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Tabcorp wins $20 million contract

Yesterday Tabcorp Holdings Limited (ASX: TAH) greeted news from premier Campbell Newman who announced that it has received a contract worth $20 million from the Queensland government.

Tabcorp, already the biggest Keno operator in Queensland and throughout Australia, has welcomed the decision to extend its contract to 2047. CEO David Attenborough said that it gives the company greater certainty and will allow it to invest in the keno lottery game in Queensland.

Keno requires players to purchase a ticket and select from numbers 1 through to 80, then the system randomly draws 20 numbers every few minutes. Combinations of matching selected numbers win a prize. Since Sunday last week, two players have become instant millionaires thanks to a keno ticket, one player in Cairns winning $1.82 million.

Tabcorp has needed the extra revenue certainty as it battles to find its place on S&P/ASX 200 (^AXJO)(XJO). After being downgraded from a stable to negative outlook the company is keen to revitalise the future prospects and share price. As more and more companies move to an online platform for punter flexibility and convenience, the company has had to adapt to the changing environment. After the creation of social media service Favourit, Tabcorp was quick to respond, announcing that its online bookmaker Luxbet was going to sign up and allow betters to take advantage of the next generation of gambling.

The success of rival Ainsworth Game Technology Limited (ASX: AGI) and the continued pressure from long-time Australian competitor Tatts Group Limited (ASX: TTS) hasn’t been all that’s nipping at the tail of this Australian betting service. Increased rivalry from overseas giant Bet365 and local icon Tomwaterhouse.com has given punters more choice at which odds they take.

Foolish takeaway

The company’s share price has suffered in recent years, due to fears of new arrivals in the domestic market as well as the increased digitalisation of betting, but yesterday’s results were a small step in the right direction. Despite the outlook being downgraded to ‘BBB’, Tabcorp remains a strong and well established gambling company with a market capital of $2.43 billion.

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The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Owen Raszkiewicz does not own shares in any of the mentioned companies.

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