In a medium size pot, combine the water, cinnamon stick, and star anise.
Bring the water to a boil over medium-high heat, add the rice, lower to simmer, and cover for about 15 minutes.
Using a small bowl, add ¼ cup of the coconut milk and vanilla extract to the spices. Whisk until it becomes a smooth paste.
When the rice is finished, add 4 cups of coconut milk and the mixed spices to the pot. Stir until it's combined.
Bring the rice back to a gentle simmer, uncovered, and cook for 15 minutes without stirring. A skin will form on the surface, which is normal.
Add the coconut sugar, stir gently, and scrape the bottom of the pot. Let it simmer again for another 20 minutes, stirring occasionally or until the pudding has thickened to the consistency of yogurt.
Take out the cinnamon stick and star anise and discard.
Put the pudding in a bowl and refrigerate uncovered for at least 3 hours or up to overnight.
Before serving, stir in the rest of the coconut milk.
Scoop the pudding into individual serving dishes/small bowls and garnish with some ground cinnamon, cinnamon sticks, and toasted coconut flakes.