Yes, it means "good night", to send someone to bed. In addition, you can also say "mimpi indah", which would mean sweet dreams. Or, "mimpi baik", which is similar, but less intimate and literally means "dream well/nice" Or, "tidur nyenyak" which can be sleep well I'm not too fluent in malay so it's probably better to await better replies.

Thank you very much for your in-depth reply! :)

The most common way is to say 'Selamat Tidur' which has the same meaning as Have a good sleep. "Selamat Malam" is Good Night. "Selamat Tidur" is Have a good Sleep. "Semoga Mimpi Indah" is Have a sweet dream. ( literally, Hopefully Your Dream is Wonderful) "Tidur Nyenyak" is correct. It means Sleep Well. I have never heard of Malays saying "Selamat Mimpi". I don't know how to explain, it just doesn't sound right. "Mimpi Indah"and "Mimpi baik" means Wonderful Dream or Good Dream but you don't use it as a Good Night wish. It is a statement as in " I have a good dream" or you can use it as a question as in "Mimpi Indah?" "Wonderful Dream?"