Collectors Universe, Inc. (NASDAQ: CLCT), a leading provider of value-added services to the high-value collectibles market, recently announced that its subsidiary, Collectors Universe (Shanghai) Company Limited, has entered into a multi-year deal with Guojin Gold Co, Ltd. (“Guojin”), a distributor of gold and silver products in China. Under the terms of this deal, CLCT’s Professional Coin Grading Service (PCGS) division will provide coin grading services to Guojin beginning in the second half of 2016 and continuing through 2020. Guojin will leverage existing bank distribution channels to dispense the graded coin products.
“Our agreement with Guojin demonstrates the significant progress we have made in establishing PCGS as a leading brand for coin grading in China,” Don Willis, president of PCGS, stated in a news release. “We look forward to a long-term relationship with Guojin and will work with Guojin in designing customized coin packages that it will market through its bank channels in mainland China, with the objective of driving submissions to levels that exceed the minimum quantities in the agreement.”
Guojin will be required to submit a minimum quantity of coins to be graded each year, which, at current exchange rates, should generate roughly $17 million in aggregate revenues across the term of the agreement. In the first years of the deal, CLCT expects to average approximately $2.8 million annually from the Guojin partnership, with a ramp-up to about $4.6 million per year occurring in the agreement’s later stages. Of course, the normal uncertainties regarding new customer relationships and the market conditions in China mean that no firm assurances of reaching these revenue totals can be offered at this time. However, both parties are optimistic regarding the long-term agreement, as was highlighted by the comments of Liao Feiming, chairman of Guojin.
“In choosing PCGS, we recognized that PCGS is a leading worldwide brand in independent third party coin grading which we believe will add value to the coin products that we sell through our bank distribution channels,” he added. “We look forward to a long-term relationship with PCGS that will drive growth in these distribution channels.”
PCGS was formed in the mid-1980s, when a small group of the nation’s leading coin experts recognized the potential of the rare coin industry. Problems stemming from misrepresentation of the quality of coins plagued the market as a result of the absence of a universal grading standard. On February 3, 1986, PCGS began serving the coin-buying community and promptly ushered in dramatic improvements to the industry, most notably through the introduction of standardized grading. In fact, PCGS has been accepted as the industry standard for the third-party certification of rare coins since 1986. Through its deal with Guojin and others like it, the company aims to expand its footprint in China in the years to come, as explained in a recent news release by Robert Deuster, chief executive officer of CLCT.
“Our objective when entering the China market was to grow that business to a level equal to our US coin business and we continue to believe that over time we can achieve that objective,” he concluded.
For more information, visit www.CollectorsUniverse.com
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