Preheat oven to 325 degrees F.
In a small saucepan over medium-low heat, melt the sugar until it caramelizes. Pour it into a flan dish, pie plate or round souffle baking dish with shallow sides, swirling it around to coat the bottom.
In a large mixing bowl, beat the eggs until foamy with a wire whisk. Beat in the condensed milk, coconut milk, vanilla extract and 1/4 cup coconut. Pour the mixture into the prepared baking dish. It will need to bake in a water-bath in the oven. Set the dish into a large baking pan with sides and carefully pour water around the flan to come 2/3 the way up the sides. Carefully transfer to the preheated oven. Bake for about 1 hour, until the flan is set and the center only jiggles a little bit, like a cheesecake would. Remove from the oven and water-bath and allow to cool completely. Turn the flan out onto a flat serving platter. Cut into slices for serving. Garnish with whipped cream and toasted coconut.
Recipe courtesy of Paula Deen, 2007