Whisk together the water, coconut milk, sugar, and salt in a medium saucepan over low heat. Let these warm up for a few minutes so the sugar and salt can dissolve.
In the meantime, rinse the rice thoroughly until the water runs clear. Drain the rice well using a fine mesh sieve.
Add the rice to the pan and increase the heat to medium-high. As soon as the mixture just begins to bubble, reduce the heat to low, cover, and allow the rice to steam for 20 minutes.
After 20 minutes, turn off the heat, but allow the rice to sit, covered, for an additional 10 minutes to finish cooking.
Fluff the rice and serve, garnished with toasted coconut flakes.