Scald the milk. Remove from the heat. Stir in butter and honey. Let cool to room temperature.
Add the milk mixture and all remaining ingredients except the coconut in the order suggested by your bread machine manual and process on the basic bread cycle according to the manufacturer's directions.
At the beeper (or a few minutes before the end of the first kneading cycle), add the coconut. Let the bread cool before slicing.
Source: The Best Bread Machine Cookbook Ever, Madge Rosenberg.