The key drivers of its growth during the period were a stronger US dollar and soft commodity prices, which worked in its favour. The company’s cash pile grew 51.1% from FY2012 to RM120 million in FY2015.

For the company’s shareholders, the rewards have been satisfying. From July 1, 2013, to June 30, 2016, Hup Seng has given a total return of 155.5%, which translates into an annual return of 36.7% in the last three years. Its dividend payout in FY2015 was six sen per share, which means a yield of 4.51% on its RM1.33 share price at the time of writing. With its sturdy operating cash flow and low capital expenditure requirement, the company should have no trouble in maintaining its dividend at this level.

What is even more impressive about Hup Seng’s achievements is that it did it without any borrowings and despite adopting a dividend policy since 2009, under which at least 60% of its net profit is distributed to shareholders.

In recent years, the company has taken steps to diversify and expand its business. Cream crackers have been its main product since it was founded in the late 1950s but the company has also been manufacturing other products, such as the oat cookies launched under the Naturell brand last year. It also broke into the instant beverage segment when it acquired In-Comix Food Industries Sdn Bhd in 2005.

In fact, the company has grown so much that its existing facilities are congested and its current capacity may not be enough to cater for demand next year, which is why it paid RM17.49 million for two parcels in Batu Pahat, Johor, this year.

“The proposed acquisitions will enable the group to rationalise and modernise its production lines with the addition of new lines and corresponding support facilities and improve the layout of its packaging areas for efficient product processes,” it said in March this year.

The acquisitions will be funded by internally generated funds, in line with the group’s philosophy to not invest using borrowings due to the risk posed by fluctuating interest rates, according to Hup Seng executive director Kerk Chian Tung.

Valuation-wise, Hup Seng is considered expensive. It was trading at a price-earnings ratio of 18.4 times and 6.4 times its book value as at Aug 16 while its market capitalisation stood at RM1.02 billion. The high valuation though is a reflection of its strong fundamentals, prudent management and well-known brand name, apart from its impressive return on equity.

Kerk told The Edge Financial Daily earlier this year that the group expects 2016 to be challenging. She said it will continue to focus on improving productivity in all areas of operation amid a slowdown in the global and domestic economies.