Preheat oven to 350° F (180° C).
In a nonstick medium skillet or saucepan, stir together sugar, water, and a few drops of lemon/ medium and cook over medium heat until sugar is melted and turns into an amber color (about 8-10 minutes). Make sure to not stir or disturb the mixture while cooking! Pour into an 8-inch round pan, quickly swirl the caramel around the bottom and sides of the pan to coat, and let sit for at least 3-5 minutes or until hardened.
In a blender, combine sweetened condensed milk, coconut milk, eggs, and vanilla until smooth (and there are no visible traces of eggs), about 30-60 seconds. Pour the mixture into the pan.
Prepare the bain-marie (water bath) by placing the flan pan into a 13×9-inch baking pan. Fill the outer pan with boiling water to halfway up the flan pan.
Bake for 45 minutes or until the coconut flan is set and slightly jiggly. Transfer the flan pan to a wire rack for about 30 minutes. Then, place in the fridge for at least 4 hours or until the flan is chilled.
To unmold, warm the bottom of the pan on a warm water bath for about 3-5 minutes and gently run a paring knife around the edges of the pan. Place a large plate over the pan and invert while holding tightly to unmold the flan.
Top with coconut flakes for garnish. Chill until serving time!