Place the water, butter and sugar into a small saucepan over low heat. Gradually melt to dissolve the sugar and allow to simmer for 5 minutes. Set aside to cool for 10 minutes.
Add the vanilla, cardamom, desiccated coconut and milk powder to the cooled butter mixture. Stir well, pour into a container, cover with plastic and allow to refrigerate for at least 4 hours. Preferably overnight.
Take tablespoons of the mixture, press a toasted hazelnut into the centre, and roll it into a ball. Toss the balls in the shredded coconut, to coat. Place back into the fridge before serving.
If you’re going to bake the kuglice, prepare them to the point of them being rolled in the shredded coconut. They should have been in the fridge for at least 3 hours before baking, otherwise they flatten too much when baking.
To bake, preheat the oven to 210°C. Place the prepared kuglice onto a lined baking tray and bake for 10 minutes, or until the coconut has just started to change colour. Remove the tray from the oven and allow the kuglice to cool on the tray. Store in a sealed container.