Banca

Leisure Canada Inc.
(LCN–V C$0.24)

Stock Rating:

Buy
12- target (C$) Potential ROR Company Profile Sector Ticker Shares O/S, basic (m) Shares O/S, diluted (m) Mkt cap, basic (C$m) Mkt cap, FD (C$m) Key Metrics Cash (C$) Debt (C$) Enterprise Value (C$m) Research Team Doug Cooper Analyst Alisa Beach Associate Sales Toronto Calgary 416.361.1064 877.513.1025 2.00 733%

Cuba – The FinalFrontier
We believe that the time could finally be right for US trade/travel embargoes with Cuba to be lifted. As the largest foreign owner of unclaimed property rights in the Country, Leisure Canada is well positioned to benefit from the anticipated upcoming paradigm shift. We are initiating coverage with a Buy rating and $2.00 target price. Company and Industry Fundamentals Leisure Canada (LCN or“the Company”) is developing 3 prime tourist and business properties in Cuba. It is a 50/50% JV partner with the Cuban government and has 75 year leases on the properties, making LCN the largest foreign “land owner” in Cuba. Cuba is a growing tourist destination with ~2.5 million visitors annually. Given this base of tourists, the country has an insufficient number of hotel rooms (and specifically 4and 5-star properties) to meet its needs. If/when the United States lifts the current travel ban to Cuba and the foreseen number of Americans arrive (estimated to be 5 million/year within 5 years), the country’s hotel shortage will be acute. Such a scenario would put LCN in a very favourable position with its first mover advantage and its ability to create value through partnerships with “flag”operators. We believe LCN’s management team has the ability to execute on its plan through a combination of Cuban business experience (Chairman Walter Berukoff has operated in Cuba since the early 1990s) and hotel/resort operating experience (the management team recently joined from Intrawest). A recent $18 million financing gives the company a strong balance sheet from which to start itsdevelopment. Catalysts and Risks We believe there are two primary catalysts. From a macro perspective, the lifting of the US travel ban to Cuba would be a significantly positive event for the company. We believe such a development is in the offing through bi-partisan sponsorship of The Freedom to Travel to Cuba Act, currently before the US Congress. The second catalyst would be the confirmation that LCN hasobtained the debt financing needed to start construction. We believe the Company is currently in discussions with a number of potential lenders. Nevertheless, Cuba remains a Communist regime and should be considered high risk, albeit under President Raul Castro, it appears more willing to make concessions for international trade. Valuation and Recommendation We are initiating coverage of LeisureCanada with a Buy rating and C$2.00 target price, which is based on the average of several valuation scenarios highlighted in this report, including earnings power, EV/room, and capitalization rate. Paradigm Capital Inc, IIROC/TSX member Doug Cooper, Analyst 416.363.5115 Alisa Beach, Associate 416.360.3579

LCN–V 165 220 39.6 52.8 16 0 23.6

416.363.5115 dcooper@paradigmcap.com 416.360.3579abeach@paradigmcap.com

Paradigm Capital research is available on First Call, Reuters or at www.paradigmcap.com Refer to last page for official disclaimer Issued by Paradigm Capital Inc.

1-Year Stock Chart
0.4 0.35 0.3 0.25 C$ 0.2 0.15 0.1 0.05 0 7-Feb-09 7-Mar-09 7-May-09 7-Nov-09 7-Jan-09 7-Jun-09 7-Jul-09 7-Oct-09 7-Apr-09 7-Dec-08 7-Dec-09 7-Aug-09 7-Sep-09

12/08/09 Initiating targetprice ($2.00) Source: Bloomberg

1

December 8, 2009

Investment Thesis
Cuba. The final frontier. The final frontier for American tourism that is. For a country like the United States that prides itself on exporting its democratic ideals, Cuba remains the one country in the world to which Americans are forbidden to travel. Want to go to North Korea, Iran, Iraq, Syria, Somalia or any...