium (ASX: LTM).

A big one on the way this year is the proposed merger of Sigma Healthcare Ltd (ASX: SIG) and the unlisted Chemist Warehouse.

The deal will create an $8.8 billion ASX healthcare major, once it is completed in 2H 2024 (assuming regulatory approvals).

Top 10 ASX listings in 2023… and their share prices today

This list represents the top 10 new listings by market cap, including ASX IPOs and major mergers.

The post Fewer ASX IPOs in 2023, but here's how they've performed appeared first on The Motley Fool Australia.

The great news for investors is that this lack of light can sometimes mean you could pick up a bargain before the rest of the market catches up to a booming business.

Here are two examples that the team at Celeste Funds Management are bullish on after a pleasing reporting season:

Higher margins coming

Internet service provider Aussie Broadband Ltd (ASX: ABB) enjoyed an almost 30% surge in its share price during August.

It's cooled off a tad this month but is still trading more than 38.5% higher than where it started the year.

The Celeste analysts, in a memo to clients, indicated their pleasure in what they saw in the annual report.

"The company reported $89.6 million EBITDA (guidance: $85 to $90 million), with their continuing growth trajectory supporting forward guidance for $100 to $110 million FY24 EBITDA."

Traditionally a consumer business, the company is increasing its presence in the corporate and government market segments.

"Management highlighted the high margin opportunity into FY24 from Enterprise & Government with $10 million new unbilled revenue and a growing sales pipeline."

NBN Co's proposed new pricing structure could come in before the end of the year, which is expected to be favourable.

"This should provide cost certainty for retailers and specifically benefit Aussie Broadband through reduced costs for higher speed plans."

Four out of seven analysts currently surveyed on CMC Markets rate Aussie Broadband as a strong buy.

Making a mockery of the IPO prospectus

Redox Pty Ltd (ASX: RDX) only listed in July, but the business has been around since the 1960s.

The company, which distributes chemicals, plastics, and other industrial materials, saw its share price rise 12.5% last month.

The Celeste team said Redox delivered "a pleasing maiden earnings report".

"The FY23 result was ahead of prospectus forecasts on almost all lines of the income statement, resulting in underlying NPAT of $89.1 million coming in 10% ahead of prospectus of $81.3 million."

This bodes well for another beat of its prospectus forecasts in the 2024 financial year.

"We remain attracted to Redox, as it is a family-founder led company, with a long track record of earnings growth, net cash balance sheet and trading at an undemanding valuation."

While analyst coverage is sparse for the western Sydney outfit, both experts surveyed on CMC Markets currently rate the stock as a buy.

The post The small-cap ASX shares Celeste analysts are 'attracted to' right now appeared first on The Motley Fool Australia.

Companies approach existing and potential investors seeking additional funds to raise capital. These funds may be in equity, debt, or a convertible instrument with debt and equity features. Different capital-raising methods (and the reasons behind them) can affect a company's share price differently. 

Why would a company launch a capital raising? 

Companies need capital to pay for their operations, such as producing goods or services. Companies invest capital in a variety of ways to create value. 

There are different types of capital, including working capital, debt, equity, and (for financial instructions) trading capital. A company's capital structure will depend on the mix of capital types used to fund its operations. Capital is critical to operating a business and financing its future growth alongside cash flow.  

Companies employ capital for productive purposes, intending to make a profit. They usually undertake capital raisings for one of three purposes: Funding an acquisition, funding growth or expansion plans, or rebalancing the business's capital structure. 

The capital raising process involves companies estimating investor demand for the type of capital they want to issue and seeking commitments from institutional investors. This helps determine pricing ahead of any offer made to potential new investors.  

What are the different types of capital raising?

Capital raising involves raising additional money. These funds may be in the form of equity, debt, or securities with features of both (such as convertible shares). 

An equity capital raising involves the issuance of new shares. Debt capital raisings involve borrowing funds that must be repaid later and on which the company must pay interest.

A company can also raise capital via the issue of convertible securities. Convertible securities may initially operate like debt, requiring the company to pay interest to investors. In certain circumstances, however, they may convert to equity. 

A closer look at equity capital raising

Equity capital raisings are frequently employed by ASX companies when capital is required. Share placements are the most common form of capital raising. 

Other methods include initial public offerings (IPOs), share purchase plans, and rights issues. The Corporations Act and ASX listing rules regulate capital-raising activities. 

Share placements

A share placement involves allotting shares directly from a company to investors. Only sophisticated investors and institutional investors can buy shares through share placements. 

Companies often conduct share placements in conjunction with share purchase plans to ensure retail investors do not miss out.

They have several advantages for companies because they can be conducted relatively quickly and raise more funds than subsequent share purchase plans offered to retail investors. 

Share purchase plans 

They allow eligible current shareholders to buy a capped amount of shares at a predetermined price, usually at a discount to the current market price.

Corporate regulations limit the maximum application under a share purchase plan to $30,000 in value per shareholder. 

Rights issue

A rights issue is an invitation to existing shareholders to purchase new shares in proportion to their existing holdings. Companies typically offer shares at a discount to the current market price. Shareholders can choose to accept the offer in full, in part, or to reject the offer. 

Because rights issues are conducted in proportion to current holdings, they allow shareholders to avoid diluting their shareholding. 

IPO

An IPO involves a previously private company listing on the ASX for the first time.

Shares in the company are first offered to institutional investors off-market through an 'underwriter' – an intermediary who facilitates the sale of stocks and guarantees a minimum price and/or a minimum number of stocks sold to ensure a successful public launch on the ASX.

Private companies may choose to go public via an IPO for various reasons. These include raising equity capital, providing liquidity for shareholders, allowing early investors to exit, and increasing public awareness of the company. Funds raised in the IPO may be used to pay down debt, fund expansion or research and development, and to pay out early investors. 

What is dilution? 

Dilution can occur when a company raises additional equity capital. New shares are issued, increasing the total number of shares in the company. This means earnings per share (EPS) may fall as earnings are spread across more shares. 

If an existing shareholder does not participate in the capital raising, they will hold a lower proportion of the company after the capital raising. Issuing new shares is the opposite of a share buyback (where a company buys back its own shares and cancels them). 

To prevent shareholders from becoming unnecessarily diluted, there are limits on how much share capital ASX-listed companies can raise via share placements to institutional investors. Share purchase plans, which follow share placements, allow retail investors to participate in equity capital raisings and avoid dilution. 

It is worth remembering that dilution is not always a significant concern. The ultimate effect of capital raising on a shareholder will depend on how the company uses the money raised. If it uses the capital to grow and expand, its share price may increase over the long term, benefitting all shareholders. In such a scenario, there may be short-term pain from dilution but long-term capital appreciation gains. 

Shareholders in companies that are conducting capital raisings need to take the time to investigate the reasons for it and the intended use of funds. By doing the appropriate research, investors can decide on the potential impact of capital raising and whether to participate in it themselves. 

Which ASX companies have raised capital recently? 

Global markets battled economic headwinds in 2023, including uncertainty around inflation and interest rates. Capital raisings were down, with just 1.1 billion raised in IPOs on the ASX in 2023, significantly below the 5-year average of $5.4 billion.

The listing of Redox Limited (ASX: RDX) was the ASX's largest IPO in 2023. The company raised $402 million in July, achieving a market cap of $1.3 billion.

The secondary capital raising market was somewhat more robust, with $34.5 billion raised. In September, Orora Ltd (ASX: ORA) raised $1.35 billion via a $450 million institutional placement and $895 million rights issue. It used the funds to pay for the acquisition of Saverglass, a premium bottle maker headquartered in France. 

Energy infrastructure business APA Group (ASX: APA) raised $675 million via an institutional placement and $75 million via a share purchase plan in August to fund its acquisition of energy assets in Western Australia's Pilbara region. 

Treasury Wine Estates Ltd (ASX: TWE) also tapped the secondary capital market to fund acquisitive activity. In October, the winemaker raised $825 million to pay for the acquisition of vineyards in California. 

Embattled casino operator Star Entertainment Group Ltd (ASX: SGR) sought to shore up its capital structure with an $800 million equity raising in October, part of a $1.2 billion debt refinancing deal. 

Pathology and diagnostic imaging provider Healius Ltd (ASX: HLS) also raised equity capital to pay down debt with a $187 million institutional and retail entitlement offer conducted in November. 

The post What is capital raising? appeared first on The Motley Fool Australia.